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




 
                  UTILIZING TECHNOLOGY TO IMPROVE TARP
                        AND FINANCIAL OVERSIGHT

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 17, 2009

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-75





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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 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 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
              Subcommittee on Oversight and Investigations

                     DENNIS MOORE, Kansas, Chairman

STEPHEN F. LYNCH, Massachusetts      JUDY BIGGERT, Illinois
RON KLEIN, Florida                   PATRICK T. McHENRY, North Carolina
JACKIE SPEIER, California            RON PAUL, Texas
GWEN MOORE, Wisconsin                MICHELE BACHMANN, Minnesota
JOHN ADLER, New Jersey               CHRISTOPHER LEE, New York
MARY JO KILROY, Ohio                 ERIK PAULSEN, Minnesota
STEVE DRIEHAUS, Ohio
ALAN GRAYSON, Florida
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 17, 2009...........................................     1
Appendix:
    September 17, 2009...........................................    31

                               WITNESSES
                      Thursday, September 17, 2009

Hahn, Gregory B., Principal, Crowe Horwath LLP...................    15
Horne, Stephen C., Senior Vice President for Master Data 
  Management and Integration Services, Dow Jones Enterprise Media 
  Group..........................................................     9
Kimner, Thomas, Risk Manager, Americas Risk Practice, SAS 
  Institute, Inc.................................................    18
Krishna, Dilip, Vice President, Financial Services and Insurance, 
  Teradata Corporation...........................................    11
Marlow, Susan, Chief Executive Officer, Smart Data Strategies, 
  Inc., on behalf of MAPPS.......................................    13
Quaadman, Thomas, Executive Director, Center for Capital Markets 
  Competitiveness, U.S. Chamber of Commerce......................     8
Schwartz, Ari, Vice President and Chief Operating Officer, Center 
  for Democracy and Technology...................................     6
Zelner, Bennet A., Professor, Fuqua School of Business, Duke 
  University, on behalf of the Probity Group.....................    16

                                APPENDIX

Prepared statements:
    Hahn, Gregory B..............................................    32
    Horne, Stephen C.............................................    38
    Kimner, Thomas...............................................    51
    Krishna, Dilip...............................................    61
    Marlow, Susan................................................    67
    Quaadman, Thomas.............................................    95
    Schwartz, Ari................................................    99
    Zelner, Bennet A.............................................   103

              Additional Material Submitted for the Record

Moore, Hon. Dennis:
    Written responses to questions submitted to Thomas Quaadman..   106
    Written statement of the Epicurus Institute..................   108
    Written statement of Ann Fulmer, Vice President, Interthinx, 
      Inc........................................................   112
    Letter from various undersigned organizations in support of 
      H.R. 1242..................................................   114
    Written statement of SecondMarket, Inc.......................   116
Maloney, Hon. Carolyn:
    Letter from the U.S. Chamber of Commerce.....................   120
    Letter from Bennet Zelner....................................   121
    Additional information provided for the record by Gregory 
      Hahn.......................................................   123
    Additional information provided for the record by Stephen 
      Horne......................................................   137
    Additional information provided for the record by Ari 
      Schwartz...................................................   255


                  UTILIZING TECHNOLOGY TO IMPROVE TARP



                        AND FINANCIAL OVERSIGHT

                              ----------                              


                      Thursday, September 17, 2009

             U.S. House of Representatives,
                          Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:02 a.m., in 
room 2128, Rayburn House Office Building, Hon. Dennis Moore 
[chairman of the subcommittee] presiding.
    Members present: Representatives Moore of Kansas, Lynch, 
Klein, Adler; Biggert, Lee, and Paulsen.
    Also present: Representative Maloney.
    Chairman Moore of Kansas. This hearing of the Subcommittee 
on Oversight and Investigations of the House Financial Services 
Committee will come to order. Our hearing this morning is 
entitled, ``Utilizing Technology to Improve TARP and Financial 
Oversight.'' This is our 7th O&I Subcommittee hearing of the 
year, and our 3rd one that will at least touch on the very 
important issue of TARP oversight.
    I am glad to have a diverse panel with a number of 
witnesses coming from the private sector, and I'll simply point 
out that we obviously are not endorsing one firm's technology 
over another whether any firm is represented here today or not. 
But we wanted to start a discussion of what kind of technology 
is currently being used in the marketplace today, and how the 
government might use these technologies to conduct stronger 
oversight and ensure greater transparency.
    We will begin this hearing this morning with members' 
opening statements, up to 10 minutes per side. We will then 
hear testimony from our witnesses, and after that, members will 
each have up to 5 minutes to question our witnesses. The Chair 
advises our witnesses to please keep your opening statements to 
5 minutes. Given the size of our panel, we want to keep things 
moving so we can get to members' questions. Also, any 
unanswered question can always be followed-up in writing for 
the record, and I encourage you to do that.
    I ask unanimous consent that Congresswoman Carolyn Maloney, 
a member of the full committee, but not this subcommittee, be 
allowed to participate in today's hearing. Is there any 
objection?
    Without objection, it is so ordered.
    All members' opening statements, without objection, will be 
made a part of the record, and I now recognize myself for up to 
5 minutes for an opening statement. This week marks the one-
year anniversary of the collapse and bankruptcy of Lehman 
Brothers, the moment when the financial crisis really 
accelerated, requiring the need for Congress to respond by 
creating the $700 billion TARP program to stabilize the 
financial sector.
    I have been pleased with the progress by banks in not only 
paying the initial TARP investments back to the government in 
recent weeks and months, but also dividends and warrant 
repurchases that have been very profitable for taxpayers. The 
Treasury Department recently reported that a total of $70.3 
billion of TARP investments have been repaid through August of 
2009. Total dividends and interest payments received by the 
government in excess of initial TARP principal repayments is 
$9.36 billion. At our last subcommittee hearing in July on TARP 
warrant repurchases, I think it's no surprise that due to our 
raising public awareness on that issue, Goldman Sachs agreed to 
repurchase the full value of their TARP warrants at $1.1 
billion. It is clear that simply raising public awareness and 
increasing transparency can reap big rewards for taxpayers, 
especially as we continue to monitor the use of TARP funds, and 
we will continue to do that.
    Of the $700 billion of TARP funds authorized, $644 billion 
has been planned for particular TARP programs, with $433 
billion of that money committed to specific institutions under 
signed contracts. As the chairman of this Oversight and 
Investigations Subcommittee, I fully intend to keep the 
pressure up until every single dollar of TARP funds has been 
repaid to taxpayers. Today, we will be hearing from a variety 
of witnesses with expertise on how technology might be used by 
the government to increase transparency, oversight, and 
accountability, especially with the unique nature of financial 
markets and activity. I thank our witnesses for being here, and 
I look forward to your testimony.
    One specific proposal we will discuss in H.R. 1242, the 
TARP Accountability and Disclosure Act, authored by my 
colleague from New York and the chairwoman of the Joint 
Economic Committee, Congresswoman Carolyn Maloney, I am proud 
to be a co-sponsor of H.R. 1242, because it will utilize 
technology that's readily available today and will help 
standardize and monitor TARP data, so that not only the 
government, but more importantly U.S. taxpayers, can know and 
see for themselves how the funds are being spent.
    Another idea that I know Ms. Marlow will raise is the idea 
of creating a national land parcel database and put into use as 
an early warning system that could monitor the housing market 
more closely and provide greater transparency. How can the 
government better utilize these technologies to conduct and 
prove financial oversight?
    Finally, I want to thank my friend and the ranking member 
of the subcommittee, Judy Biggert, for calling for a hearing on 
technology. I thought it was a great idea, and I hope today is 
the first of many conversations on this important issue so our 
financial agencies can better utilize the latest cutting edge 
technology to improve not only TARP oversight, but coordinated 
oversight of all financial services activity.
    I now recognize for 5 minutes the ranking member of the 
subcommittee and my friend and colleague from Illinois, Judy 
Biggert.
    Mrs. Biggert. Chairman Moore, thank you for holding this 
hearing. As you just said, I requested a hearing on technology 
several times this year and I am pleased we are finally able to 
make it happen. It is my hope that we can follow-up today's 
discussion with a second hearing to hear the testimony of the 
financial regulators.
    A financial oversight hearing on technology may not sound 
riveting to most, however, I would wager it will become more 
attention grabbing as American taxpayers learn about how 
technology could help Federal financial regulators detect 
waste, fraud, and abuse, as well as address risk within the 
financial institutions and markets.
    There is no question that with record deficits and debt, we 
must find the best and most cost-effective way to enhance the 
transparency and accountability of the $700 billion TARP 
program, trillions in taxpayer funds committed by the Federal 
Reserve, and other Federal expenditures in the financial 
sector. Perhaps if the Treasury used more up-to-date technology 
to track TARP funds, we would know clearly how TARP recipients 
have used the funds. However, the question remains unanswered, 
and there's no question that our financial regulators have 
antiquated IT systems that have resulted in inadequate 
regulatory oversight and enforcement.
    A GAO report concluded that HUD's 15-year-old IT systems 
contribute to the Department's inability to effectively and 
efficiently perform mission critical operations, including 
those integral to our Nation's economic recovery and investment 
activities. For example, in June GAO, issued a report on 
reverse mortgages for seniors. Among several findings, it 
determined that certain phone only housing counselors are not 
providing seniors with required information. Couldn't better 
technology infrastructure improve the accountability in this 
program?
    It's unacceptable for ineffective or inefficient technology 
to lessen the transparency and accountability of Federal 
programs and agencies, and constituents, the American taxpayers 
who give their hard-earned dollars every paycheck, are 
rightfully outraged when Federal agencies allow funds to be 
abused by organizations like ACORN. According to a staff report 
issued by the House Committee on Oversight and Government 
Reform, I quote: ``Since 1994, more than $53 million in Federal 
funds have been pumped into ACORN for services like housing 
counseling. Yet, how is this money spent?''
    The report mentions that 70 ACORN employees have been 
convicted in 12 States for voter registration fraud. The report 
even credits ACORN with helping elect in my home State, 
Illinois, now-disgraced, former Governor Blagojevich, but I 
don't really don't want to get into that. So all these things 
are unacceptable, and the common theme, that all these funds 
for TARP, ACORN, and other activities are taxpayer dollars, and 
Americans have a right to expect that each penny will be 
accounted for properly.
    Federal regulators need effective tools like state-of-the-
art technology and experts to track and flag the misuse or 
illegal use of taxpayer funds. It's no secret that one of the 
reasons our country got into this financial mess is because 
there are simply too many regulators who weren't doing their 
job and were not communicating effectively across agencies. 
Plus, I'm very skeptical that for consumers the answer is 
making government bigger, by creating a new Federal agency as 
little more than a facade of reform. And don't get me wrong. We 
need financial reform, and bailouts and the government practice 
of picking winners and losers and restoring market discipline.
    We need smart, clear, and strong regulations to get our 
financial system back on track so that our economy can grow, 
businesses can create desperately needed jobs, and American 
families can secure credit. Technology alone is not the only 
answer to address the shortcomings in our financial regulatory 
system and Federal programs, but it certainly appears that it 
could be a large part of the answer.
    With that, I welcome today's witnesses and I look forward 
to our discussion. I yield back.
    Chairman Moore of Kansas. Thank you very much, and I now 
recognize Congressman Lynch for 2 minutes. Sir?
    Mr. Lynch. Thank you, Mr. Chairman, and Ranking Member 
Biggert.
    I really appreciate that we are having this hearing and I 
appreciate all the witnesses coming forward to help us with our 
work. This is an important hearing in that it not only 
addresses the oversight capabilities of Congress and this 
committee with respect to the TARP program, which I voted 
against, but I have the unhappy task of trying to track some of 
this money, which is not being done without great difficulty.
    But also, because of the new financial regulations reform 
that we're considering, our responsibilities will be expanded, 
as will yours. And we have to figure out a way that we can 
provide transparency and accountability to the American 
taxpayer. In this one TARP program that I opposed, we put out 
$700 billion in taxpayer funds to bail out the banks, and if 
that weren't maddening enough, we have had a very, very 
difficult time tracking where the money went, what it was spent 
for, and whether or not the program was abused or used 
correctly. There were no accountability measures in the bill to 
allow us to track.
    It was done in great haste, and I understand that, but now 
we have a chance to reset our capabilities to oversee this type 
of program and all the others that are being considered. So I'm 
extremely interested in hearing your perspectives, because of 
the many talents that we have here on the panel today, and I 
look forward to your testimony. I yield back the balance of my 
time. Thank you, Mr. Chairman.
    Chairman Moore of Kansas. Thank you, sir. Congresswoman 
Maloney, you are recognized for 3 minutes.
    Mrs. Maloney. Thank you so much, Mr. Chairman and Ranking 
Member Biggert, for holding this hearing, and our panelists.
    As you know, I have introduced H.R. 1242, the TARP 
Accountability and Disclosure Act, along with Peter King. It is 
a bipartisan bill and it is very notable that this week marks 
the one-year anniversary of the financial crisis. It was on 
September 15th that Bank of America purchased Merrill Lynch; 
that Lehman Brothers filed for Chapter 11; and that the 
government moved to bail out AIG; and also, President Bush 
signed legislation establishing the $700 billion TARP fund.
    Since then, much of this fund has been distributed, and I 
will note that over $70 billion has been repaid. And I join the 
chairman in looking forward to all of this money being paid. 
But, from the beginning, the public, the media, and Members of 
Congress have raised concerns that the lack of transparency and 
accountability could lead to massive waste, fraud and abuse of 
the TARP funds. And the complexity of the institutions 
receiving these funds, combined with the volume of information 
they report, have made it very difficult to capture a 
comprehensive understanding of how these funds are being used.
    Using current, proven technology and readily available 
financial data as contemplated under my bill, it would be 
possible to get a complete picture of the actions of the TARP 
fund for recipients and contractors in real, usable time. 
Currently, TARP funds are collected in 25 different Federal 
agencies. I'll place in the record where they are. It is 
totally unusable. The Administration will say it's available, 
but it's not usable. You would have to go to 25 different 
agencies to put it together, and agencies will say the 
information is available, but it is not in a usable form. And I 
have raised this in several hearings and in letters to the 
Treasury.
    Traditional audits provide reporting, but not true 
transparency, and I would like to put it in terms of the 
difference between an autopsy and a diagnosis. An audit can be 
thought of as a financial autopsy. It may uncover issues and 
problems, but too late to effectively address them. It is far 
more effective to diagnose issues and problems as early as 
possible so that they can be addressed quickly. And by using 
technology and information that is currently available, it is 
possible to oversee these funds in a timely way and allow more 
time for addressing potential problems.
    I would like to place in the record a broad coalition of 
supporters, over three dozen outside groups from across the 
political landscape, including the Center for Democracy and 
Technology, and the U.S. Chamber of Commerce. Both are here 
today and both are supporting this bill. And the panelists 
today have a variety of unique perspectives, not only on 
transparency for TARP data, but on transparency throughout the 
financial services area.
    I would like to thank them very much for being here and 
again commend the chairman and ranking member for their 
support. I look forward to the testimony. Thank you.
    Chairman Moore of Kansas. Thank you.
    I am pleased today to introduce our witnesses. First, we'll 
hear from Mr. Ari Schwartz, vice president and chief operating 
officer for the Center for Democracy and Technology. Next will 
be Mr. Thomas Quaadman, executive director for financial 
reporting policy, U.S. Chamber of Commerce.
    I will turn to Congressman John Adler to introduce his 
constituent.
    Mr. Adler. Thank you, Mr. Chairman.
    And with respect to the other witnesses, welcome to all of 
you. I am particularly pleased to welcome Mr. Steve Horne, the 
senior vice president for Master Data Management for Dow Jones 
and Company. He has been a resident of New Jersey since age 3, 
similar to me, and his family enjoys spending their summers in 
Lovely. It is a beautiful, beautiful community in my district 
in Long Beach Island. Please come often, spend money. Master 
Data Management for Dow Jones is headquartered in South 
Brunswick, New Jersey, and houses 1,300 employees.
    Mr. Horne, welcome to the Financial Services Subcommittee 
on Oversight and Investigations. I look forward to your 
testimony and that of your fellow witnesses on this important 
topic.
    Mr. Horne. Thank you, Mr. Chairman.
    Chairman Moore of Kansas. Thank you. And next, we will hear 
from Mr. Krishna, vice president, financial services and 
insurance. After him will be Ms. Susan Marlow, chief executive 
officer, Smart Data Strategies, Inc., on behalf of MAPPS. I 
will let Ranking Member Biggert introduce our next witness.
    Mrs. Biggert. Thank you, Mr. Chairman.
    I would like to introduce Mr. Greg Hahn, who actually is 
from Grand Rapids, Michigan, but he is going to be testifying 
on behalf of Crowe Horwath, an international accounting and 
technology company. The largest office is in my district in 
Oakbrook, Illinois.
    For the past several years, Mr. Hahn has been responsible 
for Crowe Horwath's anti-money laundering or AML clients in the 
United States, helping these businesses to develop and 
implement and optimize their AML compliance programs, and he 
has helped organizations define customer relations management 
strategy and implement technology solutions that support that 
strategy. So he specializes in areas of governance, risk and 
compliance program development. He graduated summa cum laude 
from Central Michigan University with a bachelor of science 
degree in computer sciences.
    Thank you, and welcome, Mr. Hahn.
    Chairman Moore of Kansas. And for our last two witnesses, 
we have Professor Bennet A. Zelner of Duke University, as well 
as Mr. Thomas Kimner, risk manager, Americas Risk Practice, SAS 
Institute, Inc.
    Without objection, your written statements will be made a 
part of the record.
    Mr. Schwartz, sir, you are recognized for 5 minutes to 
provide a brief summary of your statement.

 STATEMENT OF ARI SCHWARTZ, VICE PRESIDENT AND CHIEF OPERATING 
          OFFICER, CENTER FOR DEMOCRACY AND TECHNOLOGY

    Mr. Schwartz. Thank you, Chairman Moore. Mr. Chairman, 
Ranking Member Biggert, and members of the committee, on behalf 
of the Center for Democracy and Technology, I would like to 
thank you for holding this important hearing today and inviting 
us to testify.
    I am here to discuss two ideas that are before this 
subcommittee. One is the increased oversight of TARP funds, and 
the second is coordination and assistance to better analyze and 
address property vacancy and abandonment, both using 
technology. Both of these ideas offer agencies the ability to 
create important technology tools to provide greater oversight 
of the use of taxpayer money.
    CDT has a couple of important, but easy to implement, 
improvements that require the agencies to keep the best 
interests of taxpayers and property owners in mind that should 
be of interest to the subcommittee in its oversight role. H.R. 
1242, Representative Maloney's bill, would require the Treasury 
Department to establish a database that would provide ongoing, 
continuous updates on the distribution of TARP funds. This 
database is vitally necessary to help track the hundreds of 
billions of taxpayer dollars at work. To accomplish this, the 
bill would create a centralized information repository from 
private and public sources to track progress.
    CDT, along with Open the Government, the Project on 
Government Oversight, OMB Watch, and Taxpayers for Common Sense 
all support the creation of the database and urge that H.R. 
1242 go a step further by requiring the centralized repository 
of TARP information be made available to the public on the Web. 
Providing TARP information directly to the public online will 
strengthen oversight. In particular, it will provide the media, 
watchdog groups, researchers, and concerned citizens with the 
ability to analyze the data, reuse it, and present it in novel 
ways, uncovering positive and negative trends and anomalies.
    Clearly, there is no prohibition in the bill against online 
access, but we ask that the text of the bill explicitly require 
that the non-propriety TARP oversight resources be made 
available to the public on the Web to ensure that agencies keep 
the public interest and direct accountability in mind. 
Financial Stability.gov, the Web site that is now online, 
offers a useful start for TARP oversight. However, there are 
many TARP activities and related public data that are not 
available. H.R. 1242 should help take this important resource 
to the next level.
    The second idea calls for the creation of a regional real 
property data system, tying property records to land parcels. 
These data systems could tie tax and foreclosure information to 
location data to create new ways to analyze and mitigate 
predatory lending practices, reverse red-lining and 
foreclosures. The bill also calls for improvement of these data 
systems in order to streamline and improve procedures around 
urban renewal strategy.
    CDT supports the goals of this effort as well, but we urge 
the committee to specifically require privacy and security 
oversight, and improve data accuracy in the effort to create 
centralized data systems. Currently, counties manage their own 
geospatial data. As less localized data systems are created and 
merged, concerns over the differing standards for this data 
must be addressed. In particular, CDT has seen a wide range of 
local practices for providing detailed images of homes and 
tying this information to other public records.
    In Ohio and Arizona, for example, we have seen cases where 
the specificity of this data has led concerns over homeowner 
safety and even identity theft in several cases. While there is 
nothing in this legislation to prevent the Federal and local 
agencies from implementing the pilots with privacy and security 
in mind, we suggest the relatively minor and light-handed 
approach of a privacy impact assessment before these pilots are 
able to move forward.
    In summary, it's important to recognize the potential power 
of the information coordination and sharing that it can lend to 
the oversight of markets. This information should be made 
directly available on the Web when possible, to provide greater 
transparency and accountability to the public. In doing so, we 
must also ensure the quality and the privacy of this data. I 
thank you for having me here, and I look forward to your 
questions.
    [The prepared statement of Mr. Schwartz can be found on 
page 99 of the appendix.]
    Chairman Moore of Kansas. Thank you, Mr. Schwartz.
    Mr. Quaadman, you are recognized, sir, for 5 minutes.

 STATEMENT OF THOMAS QUAADMAN, EXECUTIVE DIRECTOR, CENTER FOR 
   CAPITAL MARKETS COMPETITIVENESS, U.S. CHAMBER OF COMMERCE

    Mr. Quaadman. Thank you, Mr. Chairman.
    Chairman Moore, Ranking Member Biggert, and members of the 
subcommittee, I wish to thank you for the opportunity to speak 
before you on this important issue. And let me say at the 
outset that we are testifying today in support of H.R. 1242 and 
wish to thank Congresswoman Maloney and Congressman King for 
their leadership and foresight in introducing this bill.
    In the days and weeks following the Lehman collapse, the 
United States and the global economy stood on the precipice of 
an outright collapse. The credit markets were frozen. Consumers 
stopped spending. Businesses started to contract and we saw the 
first electronic run on financial institutions. To prevent 
widespread collapse, the Bush Administration and Congress took 
unprecedented and dramatic action in passing the Emergency 
Economic Stabilization Act.
    The centerpiece to the EESA is the Troubled Assets Relief 
Program, or TARP. With over $700 billion in Federal funding, 
the purpose of TARP is to stabilize the financial system and 
help create the conditions for recovery. The United States 
Chamber of Commerce lobbied for the creation of the TARP 
program and continues to support efforts to improve the program 
to ensure its success. Simply put, the financial crisis had 
driven the United States to its worst economic predicament 
since the Great Depression. In order for businesses to 
function, and for an economic recovery to take hold, the 
financial services sector needed immediate shoring up and that 
vehicle was TARP.
    TARP was intended to purchase toxic assets and take them 
off the balance sheets of financial institutions; however, 
Secretary Paulsen opted to use an alternative provision of the 
bill when it became apparent that the valuation of toxic assets 
was too difficult, and that a purchase program would take too 
long to have an immediate impact. Consequently, it was decided 
the TARP fund should be used to inject capital into struggling 
or systemically important financial firms.
    The TARP program has had its problems, but a year later we 
can say that an outright collapse was avoided. The financial 
sector is stabilizing, and the first signs are appearing that 
an economic recovery has taken hold. That being said, the 
situation is still fragile. While the Chamber has stood by the 
TARP program, we have also supported efforts to improve its 
implementation. As with any government program, the Chamber 
believes that there needs to be accountability for taxpayer 
dollars. This is particularly true with the massive expenditure 
of government moneys through an expedited process. Simply put, 
the American people have a right to know how, where, and when 
their hard-earned money is being spent.
    President Obama recently announced that firms that have 
fully repaid their TARP funds have provided taxpayers with a 
return of 17 percent. This proves that TARP can be successful. 
However, any potential misallocation or misuse of taxpayer 
dollars may erode support for the TARP program, undermine 
confidence of firms in TARP, and possibly harm efforts to 
stabilize the financial sector. By building transparency into 
the administration of TARP, accountability will be enhanced. 
Taxpayers can have trust in the program and expenditure 
resources.
    Accountability for the use of taxpayer dollars helps 
establish the confidence that is needed for TARP to stabilize 
the financial sector. Because of this need for accountability 
and transparency, the Chamber wrote to Congress on June 11, 
2009, in support of H.R. 1242. This bipartisan bill sponsored 
by Representatives Maloney and King represents an important 
step forward in creating and enforcing accountability. 
Currently, information regarding TARP funds are spread across 
multiple agencies, using incompatible formats and it takes a 
daunting task for officials and taxpayers to understand how 
funds are being used.
    The Maloney-King bill would require the use of existing 
technologies to create a single, publicly accessible database 
that can track TARP funds in near real time. This transparency 
will help avoid the misuse of funds and develop a level of 
confidence that is integral to the success of TARP. The 
implementation of this bill would provide a benefit that would 
outweigh costs.
    That being said, we also believe that there are some issues 
that need to be addressed with this implementation. In other 
pieces of legislation through the Privacy Act and Gramm-Leach-
Bliley, Congress has taken steps to ensure the privacy and 
careful disclosure of financial information of businesses and 
individuals alike. We think that these are important issues 
that need to be addressed in the implementation of this 
legislation. We also believe that information should be used in 
a contextual basis so that discussion of its context would 
provide a basis for a better understanding.
    I understand that my time is up, Mr. Chairman, and my full 
remarks are in the record. Thank you.
    [The prepared statement of Mr. Quaadman can be found on 
page 95 of the appendix.]
    Chairman Moore of Kansas. Thank you for noticing your time, 
too, and I appreciate that.
    Mr. Horne, you are recognized, sir, for up to 5 minutes.

STATEMENT OF STEPHEN C. HORNE, SENIOR VICE PRESIDENT FOR MASTER 
DATA MANAGEMENT AND INTEGRATION SREVICES, DOW JONES ENTERPRISE 
                          MEDIA GROUP

    Mr. Horne. Thank you very much. Good morning, Chairman 
Moore, Ranking Member Biggert, members of the subcommittee, and 
Congresswoman Maloney.
    My name is Steve Horne. I am vice president of Master Data 
Management for the Dow Jones Enterprise Media Group. I have 
spent over 30 years building complex databases by transforming 
highly complicated data, and I think that we have all heard 
that this is highly complicated data, into usable information.
    Dow Jones has provided transparency to the marketplace in 
the form of indexes, publicly and privately held corporate 
information and analysis for over 100 years. We are kind of in 
the transparency business. Thank you for inviting me to speak 
with you today. Since the passage of TARP, Dow Jones has been a 
strong advocate of the use of technology to provide 
transparency to the program that to date has been somewhat 
opaque to both this House and to the American people.
    The SIGTARP and the independent Congressional Oversight 
Committee have both made very strong statements that further 
action must be taken to make TARP more transparent Transparency 
is not just about casting a light and reporting to the 
institutions receiving TARP funds, but in his report to 
Congress on July 21, 2009, the SIGTARP noted that we need a 
systematic program designed to capture appropriate information 
necessary to prevent waste, fraud, and abuse of TARP funds.
    We support the goals of H.R. 1242 and the actions of 
Congresswoman Maloney and Congressman King in terms of 
providing true transparency to the TARP program. Real-time 
data-driven reporting and analysis provides the American 
taxpayer comfort that their money is being used as intended 
under TARP, and, potentially, other future programs to be 
covered under the new financial reform act. Proper reporting 
procedures are not only missing from the TARP program, but 
they're missing from almost all the current programs 
distributing Federal funds to private institutions.
    There was no clearly established mandate that such 
procedures in place to govern the distribution of funds from 
any sector of the federally-funding infrastructure are in 
place. Dow Jones' application as currently in use worldwide 
demonstrates how transparency has been delivered to the 
commercial sector. And I have been asked to show some examples 
of transparency in the commercial world. Dow Jones is well-
known for its newswires, Factiva.com, and companies and 
executives applications that take advantage of massive data 
collection and maintenance efforts that we go through. And I 
have a set of slides out there.
    If you see on slide 2, it talks a little bit about those 
efforts. We have also developed for these applications many 
capabilities to report on and provide comprehensive 
visualization of information. We give our customers insight 
into the specific areas concern.
    On slide 3, that shows a little bit about our efforts, but 
there are many firms here that are representing different 
efforts for visualization and reporting, and geospatial 
analysis, which is very important relative to accomplishing the 
task at hand. So for example we have every TARP participant 
flagged in our database, so we know who they are. Fine. Now, we 
can just assemble all the information around them.
    For example, our database and tools provided customers with 
the ability to assess risks in respect to prospective customers 
and partners. We maintain a database of over 600,000 
individuals and entities that based upon prior history could 
represent a legal or reputational risk to a company doing 
business with such people or entity.
    We provide anti-corruption applications for tracking State-
owned companies and other entities around the world that could 
pose risks under the Foreign Corrupt Practices Act. And we also 
have a financial tracking system to trace funding through our 
sanctions alert program for Counter Terrorism Funds Tracking, 
and nobody would want any of this money to end up in that 
place. These are just a few of the types of capabilities a 
system developed under H.R. 1242 could have in order to better 
manage and track funds and understand their use.
    To provide the level of transparency called for in this 
bill is not simple. Currently, the Treasury subscribes to many 
different sources of data, including our own. This data is in 
distinct formats that are not compared or aggregated in such a 
way to identify anomalies as to transform the data into usable 
information. According to the SIGTARP, ``Treasury has declined 
to adopt this recommendation, calling any such reporting 
meaningless in light of the inherent fungibility of money.''
    When I testified before the Domestic Policy Subcommittee of 
the House Oversight and Government Reform Committee in March, I 
showed that even though the money may be fungible, it's also 
volumetric, which means that it can be tracked. This fact has 
been validated by many top economists.
    The Master Database example shown in slide 4 shows a lot of 
different sources of data and we manage and maintain a good 
many, if not all the sources, to be integrated into a 
standardized single version of truth. This will require a 
considerable amount of effort on behalf of an integrator. The 
database can be refined based upon specific rules and 
regulatory objectives to be measured against the facts 
presented from various sources of information. By doing this 
and performing extensive analysis, you can identify anomalies 
or issues or problems within the data.
    The analysts can identify these anomalies where the data is 
incomplete, and when different between different sources, etc., 
and can red flag places where this is a problem. And I realize 
that my time is just about up. I want to thank you that the 
rest of my information here is for the record, and I hope that 
the panel will take a look at some of the other information we 
have included to assist in their evaluation.
    [The prepared statement of Mr. Horne can be found on page 
38 of the appendix.]
    Chairman Moore of Kansas. Thank you, Mr. Horne.
    I do appreciate very much the witnesses recognizing their 
time limitations because we do have several other witnesses to 
testify as well as questioning for each of the witnesses. So I 
appreciate the witnesses' cooperation here.
    Next, we recognize Mr. Krishna. Sir, you are recognized for 
5 minutes.

STATEMENT OF DILIP KRISHNA, VICE PRESIDENT, FINANCIAL SERVICES 
              AND INSURANCE, TERADATA CORPORATION

    Mr. Krishna. Thank you, Mr. Chairman.
    Chairman Moore, Ranking Member Biggert, and members of the 
subcommittee, my name is Dilip Krishna, representing Teradata 
Corporation. Thank you for the invitation to offer testimony 
today before your subcommittee. Before I begin, I would also 
like to thank Congresswoman Maloney for her leadership in 
introducing H.R. 1242.
    Teradata Corporation endorses H.R. 1242 without 
reservation, and encourages the Congress to pass this 
legislation as soon as possible. Teradata is among the world's 
largest companies focused solely on analytics and data 
warehousing. Our technology provides businesses and governments 
with the ability to leverage detailed, level data that's 
enabling these entities to recognize emerging trends and take 
appropriate corrective action quickly.
    The problem of comprehensive governmental oversight is 
immensely important today. The economic crisis of the last 2 
years has taught us that our financial institutions are truly a 
national asset, the abuse of which is to the detriment of every 
American. To paraphrase Joel Grey and Liza Minnelli from 
``Cabaret,'' we have learned that money does indeed make the 
world go around. Therefore, thorough, effective oversight of 
the financial system is critical to our future success. At the 
same time, we all want efficient government; and, critically, 
we need to ensure that any oversight system continues to allow 
the financial sector to provide the same high level of 
innovation and leadership that has propelled the prosperity of 
our market-based system for well over 2 centuries.
    Financial oversight depends on the ability to effectively 
monitor financial system risks with a high degree of frequency 
to detect warning signs early. Regulators must have the proper 
tools to accomplish their mission by quickly establishing the 
root cause of the warnings and addressing them promptly and 
appropriately. But, this alone is not enough. As we have seen 
in the past 2 years, focusing on known risks alone exposes us 
to risks that were not predicted. And any financial system 
therefore must also have a predictive component.
    The technology exists today to combine real-time monitoring 
and ongoing predictive capabilities within the same system, and 
based on the same detail-level data. Additional tools are 
employed, such as statistical analysis and visualization 
technology, to help quickly identify outliers and interpret 
risks. This analytic technology can allow us to develop an 
effective oversight regime, keep cost constraint, and at the 
same time allow continued innovation and growth in the 
financial services.
    Already, the financial sector uses data analytics 
technology in diverse areas ranging from marketing to fraud 
management. Financial services companies have, for example, 
employed data analytics to save tens of millions of dollars 
every year by rapidly distinguishing fraud attacks and acting 
to prevent them in real time. Large global firms routinely use 
such technology for financial risk management and anti-money 
laundering detection.
    In fact, the common framework for creating processed 
information from multiple sources of data is currently evolving 
across both the financial services and technology industries. 
Many large technology firms from across the spectrum also 
utilize essentially the same approach, and their customers in 
every industry are responding by implementing this concept 
within their enterprise.
    Chairman Moore and members of the subcommittee, this is 
very good news indeed for proponents of financial oversight, 
because it results in the various parts of the data analytics 
process being perfected at the same time. Keeping with 
technology trends in general, not only are the capabilities 
improving at a tremendous rate, but costs are also dropping 
significantly. Simply put, the time has never been better for 
leveraging information technology to create a strong system of 
financial oversight. It has proven it is successful, and it can 
be implemented today.
    Again, thank you for the opportunity to testify before you 
this morning. I look forward to answering your questions.
    [The prepared statement of Mr. Krishna can be found on page 
61 of the appendix.]
    Chairman Moore of Kansas. Thank you, Mr. Krishna. We 
appreciate your testimony. And, Ms. Marlow, you are next 
recognized for 5 minutes. I will remind each of the witnesses 
again that your written statements are received in the record. 
Thank you.
    Ms. Marlow?

STATEMENT OF SUSAN MARLOW, CHIEF EXECUTIVE OFFICER, SMART DATA 
              STRATEGIES, INC., ON BEHALF OF MAPPS

    Ms. Marlow. Thank you. Mr. Chairman, members of the 
subcommittee, my name is Susan Marlow. I am the president of 
Smart Data Strategies, a woman-owned business specializing in 
land records management. And I'm here today representing MAPPS, 
a national association of more than 160 private geospatial 
firms throughout the United States.
    I have the pleasure of serving as chair of the MAPPS 
Cadastre Task Force. A Cadastre is a parcel based register of 
land or land information system. Many nations around the globe 
have national cadastres or national property databases in large 
measure thanks to the generosity of the American people, as 
these systems have been paid for by AID, World Bank, and other 
taxpayer-supported institutions. However, in the United States 
there are 3,200 counties, and as a result when it comes to 
parcel data, there are 3,200-plus puzzle pieces of non-standard 
data that don't quite fit together. While millions of dollars 
are spent on the creation and maintenance of this data at the 
local level, the investments are not being realized at the 
Federal level due to lack of coordination.
    We witnessed the devastating effects foreclosures have had 
on our Nation--not just financial, but societal impacts on 
neighborhoods and communities--through a rise of crime, theft, 
vandalism, blight, and unsafe health conditions. Therefore, it 
is imperative that we utilize available technologies such as 
parcel-based geospatial data and systems to monitor and protect 
something so vital to our country's well being.
    The introduction of Google Earth and Microsoft Virtual 
Earth have shown all of us the power of geospatial information. 
The geospatial market is expanding into every area of business 
through the enhancement of visualization and analytical 
capabilities. The use of this decision support technology is 
critical to all levels of government. We have all seen the 
infamous John Snow map plotting the incidence and location of 
cholera in London in 1854, just as we have recently seen in the 
newspapers or on television maps showing the spread of the H1N1 
swine flu.
    A national parcel system would be a visualization, an 
analytical tool, that would allow us to see the geographic 
location, distribution, and most importantly, spatial 
relationships of foreclosed properties. It is unfortunate that 
today many Federal analyses and decisions are being made using 
the wrong level of geography. For example, under the Home 
Mortgage Disclosure Act, HMDA, data on mortgage transactions is 
collected at the census track level, not at the individual 
parcel level.
    The parcel layer is much more detailed. It contains 
information about the value, improvements, taxes, and the 
physical location of the property. Parcel data can provide an 
early warning system to track changes in the market, just as 
the ones we saw in the recent years with mortgage foreclosures. 
We urge Congress to amend HMDA to require the collection of 
parcel data as a first step toward that early warning system. 
For decades, numerous studies have recommended the use of 
parcel data at the national level and called for improved 
national coordination.
    I summarized some of these in my written statement. It is 
astonishing to note that the National Research Council, 
National Academy of Sciences found in 1980 that the technology 
was adequate for the task, but the major obstacles to its 
establishment were organizational and institutional. The 
technology is lightyears ahead today, but the organization is 
still a barrier. The National Spatial Data Infrastructure, 
NSDI, called for by President Clinton in an Executive Order and 
later reaffirmed by President Bush, identified seven framework 
layers of geospatial data for use in managing Federal 
Government, including a parcel layer.
    Sadly, 15 years later, little progress has been made in 
creating the NSDI. We urge Congress to authorize and fund this 
critical information infrastructure. In my statement, we 
provide comments and suggestions on several pieces of 
legislation to help with this effort. Let me conclude by saying 
30 years of reports and research has called for the parcel 
layer, yet it remains unfunded and incomplete. The problem is 
not technical. It is political and institutional.
    While FedEx can track the location of millions of packages 
per day moving around the world, the Federal Government does 
not track the location of land, and it is stationary. While the 
Federal Government has identified numerous needs for parcel 
data, there is only sporadic use due to failed coordination 
between Federal, State, and local agencies. When one looks at 
the agenda for this Congress from mortgages to climate change, 
from healthcare to a smart energy grid, they cannot be 
effectively implemented today because of the Federal 
Government's failure to properly utilize geospatial data.
    Mr. Chairman, we commend you for your interest and 
leadership, and we stand ready to work with Congress and the 
Executive Branch to better serve the geospatial needs of the 
American people in financial services oversight and a variety 
of other national needs and applications. The technology 
exists. A robust, qualified, and competent private sector is in 
place, and the solutions are waiting to be implemented. What is 
lacking is demand-driven leadership from the Federal 
Government.
    Thank you so much.
    [The prepared statement of Ms. Marlow can be found on page 
67 of the appendix.]
    Chairman Moore of Kansas. Thank you for your testimony, Ms. 
Marlow. Mr. Hahn, sir, you are recognized for 5 minutes. And 
again, all of your written testimony will be received in the 
record.
    Thank you, sir. Mr. Hahn?

   STATEMENT OF GREGORY B. HAHN, PRINCIPAL, CROWE HORWATH LLP

    Mr. Hahn. Good morning. My name is Greg Hahn of Crowe 
Horwath LLP. Let me first thank the subcommittee for the 
opportunity to testify today. Crowe Horwath has developed and 
implemented targeted technology solutions to assist financial 
institutions in compliance and oversight activities related to 
Federal regulations. We would also like to share how some of 
those solutions may assist the Federal Government in its 
oversight practices of the financial services industry.
    Crowe Horwath is a professional services firm with the core 
skill of bringing process, industry, and regulatory expertise 
blended with technology skills, which allows us to develop 
targeted tools that fill the gaps where large technology 
vendors have not focused. As a worldwide professional services 
firm, the 8th largest in the United States and 9th in the 
world, we are not focused on the development of public policy, 
but rather, to assist our clients in developing solutions that 
are compliant and operationally effective.
    We have significant experience working with most State 
governments, have conducted special Federal projects like 
working for the RTC during the savings and loan bailout, and 
have one of the most established track records of work with 
commercial banks. We also have significant experience assisting 
clients on issues related to the Bank Secrecy Act in supporting 
anti-money laundering or AML regulations.
    Crowe Horwath has worked with over 100 financial services 
companies to develop, implement, optimize, and test AML 
compliance programs. Our technical solutions have provided 
automation and repeatability to historically manual or non-
existent oversight processes. When the Patriot Act was passed 
in 2001, provisions related to financial institution compliance 
and strengthening for the Bank Secrecy Act raised the bar for 
compliance significantly.
    I would like to walk you through two examples today. In 
working with our clients we found that it was difficult to 
develop a process for identifying higher risk customers, 
because additional information was needed when an account was 
opened in order to make that evaluation. We developed a 
technology platform that would walk the employee opening the 
account through a logical flow that asks the appropriate 
questions of customers to maintain a competitive customer 
experience. In essence, each customer interaction was 
customized or dynamic based upon the information that was 
provided. As more guidance was made available, we added the 
ability to conduct an annual review of the customer 
relationship to determine if the risks presented were still in 
line with the institution's risk profile.
    A second example of the client need was to standardize the 
review and documentation process for investigation potential, 
suspicious activity. We focused on two specific challenges: how 
to drive more efficiency into a process that was repetitive, 
while continuing to leverage the individual's expertise and 
judgment as it related to identifying suspicious activity; and 
how to create a robust case file that increased the quality of 
the final work product.
    My firm developed a patent pending solution that models 
each institution's investigative process and focuses an analyst 
on collecting information that is specific to the type of 
customer and the types of transaction activity in question. We 
then collect all the information and reportable fields, which 
has allowed us to generate the case file summary automatically. 
This functionality alone has saved analysts hours in writing up 
case files. In recent months, we have found this application 
flexible enough to address additional areas of risk management, 
such as fraud and the identification and monitoring of changes 
in credit portfolio quality.
    As we continue to work on emerging and changing regulatory 
compliance issues, we will leverage the platforms we have 
created to give our clients the ability to comply with today's 
requirements and give them the capability to adapt as the 
regulatory environment evolves. We believe these cutting edge 
technologies in the world of financial services have merit in 
application for the Federal environment, especially today.
    I want to thank the committee for asking Crowe Horwath to 
appear this morning. I would be pleased to answer any of your 
questions.
    [The prepared statement of Mr. Hahn can be found on page 32 
of the appendix.]
    Chairman Moore of Kansas. Thank you, Mr. Hahn, for your 
testimony.
    Professor Zelner, sir, you are recognized for up to 5 
minutes.

   STATEMENT OF PROFESSOR BENNET A. ZELNER, FUQUA SCHOOL OF 
   BUSINESS, DUKE UNIVERSITY, ON BEHALF OF THE PROBITY GROUP

    Mr. Zelner. Mr. Chairman and members of the committee, 
first of all, thank you for holding this hearing on the use of 
technology to improve TARP and financial oversight. Thank you 
as well for giving me the opportunity to appear before you 
today.
    I am going to outline for you technology that my colleagues 
and I at Probity Group have developed, a technology known as 
the ``Probity Gradient,'' which we believe can help achieve the 
twin goals of improved financial oversight and also optimal 
allocation of TARP funds, both in general and as embodied in 
H.R. 1242.
    Just by way of background, I am a professor at Duke 
University's Fuqua School of Business, and my colleagues at the 
Probity Group including a Wharton school professor as well as 
several executives with extensive experience in risk 
management. We founded the Probity Group to help business 
executives and policymakers develop strategies and policies for 
assessing and mitigating high impact risks to complex systems 
composed of tangible and intangible assets.
    The Probity Gradient, the technology that I want to talk 
about today, was first developed to assess and mitigate risks 
to tangible asset systems, primarily infrastructure systems, 
ranging from stock exchanges and computer centers to oil 
refineries and transportation systems. We have also developed a 
technology known as ``PSI'' to assess and mitigate risks to 
intangible assets, such as reputation and policy; but, it's the 
``Gradient'' that I'll focus on today.
    So, the hallmark of the Gradient and the main reason why we 
think that Gradient analysis can be so useful for improving 
financial system oversight and for allocating future TARP funds 
is its holistic systems approach, like systems of financial 
assets, infrastructure systems composed of physical assets are 
extraordinarily complex with many interdependent parts that are 
connected through myriad channels. As a result and as 
demonstrated in the financial crisis that our Nation and the 
world faced a year ago, a failure or breach in one part of the 
system can cascade throughout the entire system with 
potentially dire and far-reaching consequences.
    The Gradient's systems approach provides both numeric 
indicators of the total value at risk from a breach or a 
failure in one specific area in one specific asset category, 
for example, as well as a visual indication of specific areas 
of the most high impact vulnerability. With this type of 
analysis in-hand, it's possible not only to quantify and 
visualize risk consequences, but also to identify areas of 
critical vulnerability before something actually goes wrong.
    The Gradient has its roots in a systems engineering 
approach known as ``Failure modes and effects analysis,'' as 
well as ``Trusted System'' technology, has been promoted by the 
NSA since the 1960's. My colleagues at the Probity Group 
adapted these approaches to the analysis and protection of 
infrastructure systems as I have already said. Although the 
Gradient's roots lie outside of the field of finance, public 
discussion and analysis of the devastating financial crisis 
that began last September have motivated us to explore how the 
Gradient could be applied to a complex financial system when 
its overall performance depends on the valuation of myriad, 
interdependent, often very dissimilar assets, and the viability 
of the numerous enterprises that hold these assets.
    In the words of a Washington Post Op Ed written by 
Sebastian Mallaby last March, ``We have a set of overseers who 
evaluate financial institutions one by one, but systemic risk 
is created by the interactions between institutions.'' So, in 
our opinion, the Gradient represents a low-cost, highly 
accurate tool, one with proven reliability that would enable 
regulators to take the necessary big picture perspective. 
Gradient analysis would also help policymakers and regulators 
choose the best way to allocate TARP funds by identifying 
assets or asset categories whose failure or breach would have 
the most devastating and far-reaching systemic consequences.
    Additionally, the systems engineering approach embodied in 
the Gradient could supplement existing financial analysis tools 
to assess the risk consequences of various forms of financial 
malfeasance, such as fraud, privacy invasion, insider trading, 
and valuation tampering.
    So, thank you again, Mr. Chairman and members of the 
committee, both for the opportunity to tell you why we believe 
that the Probity Gradient can help achieve the important goal 
of strengthening oversight of our complex financial system, and 
also for the strong oversight that your subcommittee is 
providing in this important area. I am happy to take questions 
today, and also in the future by e-mail.
    [The prepared statement of Professor Zelner can be found on 
page 103 of the appendix.]
    Chairman Moore of Kansas. Thank you, Professor Zelner.
    And, finally, Mr. Kimner, you are recognized, sir, for 5 
minutes.

    STATEMENT OF THOMAS KIMNER, RISK MANAGER, AMERICAS RISK 
                 PRACTICE, SAS INSTITUTE, INC.

    Mr. Kimner. Chairman Moore, Ranking Member Biggert, and 
members of the subcommittee, I appreciate the opportunity to 
appear before you today.
    By way of background, I have been deploying technology 
solutions in the financial services area for nearly 20 years in 
both private and public sectors. SAS itself has been providing 
technology to the financial and government sectors for over 30 
years. While my written testimony highlighted a number of 
themes, I'll only touch on a few here. The first theme is the 
increased complexity of the financial markets.
    The financial landscape is more complex today than ever. 
Markets have become more global and more interrelated. We have 
a whole new set of financial instruments that did not exist 
previously. These instruments are highly complex and require 
new modeling techniques to evaluate. Our financial institutions 
themselves have become much more complicated, particularly as 
they begin to enter new lines of business and sectors that they 
were not previously in.
    As a result, many of these organizations are now facing new 
regulatory and compliance issues. Oversight of these larger, 
more complex entities and their portfolios of investments is 
virtually impossible without bracing technology.
    The second theme is the existence of powerful technologies 
that could help both banks and regulators. Financial 
institutions approach risk management using varying degrees of 
technology that address market risk, credit risk, asset and 
liability management, and operational risk. For regulators, 
having these technologies would not only provide better 
insights into what is happening within a financial institution, 
but could help provide a comprehensive assessment to cross 
institutions.
    To illustrate, I would like to mention two specific tools: 
stress testing; and performance management. This year, Treasury 
asked 19 of the country's largest banks to undergo stress 
testing and established the scenarios under which the banks 
should be tested. Let me offer a few observations about the 
process. First, to comply with the new stress test, banks 
developed a one-time, manual process. It took many people 
having many conversations over many hours to translate the 
requirements into a model. Second, the stress test conditions 
may not have gone far enough in all cases. Other scenarios and 
other factors involving liquidity, cost of capital, and the 
economy could have been considered.
    Finally, individual banks had flexibility in interpreting 
applying the stress test. This creates a potential issue 
because the perception and perhaps the reality is that 
different banks receive different treatment. Technology can be 
of enormous assistance to both banks and regulators to 
streamline the process, provide consistency, assess the impact 
of additional risk factors, and integrate the results.
    A second technology area growing in importance is 
performance management. SAS defines performance management as 
the process of using technology to ensure that a project's 
goals are fully aligned with the resources and activities 
needed to achieve them. Performance management tools can help 
program managers and senior agency officials understand whether 
the right activities are being pursued with the right resources 
to obtain the stated objectives. Of course, technology alone 
cannot solve all the challenges related to effective program 
management. Without a clear understanding of the problem and 
the objectives, it is virtually impossible to assess overall 
effectiveness. The application of technology is no substitute 
for clarity.
    The third theme is that risk management is both an art and 
a science. Risk, quite simply, is uncertainty. Risk management 
then is proactively taking steps to reduce the uncertainty. For 
financial institutions, risk management involves determining 
what level of risk they are willing to absorb and then managing 
to that risk tolerance. Sound risk management is also about 
building appropriate policies and controls. From a regulatory 
point of view, risk management should involve reviews to see 
whether financial institutions are adhering to their own 
policies, as well as their view regarding what is an 
appropriate amount of risk.
    Given their broad market charter, regulators must have 
similar capabilities as banks to make independent assessments 
of the risks within individual banks as well as across all 
banks. In conclusion, SAS's catch phrase is the power to know. 
We believe that data and technology tools are powerful 
enablers. They allow decisionmakers to draw mathematically 
significant insights about their actions and make better-
informed decisions. As markets and financial products become 
increasingly complicated and interrelated, regulators would 
benefit from deploying technology solutions to assist in 
understanding and monitoring what is happening. But technology 
by itself is not sufficient. Without the right people 
possessing the right skills in the right jobs, technology will 
not improve oversight.
    I appreciate the opportunity to appear before you today and 
look forward to your questions.
    [The prepared statement of Mr. Kimner can be found on page 
51 of the appendix.]
    Chairman Moore of Kansas. Thank you, Mr. Kimner.
    I thank all of our witnesses for their testimony. Now, I 
recognize myself for 5 minutes for questions, and I will start, 
Mr. Horne and Mr. Krishna, with you if you would, please. As I 
said in my opening statement, I'm a co-sponsor of Congresswoman 
Maloney's and Congressman King's bill H.R. 1242, to better use 
technology to improve TARP oversight.
    With the approach that's taken in the bill, can you speak 
to broader applications of using technology in a similar way, 
especially as this committee debates financial regulatory 
reform. If you have any thoughts or observations, I would 
appreciate it very much.
    Mr. Horne?
    Mr. Horne. Yes, thank you, Mr. Chairman. There's a whole 
series, if you think about data being sort of the ultimate 
extensible asset. Anything that's being done in financial 
reform, frankly, should reflect the results of analysis that 
come out of what H.R. 1242's intent was to provide insight and 
information in terms of the use of TARP funds.
    It's a shame. I have a letter here that I sent to Assistant 
Secretary Kashkari on October 7, 2008, basically requesting the 
same thing that Congresswoman Maloney has put together in her 
bill; and, this was a year ago, practically, at this time. And, 
if you had the system in place right now, virtually all of the 
information that would be needed to determine the Financial 
Reform Acts rules, laws, concepts, based upon factual 
information could be gleaned from that system, rather than now 
having to sometimes shoot from the hip. And, I'll defer to Mr. 
Krishna on this, but predictive analysis off of this in terms 
of how to figure out what we should do could have been part of 
our current infrastructure to make the financial reformat the 
much more powerful capability; so, and I will defer to Mr. 
Krishna.
    Chairman Moore of Kansas. Thank you, Mr. Krishna. Do you 
have any observations, sir?
    Mr. Krishna. Thank you, Chairman Moore.
    I will speak from our extensive experience in risk 
management within the financial industry's space. Risk 
management and financial oversight is really the other side of 
that coin. It's really about thought, about thinking through 
the types of risks and the types of events that we really 
haven't anticipated so far, but could affect in a very adverse 
way what would happen to the economy. It turns out that in the 
financial institutions that we have worked with, a lot of the 
process of risk management, in fact, is about data and bringing 
data together.
    Something like 70 to 90 percent of the time is in fact 
taken up in that process as opposed to thinking. What we find 
is that taking away the problem of managing data, of 
aggregating data, in fact, leads to a tremendous improvement in 
the capability to do risk management; and, therefore, financial 
oversight. The last comment I will make is that especially 
financial oversight in this new economy is really about the 
interactions between financial institutions, and that's 
something that requires a tremendous amount of further thinking 
and further imagination which have to be tested in a predictive 
manner; and, we believe that the database as is proposed in 
H.R. 1242 is going to be instrumental in providing that further 
level of capability.
    Chairman Moore of Kansas. Thank you, Mr. Krishna.
    Ms. Marlow, as you know, a constituent of mine is MAPPS 
board member Scott Perkins. I recently toured his geospatial 
firm in my congressional district, Wilson and Company. The way 
they're able to use this technology is impressive and could 
have some, I think, application to financial oversight.
    In your testimony, you highlighted several bills before 
Congress: H.R. 932, H.R. 1242, and H.R 1520. You also 
recommended amending the Home Mortgage Disclosure Act so that 
the Federal Reserve collects home mortgage transaction data at 
the parcel level. Why is this change important? And, before you 
answer, Ms. Marlow, since you helped draft the 2007 National 
Academy's report on these issues--and we have reports going 
back to 1980--do you believe additional studies are needed? Or, 
is now the time for action?
    I would appreciate your comments, Ms. Marlow.
    Ms. Marlow. Well, I appreciate you recognizing that 30 
years of reports have called for it. This is the one that was 
done in 2007--definitely time for action. We have done numerous 
reports and every one of the reports have come to a lot of the 
same conclusions: that our problems are not technological in 
nature, they are organizational and institutional, and we 
really ask for leadership at the Federal level.
    We certainly believe that this could help with a geospatial 
component in the database that's being proposed. We certainly 
believe that would be an incredible enhancement and a 
visualization tool that would help in all areas, and, we 
believe that the parcel level is the right granularity for that 
geospatial data.
    Chairman Moore of Kansas. Thank you very much for your 
comments, and I thank all the panel members. I now recognize 
Ranking Member Biggert for 5 minutes.
    Mrs. Biggert. Thank you, Mr. Chairman.
    How could Federal regulators use real-time monitoring and 
predictive analysis and coordinate information to prevent the 
financial collapse in the Federal financial programs? You know, 
you talked about other stuff. I'll start with Mr. Hahn.
    Mr. Hahn. Thank you. In terms of real-time data and the 
presentation of that data, I think what's most critical is 
understanding the levels of flexibility that you're going to 
need going forward as things evolve as the data changes, having 
the level of flexibility to present that data in different 
ways, collect the data in ways that in the future you're going 
to be able to report against that data. With the CARS, the 
Crowe Activity Review System that we have developed and where 
we focused on assisting our clients with this evolving 
environment.
    We have repurposed what we did for anti-money laundering to 
deal with issues such as mortgage fraud investigations, 
especially where there have been quick turnarounds in terms of 
banks being acquired in this environment, and then we have also 
been focused on assisting with deposit fraud. And then we have 
begun the process of internally prototyping a TARP monitoring 
solution that our clients would use as well.
    Mrs. Biggert. Thank you. Then, Professor Zelner, how were 
you able to transform a method for analyzing complex weapons 
and industrial systems to a method for improving the financial 
systems and monitoring for systemic risk?
    Mr. Zelner. Well, I guess I would make two points in 
response to your question. The first is that the whole purpose 
of these systems that were developed to analyze infrastructure 
facilities is to take many dissimilar parts, many dissimilar 
system components, if you will, assets in the case of the 
financial system, and somehow compare both the vulnerabilities 
that these different assets or system components have in the 
threats. So if we want to think about the financial system, for 
example, threats to a given asset might include natural 
disaster or accounting fraud.
    The vulnerabilities of a specific asset might include the 
asset's degree of leverage or its ability to be hedged, for 
example. So, the whole idea, once again, is to adopt a 
standardized way of comparing the vulnerabilities and threats 
to very dissimilar assets. The other point I would make in 
response to your question is that I think that the Gradient, 
because it comes from an infrastructure and system security 
background very nicely complements a lot of the existing 
financial tools.
    So financial tools, financial analysis tools, are very 
focused on risks and probabilities, and that's critical. You 
obviously can't ignore that if you want to provide effective 
oversight. But, one thing I think has largely been missing from 
the conversation is the discussion of potential impact, 
potential risk consequences; and, what the Gradient does, 
because it was originally developed to help us think about and 
analyze weapons systems and physical infrastructure facilities, 
is identify the areas of most high impact vulnerability. This 
is very different. The areas of most high impact vulnerability 
may differ from the areas that are most likely to be breached 
are failing some way.
    Mrs. Biggert. Thank you. And with that, I would like to go 
to Ms. Marlow. In one of my former lives, I was a real estate 
attorney, and one of the things that was always worrisome to 
people was disclosure and privacy. You know, knowing if other 
people knew what the cost of their mortgage was and what 
payments they were making, and it appears here that what we're 
looking at is the disclosure in all this land data that 
everybody would have access to what their neighbors paid. A lot 
of it is all public record, but it's not that easy to find 
right now. But if it's on the Web site, there's also the 
question then that Mr. Schwartz addressed a little bit, and 
that was the security, you know, and the problems with theft or 
identity theft from people having access to so many things that 
are private to people. But then I noticed in one of your pages 
that you have that, you know, you could identify where there 
were high-cost loans that those were actually where the 
foreclosures were. But do we really need as much transparency 
as is sometimes offered?
    Ms. Marlow. Well, I appreciate the question and I certainly 
can understand your concern. I would like to note that the data 
that we're talking about aggregating is data that's available 
in your local assessor's office today. And we would call for 
authoritative data meaning data that is actually known to be 
correct. And so I believe that with that kind of data, you not 
only have the ability to have all of your personal data 
secure--and certainly the security should not be an issue at 
this particular level--but I would say that we need this kind 
of granularity of data so that we know where it's really 
happening, just so you know, like in disease control or 
anything else. If you know where it's happening, then you can 
begin to predict what it's going to do in the future, and that 
sort of thing, and you can monitor it.
    Chairman Moore of Kansas. Thank you. And Mr. Lynch, sir, 
you are recognized for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman.
    Again, I appreciate the testimony here this morning, and 
the hope of obtaining predictive analysis certainly offers 
great value to us. But, I must confess that I would be happy as 
a person on the oversight committee. I would be happy with a 
system that just tells me where the money went. Another hat 
that I wear, I am the co-chair of the task force on terrorist 
financing and non-proliferation.
    I work a lot with FINCEN, the Financial Crimes Enforcement 
Network, and one of the things that I have seen is that in the 
process of gathering--what we do is we establish financial 
intelligence units and we gather data; you know, suspicious 
activity reports, cash transaction reports--we get all these 
coming in. And I'm not so sure that our analysis is that good, 
because we get billions of pieces of data, millions of these 
reports, and the ability to sift through it all is very, very 
difficult.
    But I do know that since we started gathering the data we 
have pushed a lot of the terrorist money out of the legitimate 
financial system, because they know we're gathering the data 
and we're watching. So there's this sort of prophylactic 
function here that's pushing the money out of the system. And 
we can see it happening everywhere. I spent a lot of time in 
Jordan. They just adopted a good system in North Africa as 
well. And, just as an example, we did have a situation where 
Mr. Khan here from Hamas was actually grabbed with about $30 
million in a couple of suitcases coming over the border into 
Rafa into Southern Gaza, and that's because he couldn't 
transfer the money for a legitimate financial system. So we 
know that it's causing pressure.
    So I would be happy if we came up with a system that did 
that, that at least put people on notice that the government is 
watching and they were getting information in usable fashion. 
But Mr. Hahn and Mr. Kimner, Mr. Kimner, you hit on a great 
phrase there--``the power to know.'' And, as someone on the 
oversight committee on behalf of the American people, I want 
the power to know. And I have to tell you it has been a 
frustrating experience just trying to track this money in TARP, 
and now I'm seeing that we're going to blow out the 
responsibility of the Federal Government to regulate the entire 
financial services industry.
    How do we get the power to know? How do we? You know, 
Congress is representing the people here, the taxpayer. How do 
we get the power to know? How does that translation occur 
between your systems and us?
    Mr. Kimner. Thank you for the opportunity to answer the 
question. I think a lot of what we're talking about and my 
colleagues may agree with this is that data is really at the 
heart of all of this, so collecting data. And as you mentioned, 
you start to swim in it so you can collect it and you have it. 
And then you get to the point where you don't know what you're 
doing with it, you just have so much to look at.
    Some of what we're able to provide at SAS is pattern 
recognition software, so what that will do and what that helps 
you do is it helps you look at patterns across data over time. 
It helps you recognize where you have outliers, for instance, 
where you have anomalies to particular patterns. I'll use an 
example, in the written testimony about fraud, so you have a 
credit card. You go and when you're shopping it's a set of 
stores and you have gas purchases. But, all of a sudden, it's 
one hit on your record card for transaction for say some really 
expensive item. It may be a watch that you normally wouldn't 
buy. The predictive software that we have and the pattern 
recognition software that we have allows you to see that and 
flag that transaction.
    And what we do in real time in the credit card business is 
help people. So you may get a phone call during that 
transaction in a few minutes. The phone rings. The person at 
the cash register says hey, we want to verify it's you in this 
transaction. So that type of recognition helps you sort through 
the information and gives you knowledge about the patterns of 
information.
    Mr. Lynch. Okay. Let me just ask Mr. Hahn. Right now we're 
getting push-back. The system that I describe where we get 
these cash transaction reports and the suspicious activity 
reports, we have groups out there like the ACLU who are 
concerned about us gleaning all this data. They're saying you 
don't need it all and they're probably right, but we need a lot 
of it. How do we address the privacy concerns that folks have 
if we're bringing all this massive data?
    Mr. Hahn. So it's difficult for me to talk specifically 
about policy, but I can talk about what we have done with our 
clients, our financial institution clients, to address this, 
and we have done that in two ways. One, we worked with our 
clients to implement a dynamic on-boarding process, so 
different types of customers are going to be asked different 
types of questions to identify whether or not they present 
high-risk money laundering attributes. And that information is 
stored within the bank systems and all the security that's 
associated with what's inside a bank is applied to that 
technology.
    When suspicious activity is potentially found, we have also 
developed a dynamic process to go through the investigation so 
that it is done efficiently. It's done in a way that we're very 
focused on what needs to be reviewed based on the transactions 
and the customers, and then producing a consistent set of 
output so that when we are reporting into the government 
through the banks for suspicious activity, the information is 
consistent and then hopefully is easier for the government to 
use as they do the work that they do.
    Mr. Lynch. Thank you. Thank you, Mr. Chairman.
    Chairman Moore of Kansas. Thank you. Thank you, and the 
gentleman from New York, Mr. Lee, you are recognized, sir, for 
5 minutes.
    Mr. Lee. Thank you, Mr. Chairman.
    I guess I would start, maybe I will direct this question to 
Mr. Horne. It has been roughly a year since the TARP funds were 
initially released; and, obviously, I think we are all in 
agreement. We want to ensure that we are protecting taxpayers 
interest as best as possible and get meaningful data.
    I will take this from a different approach. In terms of the 
usable software data in terms of getting this implemented, in 
terms of a timeframe, in your estimation, how quickly could 
this be developed and have staff trained to have a useful 
system?
    Mr. Horne. Well, thank you for the question, Congressman. 
We have actually been going through this extensively in terms 
of trying to figure out how to make this come together and 
work. And we have been working with many different companies, 
frankly, because we are a data provider.
    Teradata is a data warehousing and analysis companies. We 
have been working with people from IBM. We have talked to 
people from SAS. Ms. Marlow's organization does a different 
thing in terms of spatial data; and, what we found is there are 
probably phased processes that could be used to put this thing 
in place in phases. To answer Congressman Lynch's question 
regarding, you know, I want to get the answer where the money 
went. I think that's the start, that's the foundation.
    So doing the volumetric analysis up-front probably can be 
completed within 90 to 120 days to get from the point of 
initiation of saying let's find out where the money went to get 
to that point. We are probably there in that timeframe. Okay? 
And that means that we have to combine all these sources of 
data and do preliminary analytics in that information.
    The next step is then being able to do what I call 
comparative analytics, because part of the problem is we are 
trying not to force the banks. Right now, the banks file 157 
different types of reports.
    Mr. Lee. You said how many?
    Mr. Horne. 157.
    Mr. Lee. And would this require banks then to increase 
additional compliance, additional task forces?
    Mr. Horne. No, I'm saying the opposite, because I think we 
have to stop cutting down trees. And part of the problem is 
that a lot of these reports say the same things. You have 
reports called the FR Y-9C report. You have reports going to 
the FIFEC organization, which has FDIC data, which has bank 
call report data. You have all this information going in, and a 
lot of times it's the same thing. Show me your balance sheet. 
Show me your transaction. Show me your mortgage information, 
lending information.
    Mr. Lee. I know I don't have a lot of time, so in your mind 
to get this thing fully implemented, give me a number. Is it 12 
months, 24 months?
    Mr. Horne. I think it's full implementation. We are talking 
about a full 12-month cycle with ongoing whatever requirements 
go beyond the initial implementation of everything. I am 
talking about every kind of tracking.
    Mr. Lee. And I'm not sure whom, anyone, can answer this 
question. Has there been any projections in terms of what the 
cost would be to develop this in terms, and then also the 
training aspect, which sometimes can be more expensive than the 
software itself?
    Mr. Horne. Well, part of the recommendation would be not 
necessarily to totally train, but to staff, very expert 
analysts to go along with this process; or, you have experience 
working with the data. And there were many people out there who 
do across these organizations as well as others to work with 
the government. From a cost standpoint, basically, if you look 
at just the standard government waste, fraud, and abuse numbers 
across all agencies, it is averaging somewhere in the area of 4 
to 5 percent. Medicare, I think, is like 12 percent. If it is 
just 1 percent here, it is $7 billion, so.
    Mr. Lee. I understand, but I am just curious.
    Mr. Horne. So the whole cost is under $100 million probably 
to do soup to nuts in this thing, to do everything.
    Mr. Lee. I am in the wrong business. I would love to get 
into this.
    Mr. Horne. Well, probably under $50 million to start it off 
to get the first 12 months done, and then whatever it needs to 
maintain over time. Your issue here is not the data. The data 
is not that expensive.
    Mr. Lee. Let me ask you one last one. I know I am getting 
close on time. I'm not sure what. This is a database that will 
be set up, a relational database? I'm not sure what ultimately 
it would be, but in doing so, once it is set up and 
established, what's the ability to modify it is this is going 
to be very dynamic. We hope that this would be an investment 
long-term. Would this database be easily modified downstream to 
ensure that it is?
    Mr. Horne. The whole premise is extensibility; to be able 
to change it on the fly, to be able to add new information, to 
be able to add new capabilities, new functionality in real 
time. Literally, also to have user ability to do so as well so 
a user can go in and take data into a secure environment with 
using just Excel or some other type of tool and be able to run 
a report.
    Mr. Lee. Thank you.
    Mr. Horne. With security in mind, of course.
    Mr. Lee. Thank you.
    Chairman Moore of Kansas. Thank you. And next, the Chair 
recognizes the gentleman from Minnesota, Mr. Paulsen.
    Mr. Paulsen. Thank you, Mr. Chairman.
    Mr. Quaadman, I wonder if I can ask, is sufficient 
oversight of TARP being conducted right now by the Special 
Inspector General for the Troubled Asset Relief Program or 
SIGTARP from your perspective? And how would this database 
itself really affect SIGTARP's oversight?
    Mr. Quaadman. Well, I think, you know, as I said in our 
testimony, we think that oversight and accountability is really 
at the center here, because a big part of TARP or the intent of 
TARP is to reinstall confidence in our financial system. So the 
more accountability and transparency than can be built in here 
the better, and that's why we thought that the database that's 
presented in Ms. Maloney's bill goes a long way to providing 
more accountability.
    The technology is there to do it. The information is there 
to do it, and we should use that so that taxpayers can have the 
ability to see where their money is going. So we think this is 
actually a supplement to what the Inspector General is doing.
    Mr. Paulsen. Supplement, okay. And I want to ask a question 
of Mr. Kimner, if I could.
    Given the size of various financial institutions of all 
sorts, and the varying complexity of their operations, is it 
really possible to come up with a single detail test that would 
be applicable to all businesses or all institutions?
    Mr. Kimner. Thank you for the opportunity to answer that. I 
don't know that a single test is the right answer. It may be 
that there is a variety of tests given the complexity of the 
institutions and the type of risks they take on. So it may not 
be a one-size-fits-all stress test, for example. There may be 
varying degrees of complexity within the test. I think part of 
what we are looking for is consistency, both in the application 
of the test, the information that gets collected and how it's 
used. So that if two institutions of similar risk profile and 
similar size are tested, that they have the same type of test 
being applied as opposed to having very different tests being 
applied to them.
    Mr. Paulsen. Thank you, Mr. Chairman. I yield back my time.
    Chairman Moore of Kansas. I thank the gentleman and I next 
recognize for 5 minutes the gentlelady from New York, Ms. 
Maloney.
    Mrs. Maloney. Thank you again, Mr. Chairman, and ranking 
member, for holding what I think is a very critical meeting 
that can help business, help the financial industry, restore 
confidence in our financial institutions, and move the 
regulation and oversight into the 21st Century. I first would 
like to welcome Thomas Quaadman at the Chamber of Commerce and 
comment on his work in a prior job to provide affordable and 
available healthcare to the 9/11 heroes and heroines. I wanted 
to compliment your work, but I do have limited time, so I want 
to jump on several areas and ask if you could get back to me in 
writing.
    Mr. Horne, your statement that banks have to file 157 
different reports, that is staggering. What a waste of 
paperwork. If we had one centralized system, they wouldn't have 
to do this. I would like you to get to the committee all of the 
157 different filings. I know about 20, but I didn't know there 
was 157. That is absolutely staggering.
    Mr. Horne. But there are subfilings within; in other words, 
25 different things.
    Mrs. Maloney. Get us the list.
    Mr. Horne. But you have paper coming out the wazoo.
    Mrs. Maloney. Get us the list; and I think we need to 
provide relief to financial institutions too that are 
overburdened with unnecessary filings. One of the problems that 
many of you raised in your testimony was the privacy challenge; 
and, I don't want to get into that now, because that is a 
difficult challenge. But if you have any ideas of how to handle 
that, if you could get back to us, the original bill is written 
with Mr. King and myself, has it only to regulators, Members of 
Congress and government, because of the proprietary 
information, and I thought that the privacy concerns would 
absolutely kill the bill moving forward with opposition.
    So that's not part of it, but it's something we could do in 
the future if we could figure out how to handle it. But I would 
like to say that when I first put the bill in it was in the 
midst of the financial crisis and money was being infused into 
the financial system at alarming speeds, and there were 
allegations of misuse of funds and corporate junkets, and so 
forth. It was undermining the public's support for this program 
or for stabilizing our financial institutions, which I support 
and think was necessary.
    Now we're at a point where the funds are no longer 
available from the TARP fund and the deadline has passed to 
apply for the funds, which is very different from when I first 
introduced it. So I would like to ask Mr. Krishna. Do you 
believe this is still necessary? And why is this still 
necessary?
    Mr. Krishna. Thank you, Congresswoman Maloney.
    Whenever government has spent hundreds of billions of 
dollars of taxpayer funds, I think it is relevant to think 
about where those funds have gone, even if there are no more 
funds going out. So I think that question is absolutely 
relevant, even today, to know where the funds went, how they 
were applied. But, beyond that, the bill that has been put 
forward allows us to create an asset that keeps on giving.
    So some of the comments made here were relevant, and not 
only TARP oversight, but financial oversight going forward. And 
I think that is where this bill will allow us to build a system 
of financial oversight with analytics and the use of technology 
in the appropriate way that will stand the system in good stead 
for many years coming. So I do think the TARP is very 
important, but I think the technology can help us move forward 
very effectively as well.
    Mrs. Maloney. I think that is well stated, and very 
briefly, in New York City, we had several scandals. We needed a 
Federal bailout at one point, and what we had was a system of 
separate bookkeepings, separate accounts. No one knew what was 
going on. I think AIG showed us that government regulators had 
no idea of what is going on, so any tool that we can put in 
place that helps us better analyze is going to be very helpful.
    New York City created a central database on our budget, on 
our contracts, on our whole economy, and we have been better 
managed since then, knowing when we are getting in trouble and 
able to prevent it--not after the fact--but before the fact. So 
I believe that this is a very strong and important tool. I 
believe it should have passed yesterday, and I am committed to 
working hard with Mr. Moore and others to bring it into a 
reality. I would like to ask, really, Mr. Horne, Mr. Krishna 
and others, anyone who would like to comment on what elements 
you would begin in capturing in the system. And if my time is 
expiring, I would like to invite all of the panelists to put it 
into a memo to the committee, because I think it is important 
to clarify exactly the elements that we need to capture; and, 
again, I want to thank the Chamber of Commerce, which speaks 
for business in America, for being here today. Your presence is 
extremely important, so do you have a quick response?
    Chairman Moore of Kansas. I thank the gentlelady. Her time 
has expired, and we would ask that the witnesses comply if you 
have comments to make with her request, because I think that 
could be very valuable for the record. If you would supply your 
written comments for the record, that would be appreciated. And 
I thank the gentlelady for her question.
    Mrs. Maloney. I thank you, and I hope you will reply with 
elements you feel should be part of it. I think we should have 
some elements in the core bill to begin with. Thank you. I 
yield back.
    Chairman Moore of Kansas. Thank you. And the gentlelady 
from Illinois has asked for an additional 2 minutes for one 
question.
    Mrs. Biggert. Yes, thank you, Mr. Chairman. I appreciate 
it. I just wanted to go back to Mr. Schwartz on the land data 
issue, and I just wanted to clarify that when I was talking 
about disclosure, I really was talking about the importance of 
transparency. And I think Ms. Maloney's bill is a really good 
bill and probably doesn't have some of the problems, I think, 
that the land data bill--the other one that's in Congress--
because I think it is really important from a consumer point of 
view that consumers' data is protected.
    I worry about such a bill where everything is known about 
the transactions, and is available. You can go to Zillow or if 
you're an attorney you go out to the county seat, or anyone can 
really go out and find out all that information, but it is 
harder than if it is posted on somebody's Web site for everyone 
to see. And I just wondered with some of the problems that have 
occurred in that area with security and identity.
    Mr. Schwartz. It is an extremely important question and I 
thank you for asking it. I think one other distinction I would 
like to make with Representative Maloney's bill that Mr. 
Quaadman also made was that the Privacy Act clearly applies to 
data that is collected by the Federal Government. We have a law 
for when that information is collected--brought into the 
Federal Government--and you are searching it on individuals' 
names. And there is also another law, the Government Act, has a 
provision for privacy impact assessments to be created in that 
situation.
    The problem with the land records issue is that information 
is collected by counties right now. As you start to manipulate 
it and use it in different ways, remember the Privacy Act was 
written in 1974. The guidance for it was written in 1975, and 
has not been updated since then. They didn't have the idea that 
we were going to have geo location systems, so it's not clearly 
covered by the Privacy Act, and that's where this problem 
begins.
    If it were a centralized database where we were looking up 
individuals by their name or by their Social Security number, 
we would have a law in place that covered that. The problem is 
with geo location data, that's not necessarily covered.
    CDT has been working on trying to update the Privacy Act so 
something like this would be covered if it were centralized. 
There were questions about how this database will be set up and 
whether it will be distributed or whether we will actually 
reside in an agency, which raises other questions as well. But 
I think that what we have seen and I think to back-up some of 
the issues that Ms. Marlow was talking about--
    Chairman Moore of Kansas. The gentlelady is recognized for 
one additional minute.
    Mrs. Biggert. Thank you. Please continue.
    Mr. Schwartz. --that Ms. Marlow raised is that we have seen 
counties do protect privacy. Some counties have done a very 
good job in protecting privacy and looking at the security 
issues. And many of the companies have as well: Google Earth 
only goes down to a certain point; you can't look into people's 
backyards, for example. And so we have seen some companies do a 
very good job with this kind of data. Some of the counties have 
done a very good job. Others have not done a good job.
    They have made it, so they put the land records data right 
next to a court data, where we have seen some identity thieves 
go in and try to match up the information and use it to take 
people's information. So what we are trying to drive to with 
the suggestion of including privacy impact assessments is that 
as this database is built, we are looking towards the best 
practices of what we know is out there.
    Mrs. Biggert. Thank you so much and I appreciate that.
    Mr. Moore, I really thank you for having this hearing and I 
hope that we can have one that has the Federal regulators. I 
would also like to recommend that we invite HUD representatives 
and other Federal agencies that granted funds to such groups as 
ACORN and have the ACORN representatives to testify at a 
hearing.
    Chairman Moore of Kansas. Thank you to the ranking member, 
and again, thanks to all of our witnesses for their testimony 
this morning. I believe today's hearing helps us understand 
what technologies are available today, and what might be 
possible if the Federal Government can take full advantage of 
these technologies to provide better oversight of TARP and 
other governmental programs.
    I look forward to working with the ranking member and other 
members to make sure we are better utilizing these technologies 
to strengthen financial oversight. I ask unanimous consent that 
the written statements of the following organizations be made a 
part of the record: Epicurus Institute; SecondMarket; and 
Interthinx. Without objection, it is so ordered.
    The Chair also notes that some members may have additional 
questions for our witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for members to submit written questions to these 
witnesses and to place their responses in the record. Again, I 
thank all the witnesses, and this hearing is adjourned.
    [Whereupon, at 11:32 a.m., the hearing was adjourned.]

                            A P P E N D I X



                           September 17, 2009

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