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


 
THE U.S. GOVERNMENT AS DOMINANT SHAREHOLDERS: HOW SHOULD THE TAXPAYERS 
                 OWNERSHIP RIGHT BE EXERCISED? (PART 2) 

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON DOMESTIC POLICY

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           DECEMBER 17, 2009

                               __________

                           Serial No. 111-133

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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                     http://www.oversight.house.gov

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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       JOHN J. DUNCAN, Jr., Tennessee
WM. LACY CLAY, Missouri              MICHAEL R. TURNER, Ohio
DIANE E. WATSON, California          LYNN A. WESTMORELAND, Georgia
STEPHEN F. LYNCH, Massachusetts      PATRICK T. McHENRY, North Carolina
JIM COOPER, Tennessee                BRIAN P. BILBRAY, California
GERALD E. CONNOLLY, Virginia         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               JEFF FLAKE, Arizona
MARCY KAPTUR, Ohio                   JEFF FORTENBERRY, Nebraska
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         AARON SCHOCK, Illinois
PATRICK J. KENNEDY, Rhode Island     BLAINE LUETKEMEYER, Missouri
DANNY K. DAVIS, Illinois             ANH ``JOSEPH'' CAO, Louisiana
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director

                    Subcommittee on Domestic Policy

                   DENNIS J. KUCINICH, Ohio, Chairman
ELIJAH E. CUMMINGS, Maryland         JIM JORDAN, Ohio
JOHN F. TIERNEY, Massachusetts       MARK E. SOUDER, Indiana
DIANE E. WATSON, California          DAN BURTON, Indiana
JIM COOPER, Tennessee                MICHAEL R. TURNER, Ohio
PATRICK J. KENNEDY, Rhode Island     JEFF FORTENBERRY, Nebraska
PETER WELCH, Vermont                 AARON SCHOCK, Illinois
BILL FOSTER, Illinois
MARCY KAPTUR, Ohio
                    Jaron R. Bourke, Staff Director





























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on December 17, 2009................................     1
Statement of:
    Allison, Herbert M., Jr., Assistant Secretary for Financial 
      Stability, U.S. Department of Treasury.....................    12
Letters, statements, etc., submitted for the record by:
    Allison, Herbert M., Jr., Assistant Secretary for Financial 
      Stability, U.S. Department of Treasury, prepared statement 
      of.........................................................    14
    Kucinich, Hon. Dennis J., a Representative in Congress from 
      the State of Ohio, prepared statement of...................     5


THE U.S. GOVERNMENT AS DOMINANT SHAREHOLDERS: HOW SHOULD THE TAXPAYERS 
                 OWNERSHIP RIGHT BE EXERCISED? (PART 2)

                              ----------                              


                      THURSDAY, DECEMBER 17, 2009

                  House of Representatives,
                   Subcommittee on Domestic Policy,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:15 a.m., in 
room 2154, Rayburn House Office Building, Hon. Dennis J. 
Kucinich (chairman of the subcommittee) presiding.
    Present: Representatives Kucinich, Maloney, Cummings, 
Foster, Turner, and Jordan.
    Staff present: Jaron R. Bourke, staff director; Michael 
Clark, professional staff member; Jean Gosa, clerk; Leneal 
Scott, IT specialist; Adam Hodge, deputy press secretary; Adam 
Fromm, minority chief clerk and Member liaison; Christopher 
Hixon, minority senior counsel; Hudson Hollister, minority 
counsel; and Brien Beattie and Mark Marin, minority 
professional staff members.
    Mr. Kucinich. Good morning. The Domestic Policy 
Subcommittee of the Oversight and Government Reform Committee 
will now come to order.
    Today's hearing is the second day of hearings to examine 
the way that common equity shareholder rights acquired by the 
Treasury Department under authorities provided in the Emergency 
Economic Stabilization Act of 2008 have been exercised to date 
and to assess alternative frameworks for exercising and 
protecting taxpayers' interests.
    Without objection, the Chair and ranking minority member 
will have 5 minutes to make opening statements, followed by 
opening statements not to exceed 3 minutes by any other Member 
who seeks recognition.
    Without objection, Members and witnesses may have 5 
legislative days to submit a written statement or extraneous 
materials for the record.
    AIG, Citigroup, GM, and Chrysler came on their knees to the 
government for a bailout. To an important degree, the failures 
of all four companies have resulted from failures in corporate 
governance, failures in risk management, failures in 
compliance, failures to hold executives accountable, and 
failures to rein in excessive corporate pay. Taxpayers are 
underwriting the rescue efforts, and the Treasury Department is 
managing about $200 billion in common equity in these four 
failing companies acquired under the Emergency Economic 
Stabilization Act of 2008.
    The first question we have to ask is, is Treasury 
appropriately accountable to Congress and the taxpaying public 
in its exercise of these shares, including key decisions that 
Treasury has made or will have to make, such as the decision to 
manage the shares passively, the decision to allow Citigroup to 
decide when the Government would divest its shares, the 
criteria for disinvesting, how and under what circumstances 
would congressional approval be required for actions such as 
divestiture, the regulations by which Treasury would administer 
the shares.
    The second question is, have the actions of the Federal 
Government had the effect of upholding best practices in 
corporate governance, or has Treasury managed our stake in 
these four companies in a way that amounts to a major step 
backward in corporate governance?
    The experts we spoke with yesterday were unanimous on at 
least one point: The U.S. Government has done far less than it 
could have done and should have done to advance the cause of 
effective, accountable corporate governance. Instead, the U.S. 
Government has adopted a passive role by refusing to exercise 
even the minimal role expected of large shareholders in board-
level decisionmaking and dealing with corporate management. 
This failure puts taxpayer interests and the public interests 
at risk in several ways. It breaks the chain of authority, 
transparency, and accountability. It weakens oversight 
functions and fosters a culture of backroom deals. And it sends 
a signal to corporate boards and managements that this 
government has very low expectations when it comes to 
reasonable and responsible exercise of legitimate shareholder 
preferences.
    We also heard evidence that the government hasn't taken a 
hands-off approach in all manners. We have heard testimony in 
the past and received confirmation from the GAO yesterday, for 
example, that in the case of AIG the Federal Reserve Bank of 
New York participates in board and committee meetings, meets 
frequently with management, has a large team of experts 
following many aspects of the company activity.
    The third question we have to ask is, whose interest and 
whose values are being represented by the way in which 
government shareholding is being exercised?
    Nothing the Treasury Department is doing as dominant 
shareholder, according to our expert witnesses yesterday, 
assures that government-owned companies do not participate in 
consumer rip-off schemes, are neutral toward any efforts by 
workers to unionize as the law allows them to do, or adopt 
stricter than legally required controls over the use of exotic 
financial instruments and off balance sheet financial 
transactions.
    Fourth, we ask, how has the Treasury used its rights as 
dominant shareholder to preserve jobs, home ownership, 
pensions, and life savings, as the law requires? The applicable 
statute is the Emergency Economic Stabilization Act of 2008, 
which sets out two fundamental purposes: One of course is to 
provide authority and facilities that the Treasury Secretary 
can use, ``to restore liquidity and stability to the financial 
system.'' The other, equally important and binding, is, ``To 
ensure that such authority and facilities are used in a manner 
that, A, protects home values, college funds, retirement 
accounts, and life savings; B, preserves home ownership and 
promotes jobs and economic growth; C, maximizes overall returns 
to the taxpayers of the United States; and, D, provides public 
accountability for the exercise of such authority.''
    Is Treasury realizing those goals through its dominant 
equity positions in AIG, Citigroup, GM and Chrysler? On the 
issue of jobs, we learned that our ownership of GM and Chrysler 
has actually accelerated job losses, plant closings, and 
dealerships. We have also downsized expectations, as well as 
the probability of meaningful success in protecting, let alone 
expanding, our core industrial base. For only the second time 
since records have been kept industrial capacity is actually 
shrinking in this country. We were reminded that the Obama 
administration bragged that they were even tougher on worker 
compensation than the Bush administration was, forcing American 
workers to accept by the end of the year pay and benefits cuts 
to make their compensation comparable to foreign auto makers in 
the United States. It was pointed out that then CEO of GM 
announced that in October 2009, post-taxpayer bailout, that the 
company would be sourcing even more parts and equipment from 
Korea, thus depriving American manufacturers of the benefits of 
supplying their own home market.
    On pensions, we are reminded that creditors of the auto 
companies were forced to accept as little as 10 cents on the 
dollar for their investments in the auto companies while big 
banks that remain creditors of AIG and other companies have 
been made whole, made whole, through this crisis.
    On home ownership, this committee has held several 
committee hearings in Washington and in the field in Atlanta 
and Cleveland. It is very clear that despite whatever Treasury 
thinks it is doing and may well be doing, it is very hard to 
find anyone who is benefiting from its piecemeal and half-baked 
approach. Forget about subprime mortgages. The evidence is that 
the level of household indebtedness that has resulted from the 
government-sponsored inflation of home equity values, 
extraordinary explosion of household indebtedness between 2001 
and 2007, is the single largest impediment to economic recovery 
that we face today, and nothing meaningful to most ordinary 
Americans has been done.
    And, fifth, we have to ask, why is Treasury giving 
preferential treatment to the two financial service companies 
whose failures required a government bailout, as compared to 
the treatment of two manufacturing companies? Almost every day 
brings new reports of yet another secret backroom negotiation 
to provide yet another sweetheart deal to yet another flagrant 
free-standing fat cat Wall Street firm. Yesterday, the 
revelation was the outrageous report that, in order to allow 
Citigroup escape from U.S. ownership, the U.S. Treasury, our 
trusted fiduciary, secretly gave its OK to an IRS exemption 
from a tax rule that may be worth several billion dollars. A 
high-level administration official is quoted in the Washington 
Post as saying: The tax benefit was unavoidable. ``Either the 
government changed the rules and parted way with Citigroup, or 
the company kept the government as a shareholder and kept the 
tax break anyway.''
    Are you kidding me? We give away the tax break, give away 
any semblance of control over a company that has been a 30-year 
poster child for troubled management and has almost a 
continuous need for government tutelage, give away any real 
upside from our most massive investment in Citigroup. Do this, 
or else we will be forced to do, what, keep our tax break? Keep 
our ownership? Keep our potential upside? It is a farce. It is 
an outrage.
    This committee is not going to rest until we have examined 
this last deal threadbare, until we have spoken to every 
individual associated with it, examined every communication 
related to it, with every person who may have had an interest 
in it or who may have had some kind of a channel of influence.
    And I speak as someone who opposed the bailouts, who was 
skeptical about this whole process from the beginning. It might 
be the Christmas season, but you are looking at a chairman who 
didn't fall off a Christmas tree.
    I yield to my colleague.
    [The prepared statement of Hon. Dennis J. Kucinich 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Jordan. Thank you, Mr. Chairman. And I want to thank 
you for holding this important hearing, and Mr. Allison for 
coming.
    Congress and the American people were misled last fall when 
former Treasury Secretary Hank Paulson told us he needed $700 
billion to buy troubled assets. Instead, he took the money and 
used it to partially nationalize the U.S. financial system.
    As if that weren't bad enough, under both the Bush and 
Obama administrations over $80 billion of this money was used 
to bail out two auto companies, General Motors and Chrysler. 
President Obama has turned the TARP into little more than a 
political slush fund, doling out money to special interests 
under the guise of job creation.
    This has to stop. Our country cannot sustain much more 
fiscal irresponsibility. In a year of record deficits, TARP 
needs to be wound down as soon as possible and the money 
applied to deficit reduction. Let me repeat. TARP needs to be 
wound down as soon as possible and the money applied to deficit 
reduction.
    TARP has brought implications than just rising deficits, 
however. The use of public funds by the Federal Government to 
get its hooks in the private sector may have far-reaching 
consequences for freedom and prosperity in the United States. 
Bailed-out companies are merely responding to the whims of 
well-connected special interests and powerful politicians. 
These companies have ceased to be private enterprises and 
become arms of the government and its favored constituencies. 
This process threatens to stifle the innovation and competitive 
spirit that made America the great Nation that it is.
    We need an exit strategy from TARP, and we need it now. 
Yet, the GAO told us yesterday that the administration's plans 
for an exit strategy are, ``evolving.'' That does not sound 
encouraging. When you are headed down the road, progress is 
defined as turning around and getting back to where you need to 
be just as quickly as possible.
    I want to thank Mr. Allison again for appearing before the 
committee today. I am eager to hear from him about what the 
administration's plans are to get us out from under this TARP 
and repay the American taxpayers as quickly as possible. The 
American people are suffering. Job losses and home foreclosures 
continue to take a terrible toll on ordinary Americans 
everywhere.
    Robust economic recovery depends on restoring a stable 
economic environment based on a clear separation between 
government and business with predictable rules of the road. To 
get there, the Federal Government needs to stop making up the 
rules as it goes along and extricate itself from this ill-
conceived adventure in crony capitalism.
    As someone who voted against the TARP, I think I am on sure 
footing when I say that this has been a misguided chapter in 
American government, and one that we need to put behind us just 
as quickly as possible.
    Thank you, Mr. Chairman, and I look forward to hearing from 
our witness.
    Mr. Kucinich. I thank the gentleman. The Chair will 
recognize Members in the order in which they came. Mr. Cummings 
is recognized. You may proceed.
    Mr. Cummings. Mr. Chairman, first of all, thank you for 
holding this hearing. Yesterday's hearing yielded a number of 
differing opinions on how the government should exercise its 
rights as a controlling shareholder. Unfortunately, none of the 
witnesses seemed to cite the administration's method as the 
best course of action. President Obama has publicly stated his 
preference that the government act as a passive investor in 
AIG, GM, Citigroup, and other firms, voting only on the most 
fundamental corporate governance issues.
    Mr. Nader, on the other hand, argued persuasively that when 
the government has controlling interests in these firms, it has 
the responsibility to vote its interest actively, leveraging 
its position into real change at the firm in corporate 
governance, executive compensation, consumer protections, and 
corporate social responsibility.
    The hearing was also valuable in that it reminded us that 
regardless of whether the government votes its shares actively 
or passively, that decision must be coordinated with our 
overall economic policy.
    Independently but not unrelated, hours before the hearing 
convened yesterday it was reported that the Internal Revenue 
Service had ruled to grant Citigroup's exemptions from tax 
liability on $38 billion in future profits. By the government 
selling its 34 percent stake in Citi, the company stood to lose 
tax breaks on up to $38 billion in losses. Fortunately, the IRS 
came to Citi's rescue, providing a welcomed exemption.
    While questions emerged almost immediately about the 
fairness of granting Citigroup such a benefit, what concerned 
me more about the story was a quote from financial market 
analyst Christopher Whelan, who doubted that Citigroup would 
emerge from this without having to soon raise capital again.
    Further, last night it was reported that the market 
reacting to Citi's equity share offering was less than 
enthusiastic as shares sold at a substantial discount, and 
investors expressed concern that Citi was diluting shareholders 
in a desperate attempt to get out from executive payrolls. The 
discount led Treasury to announce that it would delay selling 
its stake in Citigroup.
    Which leads me to the question that I hope Secretary 
Allison can address: If the market confidence in Citi is so low 
that the Government refuses to unload its shares at a loss, are 
we still comfortable that the firm does not present systemic 
risk and thus should be let out of risk reducing executive 
compensation restrictions?
    In closing, Mr. Chairman, I look forward to Assistant 
Secretary Allison's testimony, and along with a continuing 
discussion on exercising shareholder rights, I hope we can get 
clarification on the status of the government's stake in 
Citigroup, the rationale for waiving our claims to extensive 
tax revenue, and whether this firm still presents a risk to the 
greater economy.
    With that, Mr. Chairman, I yield back.
    Mr. Kucinich. I thank the gentleman. The Chair recognizes 
Mrs. Maloney.
    Mrs. Maloney. Thank you very much, Mr. Chairman. And thank 
you for your leadership and your attention to detail, and your 
leadership really and truly in so many areas. And thank you, 
Mr. Allison, for being here today.
    The Great Depression was horrific. My mother and father 
lived through it. The stories they told me were absolutely 
horrible about the human suffering. And when the historical 
accounts are written of the Great Recession, the story of what 
the American people lived through and recovered from will have 
to be told in part with numbers. And the numbers of how the 
distress was felt is much less, partly because of the actions 
of this Congress, Treasury, FDIC, and the Federal Reserve.
    The Troubled Asset Relief Program, voting for it as I did, 
was probably the most unpopular vote I ever cast but probably 
one of the most important. The alternative would have been the 
failure of our financial markets. People were calling me. There 
was a run on the money market funds. There were runs on the 
banks. And it was not until the Democratic leadership stood up 
and said they would join the Republican leadership in voting to 
stabilize our markets that the runs on the banks, the money 
markets, and other financial instruments held.
    Christina Romer, before the Joint Economic Committee, 
testified that the economic shocks during the recession were 
far greater than the Great Depression. So what we lived through 
was truly a tremendous shock on our markets that could have 
brought down the American economy. And the Troubled Asset 
Relief Program, in fact, although unpopular, the financial 
system has stabilized. Markets are returning, not to the point 
we would like, but it has stabilized. And unlike the last month 
of the Bush administration where the unemployment numbers were 
750,000, last month the unemployment numbers were 11,000. Too 
much for the families that have lost their jobs, but certainly 
trending in the right direction.
    There has been a great deal of criticism of the Troubled 
Asset Relief Program, TARP, and therefore I put in a bill which 
passed the House of Representatives unanimously with bipartisan 
support to computerize and track the TARP money so that we know 
actually where it went, how it was spent so in the future we 
can do a better job and also putting sunlight on where we are 
going and what we are doing.
    I do want to say on the Citigroup thing, I believe that 
Treasury made the right decision in terms of the American 
taxpayer not to buy the stock at a distressed amount but to 
wait until the stock improves in value so that we get a better 
return on our money. But my colleague raised some very good 
points that need to be addressed and, as always, he has a sharp 
pencil.
    One of the most important things that passed in our 
financial recovery is the wind-down authority that we put into 
legislation. After the Great Recession, we had two choices: To 
let it fail like Lehman or to bail it out like AIG, neither of 
which is a good choice. When this legislation passes, we will 
have all financial institutions. The AIGs will be under the 
FDIC so that we can have an orderly wind-down. We lost over 130 
banks with forced mergers, acquisitions, or wind-downs. We 
controlled it, and taxpayers' deposits were secure. With this 
new wind-down authority, we hope to have a better control over 
the entire financial markets should we have such a tragedy in 
the future.
    In any event, this is an ongoing discussion and one that is 
important to the American people. I applaud the chairman for 
his attention.
    Everyone told me that the hearing was canceled today, that 
surely he wouldn't be here because we weren't in session. And I 
said, no. I know Dennis Kucinich. He is having this hearing. 
And I was right.
    Thank you, Mr. Chairman, for your steadfast work.
    Mr. Kucinich. Actually, we learned that CQ somehow sent out 
a notification falsely that this meeting had been canceled. But 
I didn't check with them; I decided to hold the hearing anyway.
    The Chair recognizes Mr. Foster.
    Mr. Foster. I would just like to briefly associate myself 
with the remarks of Congresswoman Maloney. She hit a number of 
very important points. One point which actually frequently gets 
misstated is the question of whether there has been some sort 
of bait and switch on the TARP funds. Those of us that actually 
read the legislation saw there was very clear authority for an 
emergency investment in large financial institutions. That was 
put in. If you go back and read my testimony in front of the 
Financial Services Committee, that was very carefully put in 
there, and it was recognized at the time that this would allow 
what was called at the time I think the Swedish-style bank 
rescue, to direct investments of banks under distressed 
conditions with a reasonable expectation of getting most of the 
money out. And because, frankly, the Democrats have competently 
managed this operation, I think it appears now that the 
taxpayers are getting out whole from their investments in the 
banks, which is tremendously to your credit. This requires good 
management and good oversight and careful attention to detail. 
We are going to find areas where not everything was done right. 
But in the big picture, getting out whole in our investments in 
the banks and large financial institutions is a tremendous 
accomplishment. And even if we don't quite accomplish it in the 
case of AIG, I think that we have to be careful also to 
distinguish the fraction of the money that went into large 
financial institutions to stabilize the emergency situation 
there and into the automobile companies where the motivation 
was, I believe, substantially different. There wasn't a 
systemic risk to the financial world, but a huge risk to the 
employment and the overall economy. There are different goals 
there, and the expectation of getting out 100 percent whole I 
think is going to be different in that case because the 
motivations were different. Anyway, I look forward to diving 
into the details on this.
    I would also like to point out the Exxon letter, for people 
who only have time to read summaries on this, that Tim Geithner 
sent to Speaker Pelosi and to Harry Reid recently. I guess it 
is dated December 9th, and I think it has a very good summary 
of what you have accomplished, which is nontrivial, and the 
risks going forward which are also nontrivial.
    Thank you. And I yield back.
    Mr. Kucinich. I thank the gentleman. If there are no other 
opening statements, I am going to introduce our witness.
    Mr. Herbert Allison is Assistant Secretary of the Treasury 
for Financial Stability. Mr. Allison is responsible for 
developing and coordinating Treasury's policies on legislative 
and regulator issues affecting financial stability, including 
overseeing the Troubled Assets Relief Program. Prior to his 
public service, Mr. Allison was CEO of Fannie Mae and before 
that he was chairman, president, and CEO of TIAA-CREF. Mr. 
Allison began his career at Merrill Lynch, where he served many 
roles, ultimately becoming president, chief operating officer, 
and a member of the board.
    Mr. Allison, this subcommittee appreciates your appearance 
here today. We look forward to your testimony, and also to the 
opportunity that you are providing us to answer questions about 
your involvement and the programs that you supervise. So you 
may proceed, and you have at least 5 minutes. If you need a 
little more, I am sure we can work that out. Go ahead.
    Excuse me. I have just been reminded that all witnesses 
before our subcommittee are asked to be sworn in. So if you 
could please rise.
    [Witness sworn.]
    Let the record reflect that the witness answered in the 
affirmative. You may proceed.

 STATEMENT OF HERBERT M. ALLISON, JR., ASSISTANT SECRETARY FOR 
        FINANCIAL STABILITY, U.S. DEPARTMENT OF TREASURY

    Mr. Allison. Chairman Kucinich, Ranking Member Jordan, and 
members of the subcommittee, thank you for the opportunity to 
testify before you today on the Troubled Asset Relief Program 
[TARP].
    Last fall, to confront a financial system on the verge of 
collapse, Congress granted the Treasury Department authority to 
restore liquidity and stability to the U.S. financial system by 
purchasing and guaranteeing troubled assets. As a result of 
coordinated efforts, including those taken under the Emergency 
Economic Stimulus Act [EESA], confidence in the financial 
system has improved, credit is flowing, and the economy is 
growing. The Government is exiting from its emergency financial 
policies, and taxpayers are being repaid.
    With the announcement this week of repayments by Citigroup 
and Wells Fargo, banks will soon have repaid nearly two-thirds 
of the total amount invested in banks under TARP. We expect a 
positive return from the Government's investments in banks. 
Investments are generating more income than previously 
anticipated, more than $15 billion so far, and we expect 
substantial additional income going forward. As banks replace 
Treasury investments with private capital, confidence in the 
financial system increases, the Government's unprecedented 
involvement in the private sector diminishes, and taxpayers are 
made whole.
    It is clear today that TARP will not cost taxpayers $700 
billion. Based on current commitments and plans, we expect 
total disbursements to be around $550 billion, with the overall 
cost of the program at least $200 billion less than the $341 
billion projected in the August mid-session review of the 
President's budget.
    The financial statements we just published estimate that 
the ultimate cost of the disbursements through the end of 
September will be about $42 billion. Treasury does remain an 
equity shareholder in a few institutions, and I would like to 
discuss the principles we follow in managing our investments.
    First, as President Obama has stated, the U.S. Government 
is a shareholder reluctantly and out of necessity. We intend to 
dispose of our interests as soon as practical, with the dual 
goals of achieving financial stability and protecting the 
interest of taxpayers.
    Second, we do not intend to be involved in the day-to-day 
management of any company. Government involvement in day-to-day 
management might actually reduce the value of these 
investments, impede the ability of the companies to return 
fully to being privately owned, and for us attainment of our 
broader economic policy goals.
    Third, we believe an effective board of directors that 
selects and oversees capable management with a sound long-term 
vision should restore a company to profitability and end the 
need for government support as soon as practical.
    Fourth, we take a commercial approach to the exercise of 
our rights as a shareholder. We will vote only on core 
shareholder matters, such as board membership, amendments to 
corporate charters and bylaws, mergers, liquidations, 
substantial asset sales, and significant common stock issuance.
    Because financial conditions have started to improve, 
Treasury is now in a position to begin winding down TARP 
programs and to begin exiting from these investments. Our exit 
strategy for TARP balances the dual mandates of EESA to 
preserve financial stability and to protect the interests of 
taxpayers. We will exit these investments and return TARP funds 
to the Treasury as soon as is practical, consistent with the 
objective of avoiding further market and economic disruption.
    In my written testimony I have outlined the specific 
situations, terms, and exit strategies surrounding our 
investments in AIG, Citigroup, and the auto companies, and I 
would be happy to answer any questions on those topics.
    As I work with my dedicated colleagues in Treasury, we will 
continue to manage these investments prudently on behalf of the 
American people.
    Thank you for having me here today. I look forward to 
answering your questions.
    [The prepared statement of Mr. Allison follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Kucinich. I thank the gentleman. We are now going to go 
to questions. I will begin with 5 minutes. Each Member will 
have 5 minutes to ask questions. If necessary, we will go to a 
second round.
    I would like to talk about Citigroup. Prior to divesting 
shares in Citi, what notification do you plan to give to this 
committee?
    Mr. Allison. We intend to be divesting of the shares over 
the next year. We believe that by gradually selling the shares 
we will be in a better position to achieve the best possible 
prices for the American public. We are going to be--and we 
already have stated our approach to divesting of the shares. So 
it will be a gradual process.
    Mr. Kucinich. Are you going to notify this committee when 
you are going to do that? Are you going to let us know?
    Mr. Allison. We will begin selling the shares after the 
next 90 days.
    Mr. Kucinich. When you are in the process of selling these 
shares, are you going to have any communication with the 
oversight committee about this?
    Mr. Allison. We will be happy to speak with the staff of 
the committee and the members of the committee at any time, Mr. 
Chairman.
    Mr. Kucinich. It would be, I think, advisable given the 
questions raised about responsibility of Government as a 
passive shareholder to not be passive with the subcommittee on 
these matters.
    What accounts for the timing of your decision to permit, 
then to reverse your decision to allow Citi to exit from the 
TARP?
    Mr. Allison. Well, let me say first, Mr. Chairman, thank 
you for your question. We don't make the determination of when 
Citi can repay the Treasury for our investment in the company. 
That decision is made by the regulator, and under the 
provisions of the ARRA law, we must follow permission that is 
given by the----
    Mr. Kucinich. The regulator, meaning?
    Mr. Allison. The regulator, meaning the Federal Reserve in 
this case, and also in consultation with the----
    Mr. Kucinich. So it is the Federal Reserve that decides 
when to exit the TARP, and the Federal Reserve does it at their 
choosing? Or who chooses? How do we know who makes the choice 
whether to exit the TARP? How do we know whether it is the 
banks who are deciding or the Federal Reserve? Do you know?
    Mr. Allison. The regulators decide, Mr. Chairman, on when 
it is appropriate for a bank to repay the Treasury.
    Mr. Kucinich. Is that a transparent process, Mr. Allison, 
or is that pretty much done over at the Fed without any report 
to you?
    Mr. Allison. That is a matter for the regulator.
    Mr. Kucinich. Well, they are a regulator but we are the 
shareholder. When do we find out? When do you find out? Do you 
find out when you read about it in the newspaper?
    Mr. Allison. When the regulator informs us that----
    Mr. Kucinich. When the Fed informs you?
    Mr. Allison. Yes, sir. In this particular case, or it could 
be in other ones as well.
    Mr. Kucinich. Let's talk about this, but the Fed informs 
you.
    Mr. Allison. Yes.
    Mr. Kucinich. The Fed doesn't ask you if you have any 
position on this; they just tell you they are doing it. Is that 
what you are saying?
    Mr. Allison. We don't have regulatory oversight over the 
banks. That is a matter for the regulatory agencies.
    Mr. Kucinich. But we are holding all these billions in 
shares. Shouldn't the government have any ability to decide 
when the banks would exit from TARP?
    Mr. Allison. We are following the laws enacted by Congress, 
Mr. Chairman, as to how we will dispose of the shares, and that 
is with the approval of the regulator.
    Mr. Kucinich. Do you have to agree with the banks whether 
they are healthy or not, or does the Fed agree with the banks 
whether they are healthy? You don't talk to the Fed and you 
just go on with whatever they tell you?
    Mr. Allison. We have conversations with the regulatory 
agencies, but we do not make the decision as to when a bank is 
ready and able to repay us.
    Mr. Kucinich. Members of the committee, we have a problem 
here where the Fed might let someone out of the TARP but it 
might be adverse to the interest of the taxpayers of the United 
States of America. I just want to point that out. This is a 
strange system we have set up here. We were not only talking 
about passive shareholders, but we are talking about 
shareholders who don't know nothing. That is a problem. Now.
    Mr. Foster. If the chairman will yield for a moment?
    Mr. Kucinich. No. Will Citi shareholders be given an 
opportunity to vote on any planned share buyback? Do you know?
    Mr. Allison. Under the bylaws of Citigroup, the bylaws 
would determine the rights of the shareholders in that case.
    Let me also say, if I may, that each of the banks that has 
repaid us has raised capital in the public markets. They are 
replacing when they repay us government capital with higher 
quality capital raised in the private markets. And so far, as I 
mentioned, we have received about two-thirds of the investment 
back on behalf of shareholders from the banks. They have raised 
about $150 billion of capital in order to be able to repay us 
and we have received about $160 billion.
    Mr. Kucinich. Mr. Allison, we are going to get into that 
discussion. My time has expired. I am going to go to Mr. Jordan 
in a moment. But we are going to get into the discussion about 
how it is that banks are able to raise this money in the 
private markets while they are still under TARP and how the 
assets that they are holding have been upwardly evaluated 
through changes and accounting procedures that enables their 
stock to go up. Then they get more money and pay off the 
Government. I just wonder if we are just in another funny money 
economy where the taxpayers are going to get hosed again.
    Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman. I think the chairman's 
questions point out to the simple fact that Treasury gets to 
decide when the money goes in but not when it comes out. And 
one of the many problems I think underscoring the fact that we 
should have never got into this whole bailout program to begin 
with, I think the last 2 days we have seen two news stories, 
the story yesterday that the chairman brought up, I think Mr. 
Cummings brought up in his opening statement about Citigroup's 
bailout repayment and the impact that has on the taxes that the 
company owes. And then today's Wall Street Journal with: 
Treasury halts plan to hold off Citi stock because they weren't 
going to get back what they paid for.
    I mean, so we have two news stories, that just again 
highlights in my mind the fact that we should have never 
started down this road to begin with because once you do it 
just brings on a whole host of problems. But I want to go to 
this fact. And contrary to Mr. Foster's opening statement where 
he, I think, tried to rewrite history a little bit, the fact is 
the Congress was misled. In fact, Mr. Allison, in your opening 
statement you said that TARP was created to purchase troubled 
assets. Direct quote from your opening statement. But that is 
not what took place. In fact, we had Ms. Bair in front of this 
committee just last week. She was at the meeting 9 days after 
the TARP was passed where the nine biggest financial 
institutions were brought to this town. She indicated she was 
in that meeting, and her direct statement when questioned, when 
I asked her was, it took her breath away--took her breath away 
what took place at that meeting where Hank Paulson, Ben 
Bernanke, Hank Paulson slid a piece of paper over and said 
``You will take this partial nationalization of your bank. You 
will take this TARP money not to buy, just inject capital into 
the bank.''
    And so we have the history and the record that we got from 
all the various hearings we have had over the last year, but 
now we finally have it in writing. I don't know if you read Mr. 
Wessel's book, In Fed We Trust, but there is a quote there on 
pages 226-227 of the book. And I am reading from the book now.
    ``The House of Representatives rejected the Bush 
administration's bank rescue plan on Monday, September 23.'' 
Remember, last fall there was the first vote that lost, then a 
few days later came back to the Congress, and the vote that 
passed the TARP program lost the vote 228-205. The next 
morning, according to Mr. Wessel's book, Mr. Paulson ran into 
Michele Davis, his spokeswoman and policy coordinator in the 
Treasury building. ``I think we are going to have to put equity 
into the banks.'' He said. Despite what Paulson had told 
Congress, buying toxic assets was going to take too long. Davis 
gave him a blank stare and said this, 'We haven't even gotten 
the bill through Congress.' She remembered thinking, 'How are 
we going to explain this?' She told her boss, 'We can't say 
that now.' And he took the advice.''
    So we know what happened here. They came to Congress. They 
couldn't come to the Congress and say, hey, give us a bunch of 
taxpayer money. We're going to go give it to the bank. They had 
to come up with some scheme to buy troubled assets, and that is 
what they sold the whole package to the Congress about.
    So I just want to ask you, Mr. Allison. Do you think the 
Congress of the United States was misled in this? The start of 
this whole program, do you think Mr. Paulson misled the 
Congress of the United States last September and last October?
    Mr. Allison. Thank you, Member Jordan. First of all, the 
EESA law allows the Treasury to purchase preferred stock and 
other forms of stock from these banks. I think we have to look 
back at the situation at the time.
    Mr. Jordan. Mr. Allison, do you remember back at the time, 
though, you can say that in your opening statement they 
purchased troubled assets. The whole debate, the whole debate 
was about purchasing troubled assets last fall. And I think you 
talk to just about any Member of Congress and they will tell 
you, maybe with the exception of Mr. Foster, they will tell you 
that was the premise of the entire package presented to the 
Congress of the United States last fall.
    Mr. Allison. I know that this has been a question that has 
been asked many times. However, if we look at the EESA law, it 
clearly was the authority granted to the Treasury to buy 
troubled assets. Troubled assets are broadly defined. It was 
deemed at that time by the people who were responsible in the 
Treasury Department and the regulators and elsewhere that it 
would be more efficient use of the authorization. In order to 
stabilize the financial system at that time, which was on the 
verge of a catastrophic meltdown, the most efficient way of 
doing that they felt was to purchase equity shares.
    Now, I think we have to look at what has been going on.
    Mr. Jordan. Let me change directions. I have a few seconds 
here if I could.
    Twice in your testimony you said this should be wound down 
as soon as practical. Twice you said that in your opening 
statement.
    How does the actions that the House of Representatives took 
yesterday with the so-called second stimulus using TARP dollars 
for, ``job creation,'' the fact that Mr. Obama has said he 
supports that, how does that square with what you said twice in 
your opening testimony about winding this down as quickly as we 
can?
    Mr. Allison. Our responsibilities are to promote financial 
stability and protect the interest of taxpayers. We are 
managing the investments that were made under the EESA law with 
the intention----
    Mr. Jordan. Mr. Allison, how does that square with winding 
this down as quickly as possible, your testimony; twice you 
said that in your opening statement, with the idea that we are 
now getting completely away from the mission of TARP, whether 
it was allowing equity or not? The whole job creation stimulus 
II package, actually, how does that square with winding it 
down?
    Mr. Allison. Those are decisions that will be made by 
Congress, and our job in managing the TARP is to try to wind 
down this program as quickly as is responsibly possible while 
also maintaining financial stability. And that is exactly what 
we are doing, and that is why already we have received two-
thirds of the assets that we invested back from the banks, and 
we have done so at a profit for taxpayers.
    Mr. Kucinich. I thank the gentleman. The gentleman's time 
has expired. The Chair recognizes Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman. And I 
thank you, Mr. Allison. You know, Mr. Secretary, I have 
continued to insist that the administration explore all avenues 
available for preventing further foreclosures in our 
communities. And not too long ago Secretary Geithner appeared 
before the Joint Economic Committee, upon which I sit, and we 
were talking about foreclosures. This was before the most 
recent efforts on the part of the President to push the banks 
to do what they are supposed to do, and that is help people get 
the modifications quickly. But he said something that I have 
thought about a lot, and I just want your reaction to it, and I 
didn't get a chance to ask him to followup on this.
    I said to him: A lot of people in my community, in my 
district are losing their houses, and it is a very sad sight 
and a very painful sight. And I said to him these are people 
who did not get subprime loans, these are prime. These are 
people who have lost thousands through no fault of their own in 
many instances because they lost their jobs. And I asked him, I 
said, you know, we really do need to do a short-term emergency 
loan kind of, have that kind of effort. And I understand that 
Barney Frank has that in his bill that we just passed. But he 
said something that really bothered me. He said, Well, Mr. 
Cummings, there are some people that we just won't be able to 
help. In other words, he was saying they have just got to fall 
by the wayside. And for some reason that thing has haunted me, 
because when it came to the banks, we didn't say that. We 
didn't say they have just got to fall by the wayside. We gave 
them billions upon billions of dollars. And I am just 
wondering, and--I just am wondering, it seems to me sometimes a 
lack of sensitivity with regard to the person on the street, on 
Main Street, and then--and how the--then when we compare how 
Wall Street is treated.
    And I am telling you that I am a big supporter of President 
Obama, probably no one more loyal. But I have to tell you that 
in order for him to get his economic efforts, to be most 
effective and efficient in his economic efforts to straighten 
our economy out, you have to help the American people. They 
have to believe that there is something coming out of this for 
them. That is what underlies a lot of the angst that we hear 
every day.
    So I am just wondering, what do you see with regard to 
these foreclosures? Because I am telling you, it is just not 
the pain, it is also the draining of communities, property 
values going down, tax revenues going down. I mean, it is just 
a vicious cycle. And, guess what, those people have to live 
somewhere.
    So I am just wondering, can you comment on that for me.
    Mr. Allison. Sir, first of all, let me thank you for your 
comments and your questions. The administration certainly 
shares your deep concerns about the American public, about 
people losing their homes. And that is why one of the first 
acts that the President took when he entered office was to 
establish the Making Home Affordable Program which we are 
administering. And that is aimed at keeping people in their 
homes. And so far we have expanded that program to help over 
700,000 homeowners who are saving on average $550 a month in 
their mortgage payments.
    We have shifted also the focus of the TARP program, which 
initially placed large amounts of money in banks in order to 
stabilize the financial system, and without that there would be 
far more people unemployed and losing their homes.
    But in this administration we have put very little money 
into banks, only about $7 billion. We have received back $160 
billion, and we have now focused this program on promoting home 
ownership, helping small business through small banks in part, 
and helping the securitization markets which are responsible 
for providing a lot of the credit that is available to American 
households.
    Mr. Cummings. I am running out of time. Let me just ask you 
this. With us owning say, for example, us having so much equity 
in some of these banks, I know the President says take a 
passive position and all that. But it seems to me that we ought 
to be able to use more than just a conversation and strong talk 
to get these folks to do the right thing. Because I think a lot 
of us who voted for the bailout and whatever were of the 
opinion that people would be able to get the loans and 
whatever. And I am just wondering, people, normal, average 
people say, gee, if we own part of it, we ought to be able to 
get certain things done.
    Could you just comment on that? I see my time is up.
    Mr. Allison. We are meeting with the banks very frequently. 
We have had them come in four times in the last few months to 
meet with us, to talk about and to improve the Making Home 
Affordable Program. We are making considerable progress. We are 
not satisfied by any means, we are not where we need to be, but 
we are helping more and more people very rapidly today. We 
still want to be encouraging the banks to work even harder and 
more effectively. We are meeting with housing counselors. We 
are holding events all over the country to bring in homeowners, 
to acquaint them with this program. We have streamlined the 
program a great deal so it is easier for people to provide the 
documentation, to get a permanent modification.
    And there is still more that we can be doing. We are 
looking at how we can help more unemployed. For example, 
currently the program provides that if a person is unemployed 
and they are going to be receiving at least 9 months of 
unemployment insurance, they are eligible for a modification. 
We are seeing whether we can enhance that program further.
    But let me also say that the Obama administration is not 
relying only on the EESA programs under TARP to help 
homeowners. The Economic Stimulus Act and all the many 
activities of HUD and others in the administration are working 
very hard through housing agencies and State and local 
governments to help people keep their homes.
    Mr. Cummings. Thank you, Mr. Chairman.
    Mr. Kucinich. The Chair recognizes Mr. Turner for 5 
minutes.
    Mr. Turner. Thank you, Mr. Chairman. I appreciate your 
continued efforts to work on this issue and to bring to light 
some of the disparities that I think happened in the 
application of these funds.
    I voted against the TARP program, and I voted against 
applying the TARP moneys to General Motors. And I did that 
because I believe that the legislation itself was undefined as 
to its goals and objectives, undefined as to how it was going 
be accomplished, that it could result in inequities. I come 
from Ohio, like the chairman and Ranking Member Jordan, so I am 
from Ground Zero of the mortgage foreclosure crisis. And I 
didn't see in the TARP anything that was going to result in 
targeting the real problem that resulted in the financial 
crisis. I believed it was going to reward those who were the 
bad actors and in fact leave the American people, those who 
were either in neighborhoods where foreclosure was rampant or 
those themselves that were foreclosed, without having any 
significant help.
    Having said that, though, I do want to thank you for your 
dedication. I am certain that as you approach these issues you 
have in your heart an absolute dedication to moving this 
country forward and to ensuring our financial stability, and I 
appreciate you coming forward so we can ask questions of some 
of those issues that either need to be addressed or information 
for us so that we know t hat we shouldn't do it this way again.
    My two areas of concern relate to the General Motors 
bailout. In your testimony, in one of the paragraphs, you end 
that paragraph by saying: The new companies are now leaner and 
more efficient, and poised to help further the ongoing economic 
recovery and the competitiveness of the American automotive 
industry.
    The problem with that leaner and more efficient is it 
translates directly to the issue of jobs, commitments to 
retirees, commitments to employees. And that is an area where I 
have significant concern, because in my community General 
Motors closed its plant, Delphi closed its plant. Delphi walked 
away from its pension obligations to the salaried workers. 
21,000 salaried workers were treated differently than their 
coworkers that they worked side by side with, having losses of 
substantial portions of their pensions that not only did they 
depend on for their future but they earned. And this is being 
done in the name of a leaner and more efficient company as they 
are pushed aside, and creditors, some of which are being 
honored instead of the honoring of the employees who made the 
company successful in the past, the company's failing through 
no fault of their own, as they showed up every day and were 
dedicated to the success of Delphi and General Motors.
    So my two questions are: Could you please speak for a 
moment about the Delphi pension issue and the disparate 
treatment that the workers received? I think it is unfair, and 
I believe that this should have been handled differently. And 
there were great opportunities as the administration was at the 
table in the negotiations of the bankruptcy deals and the terms 
where people could have been honored instead of cast aside in 
the name of more leaner and more efficient.
    The second thing is this issue of jobs going offshore. I 
personally believe that, when this is all said and done, that 
there will not only be less jobs in the United States in the 
vein of having them more efficient, but there will be more jobs 
overseas for General Motors, for their suppliers, their direct 
investments and their partnerships. And I would have thought 
that would have been a goal of the administration to ensure 
that the jobs remain here in America; that we don't take 
taxpayers' money and finance, in effect, jobs going offshore so 
it weakens our economy in the future, the suppliers that would 
have supplied those jobs, the individuals that would have held 
those jobs lose that opportunity.
    So I am very concerned on those two areas. One, the loss of 
the pensions to the people that were in Delphi, and, two, the 
loss of jobs overseas. Could you speak to that?
    Mr. Allison. Thank you very much, Congressman, for the 
question. The administration is very concerned about job loss, 
obviously. It has been extremely active in trying to reduce the 
unemployment rate, and also to begin to rebuild this economy in 
ways that can create far more jobs for the American public.
    If we look back on the actions taken to rescue General 
Motors and Chrysler, without those actions hundreds of 
thousands of more jobs would have been lost, not just in those 
companies but in the suppliers and the dealers and the large 
network that is the auto industry in the United States. So we 
would have had a far worse crisis.
    Our goal in TARP is to promote financial stability, and by 
intervening with those two companies, we were able to do just 
that. They were not just manufacturing companies, but large 
financing and lending companies. Our role, though, is not to 
manage those companies directly. We did review their plans. We 
insisted that their plans be altered to assure us that they 
would be able to sustain and eventually grow their business.
    So this is about enabling these companies to survive, and 
then enabling the auto industry and those companies to grow in 
the future.
    We did take steps to assure that they would have a new 
board as well as new management. They have been making 
progress. And so we are hopeful that, down the road, they will 
be growth engines again, along with----
    Mr. Turner. Excuse me for just moment.
    Mr. Chairman, if I could clarify, I just want to make 
certain that we have----
    Mr. Kucinich. The gentleman will suspend. Hold on.
    Mr. Turner. Sir, if I could just----
    Mr. Kucinich. I'm going to let the gentleman followup. But 
there's a point raised here that I'm going to have to take a 
privilege as Chair and interject.
    You know, if the Treasury isn't managing day-to-day 
operations, then why did a high-ranking administration official 
brag about the fact that you are actually paying workers less? 
I don't understand. I mean, could you answer his question and 
followup? What's going on here?
    Mr. Allison. First of all, I don't think anybody is 
commenting, in the administration, about the wage levels of 
people here. What we're talking about is enabling these 
companies to operate and eventually to grow again----
    Mr. Turner. Sir, if I could then----
    Mr. Allison [continuing]. And to preserve jobs.
    Mr. Kucinich. Mr. Turner, go ahead, followup.
    Mr. Turner. I just want to make certain that I'm not 
misspeaking. You would agree that taxpayers' funds that are 
financing General Motors in its reorganization are being used 
for the financing of jobs moving offshore?
    I mean, it's inevitable that there is no way to sequester 
the funds as the taxpayers' money is being used as capital for 
General Motors and General Motors in turn uses capital for 
taking jobs offshore, it is inevitable that capital is, in 
part, taxpayers' funds. Would you not agree with that?
    Mr. Allison. Well, let me say, first of all, that there 
were standards established for both companies to maintain----
    Mr. Turner. Sir----
    Mr. Kucinich. We----
    Mr. Turner. My time is----
    Mr. Kucinich. Would the gentleman suspend? I've actually 
given you 8 minutes because I thought this exchange was very 
important, but we're going to have another round. We're going 
to go to Mr. Foster right now. We'll come back to you.
    Mr. Turner. Thank you, Mr. Chairman.
    Mr. Kucinich. Mr. Allison, just put a little bookmark by 
this discussion, because we will get back to it.
    Mr. Allison. Fine. All right.
    Mr. Kucinich. Go ahead, Mr. Foster. You're recognized.
    Mr. Foster. Yeah, I would like to go over quickly just a 
few different aspects.
    Mr. Kucinich. Just take your time.
    Mr. Foster. One of them is the money market fund guarantee 
program, which one of Treasury's activities relating to EESA. 
What was the maximum size of this program, in terms of assets 
guaranteed?
    Mr. Allison. The maximum size of the EESA program?
    Mr. Foster. No, the money market guarantee fund.
    Mr. Allison. I believe that, at one point, we were 
guaranteeing about $3 trillion.
    Mr. Foster. OK. And what are the losses that have been 
incurred at this program?
    Mr. Allison. Actually, we earned a profit on that program 
of over a billion dollars.
    Mr. Foster. OK. And is there any way to estimate if the 
money markets were not bailed out, if my colleagues from Ohio 
had had their way, and the money markets had collapsed, is 
there a way to estimate the loss of the economy from the 
collapse of money markets, had they not been bailed out?
    Mr. Allison. If the--if the money market funds were allowed 
to begin failing, there would have been, in effect, a giant run 
on the bank, both on the money market funds, which are a source 
of many Americans' savings, as well as on the banking system as 
a whole.
    I don't think we can exaggerate the level of that crisis 
last year. It was, as was earlier stated, unprecedented in 
terms of being a financial crisis. And if we hadn't taken very 
strong action at the time, the consequences of that would have 
been cataclysmic.
    Mr. Foster. Right. And, as you said, the taxpayer actually 
turned a small profit on that interaction.
    Mr. Allison. Yes.
    Mr. Foster. Thank you.
    Now, in the case of Citi, if you follow through your 
strategy going forward, that you're going to dribble the stock 
into the market over time, and if it's trading at roughly its 
current value--and, as I understand, there is a warrant 
position that the Government----
    Mr. Allison. Yes, there is.
    Mr. Foster. What is your best estimate, as of today, if you 
just execute that, there no big shifts in the market price, 
that what you will end up with? Are we going to be money ahead 
or money behind in the investment in Citi?
    Mr. Allison. I really, at this point, wouldn't want to 
forecast our profitability on the Citgroup position. What I 
would tell you is, currently we would have a small profit on 
that position overall, counting their payments of dividends to 
us over time, but I wouldn't make a forecast down the road.
    What I would point out, however----
    Mr. Foster. Right.
    Mr. Allison. I would point out that so far we have earned a 
profit on our investments in the financial institutions--in the 
banks, that is.
    Mr. Foster. And could you say a little bit about the 
difference in the decision mechanism for exiting TARP between, 
you know, a primarily privately held bank or a publicly held 
bank in which the Government has a minority position and 
something like Citi or AIG where we own most of it? You know, 
what is the difference, if any, in the decision mechanism for 
deciding how to exit TARP?
    Mr. Allison. Well, again, decisions are made as to when a 
bank is ready to exist by the regulator. And let me point out 
that----
    Mr. Foster. But is there a separate--does the bank also 
have to request to exit, or does the regulator boot them out? 
Does there have to be a separate choice that I want to exit 
now?
    Mr. Allison. There is a discussion between the bank and the 
regulators. I think, in many cases, the banks have been eager 
to exit the TARP, and--but they can't exit unless the regulator 
opines that they are able to.
    In these cases where the banks are exiting, I should point 
out that their capital ratios are far better than they were 
before this crisis began, and they have been building tangible 
common equity positions which are far larger than they were. 
And so they are in a much better financial condition than 
before this crisis and certainly during this crisis.
    So, at the same time as we're being repaid, these banks are 
exiting in a far better position than they were.
    Mr. Foster. OK. And there is an ongoing stress test? Is a 
final stress test applied prior to the exiting, or an ongoing 
stress test rigor applied to these firms?
    Mr. Allison. Yeah, the regulators are constantly examining 
the condition of these banks closely, monitoring them closely. 
And then they render their opinion as to whether the bank is 
ready to repay.
    Mr. Foster. OK. Thank you.
    I yield back.
    Mr. Kucinich. I thank the gentleman.
    We're going to go to a second round of questions here, 
given the Member interest in your appearance, Mr. Allison.
    Isn't is true that the statute requires that you maximize 
taxpayer value?
    Mr. Allison. Yes, sir.
    Mr. Kucinich. And if you're maximizing the value, how do 
you do that by divesting rapidly and awarding special tax 
benefits that reduce tax revenues?
    Mr. Allison. Well, let me talk about the recent guidance 
that was issued by the IRS regarding Section 382, which you 
commented on earlier. I think that this--the purpose of that 
section has been mischaracterized in the press.
    It was intended--and it was enacted, actually, back in the 
1980's--to prevent corporate raiders from sheltering income in 
one company by buying a company this had tax loss carry-
forwards and using those carry-forwards to shelter themselves 
from tax. It was in the taxpayers' interest as a whole that 
rule was enacted.
    Mr. Kucinich. You know, thanks--you know, thanks for the 
history lesson, but, you know, let's go more to present day.
    Mr. Allison. And, therefore, therefore, when the Government 
purchased shares in some of these companies----
    Mr. Kucinich. Right.
    Mr. Allison [continuing]. That was an extraordinary event 
not contemplated by Section 382. So all that has been done is 
that there is a very narrow guidance relating only to purchases 
and then sales, recently, by the Government so that----
    Mr. Kucinich. Well, but you still, with all due respect, 
Mr. Allison, you still didn't answer my question. And I 
understand that you're not going to answer the question. So 
what we will do is we'll have more of a written series of 
interrogatories between the subcommittee and you, so you can 
walk us through how, under this narrow passage of 382, you 
ended up with a circumstance where the Government gave huge tax 
breaks, multi-billion-dollar tax breaks, to a company that's in 
a bailout. That, to me, could be a bailout on top of a bailout.
    And I'm--we're going to keep that going, though I don't 
want to spend all my time talking about that. But I just want 
you to know that we're going to keep asking questions about 
that.
    Can you explain how Treasury avoided a conflict of interest 
in both managing shares in Citi and awarding a tax exemption 
for the one-time sale of the Government stock in the company? 
How did that----
    Mr. Allison. Well, let me, first of all, say that rule--
that Section 382 still applies to Citgroup, and as it was 
intended to. We have not changed that in any way----
    Mr. Kucinich. But is there a conflict? I mean, are you--
tell me how you do this. I want to do it the way Mr. Cummings 
would do it. Tell me how you do this. How do you, on one hand, 
say that you represent the taxpayers and maximizing their value 
and, on the other hand, get more money from the shareholders by 
giving more of the taxpayers' money to the shareholders? Help 
me with that, please. I'm having difficulty understanding.
    Mr. Allison. Well, first of all, the U.S. Government is not 
a taxpayer. The U.S. Government is not a taxpayer. This----
    Mr. Kucinich. Well, whose money are you dealing with here? 
I'm just--I missed something.
    Mr. Allison. What was created when the Government 
invested--and, at the time it invested, it issued guidance, as 
well, about its investments in these companies. The Government 
is not a--is not a taxpayer.
    Mr. Kucinich. But it works with taxpayers' money.
    Mr. Allison. And the intention of getting in was, this was 
very extraordinary. It was intended to be a short-term 
investment. It was not for the purpose of sheltering taxable 
income. And, therefore----
    Mr. Kucinich. Does the right hand know what the left hand 
is doing, Mr. Allison? On the one hand, the right hand is 
handling shareholder assets; the left hand is handling 
taxpayers' money.
    We'll go into this more. I have one more question. And, you 
know, I don't mean to cut you off, but my time is running 
shorter.
    As major shareholders in four companies, with shareholder 
votes coming this spring, will Treasury be voting these shares?
    Mr. Allison. Treasury will be voting shares along the lines 
that I outlined in my testimony. We will be voting on the 
election of directors. We will be voting over time on special 
corporate events, major corporate events.
    Mr. Kucinich. And what's the process by which you'll take 
positions on issues before the shareholders?
    Mr. Allison. At--we are working on those guidelines now. 
And I'm sure we would be happy to talk with the committee 
members about them.
    Mr. Kucinich. That would be great.
    Mr. Allison. We'll be happy do so.
    Mr. Kucinich. So you'll--so you'll--we'll have some dialog 
between Treasury and the committee before you get to a 
situation before you are actually voting on those shares.
    Mr. Allison. Right. Thank you.
    Mr. Kucinich. That's progress. I appreciate that.
    The Chair recognizes Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman.
    Mr. Allison, in your discussion with Mr. Foster a few 
minutes ago, you talked about this program and made it sound 
like it was apple-pie wonderful. I think the word ``profit'' 
was used several times in that discussion.
    But I'm just curious, what do we expect, what do the 
taxpayers expect when it comes to the TARP dollars, their 
dollars that were put into AIG, GM, Chrysler, the financing arm 
of GM, the financing arm of Chrysler? What do we expect to 
happen there? Are we going to be able to use the word 
``profit'' when we are talking about all that money, those 
billions of dollars put in those five entities?
    Mr. Allison. Well, just last week, we published our 
evaluations of all of our assets. And we will be sending you a 
copy of this, if you haven't already received it. And it is a 
full report on our approach to valuation and the current values 
of these positions.
    And the way that we value them is, where possible, to use 
market instruments----
    Mr. Jordan. Cut to the chase.
    Mr. Allison. Yes, sir.
    Mr. Jordan. Are we going to be able to use the word 
``profit'' like you did so many times in talking about the 
banks?
    Mr. Allison. Well, it's, I'd say, too early to be able to 
estimate what the outcomes will be. Currently----
    Mr. Jordan. Hasn't the Secretary himself said we're not 
likely to make a profit on AIG, GM, and Chrysler?
    Mr. Allison. Right. Currently, we show that the total 
current valuation of the auto companies and AIG would be a loss 
of about $60 billion, which is less than it was before. Again, 
let me emphasize that the projected losses, using the accepted 
means of valuation, were about $341 billion. They are about 
$200 billion less than that over the entire program. The 
investments in total that have been made so far would show----
    Mr. Jordan. The picture is not quite as rosy when we talk 
about all the money that's been put into those entities.
    Mr. Allison. Yes, sir, that's true. Today they are marked 
as losses.
    Mr. Jordan. And rational people, including the Secretary of 
Treasury himself, would say it is likely the American taxpayer 
is going to lose on those five.
    Mr. Allison. Based on current valuations.
    Mr. Jordan. OK.
    Mr. Chairman, if I could--and this, I think, brings up a 
point. I think it's important--you know, think about this. This 
committee has had, over the last year, oh, I forget how many 
hearings on Bank of America. We have had Mr. Barofsky in front 
of this committee, a couple times I believe. We've had Mr. 
Kashkari and Mr. Allison today, and we appreciate that. We've 
had Mr. Feinberg--and I do want to ask the gentleman a question 
about Mr. Feinberg. We had a hearing in Cleveland, Ohio, at the 
chairman's request, on the HAMP program. Miserable failure, we 
found out at that hearing, a home mortgage modification 
program, not working.
    At some point, I think it makes sense--the Treasury 
Secretary seems to be able to come and testify in front of the 
Budget Committee, in front of other committees--it makes sense 
for him to come in front of the Oversight Committee. Whether 
it's this Subcommittee on Domestic Policy, Mr. Chairman, or, 
frankly, the full committee, that seems to be in order. And, 
frankly, it should happen sooner rather than later.
    And I have another question, Mr. Chairman. But I guess I 
was directing that question to the chairman a little bit.
    Mr. Kucinich. Well, yeah, I will respond to the gentleman's 
question. I think the gentleman raises a valid point about the 
responsibilities that we have as a subcommittee for oversight 
on this matter. And let's consult and draft a letter of 
invitation.
    Mr. Jordan. I appreciate the chairman's willingness to do 
that.
    Let me just ask you one last question, Mr. Allison. We did 
have Mr. Feinberg here. What kind of interaction do you have 
with the executive compensation czar, so-called pay czar?
    Mr. Allison. I speak with the pay czar from time to time--
that is, Mr. Feinberg--who is the special master overseeing 
compensation of companies that have received exceptional 
assistance.
    Mr. Jordan. Speak with him from time to time. Do you review 
his decisions at all? Do you weigh in on his decisions when it 
comes to compensation for executives?
    Mr. Allison. Mr. Feinberg's decisions are his own. He's 
independent for those purposes.
    Mr. Jordan. And does Mr. Feinberg answer to anybody?
    Mr. Allison. Mr. Feinberg is responsible to the Secretary 
of the Treasury for performing his role, but Mr. Feinberg has 
been making his decisions independently.
    Mr. Jordan. Are you troubled by the fact--I mean, you're an 
accomplished individual. You served our country in the Navy. 
You've got an undergraduate degree from Yale, master's degree 
from Stanford, held many important roles in the private sector 
and now the public sector.
    Are you troubled by the fact that we have one single 
individual in the U.S. Government telling private American 
citizens how much money they can make?
    Mr. Allison. First of all, Mr. Feinberg has made his 
decisions transparent. The American people can judge for 
themselves. And----
    Mr. Jordan. That's not what I asked. Are you troubled, as 
someone with your education, your experience, your background, 
and, frankly, someone whose title is ``Secretary for Financial 
Stability,'' overseeing the TARP program, are you troubled by 
the fact we have in the United States of America one single 
individual telling private American citizens how much money 
they can make?
    Mr. Kucinich. The gentleman's time has expired, but you may 
answer and I would encourage you to answer the question.
    Mr. Allison. Thank you very much, Mr. Chairman.
    We have to, again, put this into context. We made 
investments on behalf of the taxpayers--extraordinary 
investments, unprecedented in financial institutions. These are 
temporary investments. We have to protect the taxpayers' 
interests. And, therefore----
    Mr. Jordan. Yes or no, are you troubled by what--it is a 
yes or no. And I would say that Mr. Feinberg said, yes, he is 
troubled by the fact. He himself said that when I asked him the 
same question.
    Mr. Allison. I would say that it's unfortunate that we are 
at the point, because of this crisis, where a special master 
has to be appointed to protect the interests of taxpayers. I 
think that he has a very difficult job; I think he is 
performing it well. So I'm not troubled by his performance at 
all.
    Mr. Kucinich. Thanks to the gentleman.
    We're going to go to Mr. Cummings. You're recognized for 5 
minutes. Go ahead.
    Mr. Cummings. Thank you very much.
    On March 30th, President Obama publicly rejected both the 
GM and the Chrysler plans for stabilization and long-term 
viability. The White House hired dozens of consultants--a dozen 
consultants and experts and forced additional reviews and major 
changes to their plans and then approved them.
    Why wasn't that same in-depth, hands-on approach used when 
it came to the financial firms?
    Mr. Allison. Well, we have to, again, take account of the 
situation at the time that those initial investments were made. 
This country faced a financial catastrophe, and it literally 
had days to act before the entire system would unwind, 
irreparably perhaps. And, therefore, those decisions were made, 
I think, by very capable people under tremendous pressure.
    And I think that the events since then have proven the 
wisdom of those actions that were taken at the time. I think 
they saved the financial system and the American economy. And 
the taxpayers are receiving returns that I think were far 
better than anyone could have dared forecast at the time.
    Mr. Cummings. Well, and so, do you think the trusteeship 
model that was used for AIG should have been considered for use 
with all companies in which the Government held voting shares?
    Mr. Allison. Well, again, the trustee structure overseeing 
AIG was formed before the EESA law was enacted.
    Mr. Cummings. Right. Right.
    Mr. Allison. And I think today we have, with the other 
companies, Treasury is overseeing our investments. I think it's 
important to link the authority over financial stability with 
the oversight of our investments in those companies so that 
authority and accountability are conjoined.
    Mr. Cummings. Uh-huh. And so, now we are in a situation 
where you just said that, with regard to our voting shares, you 
sound like there's some meetings that take place and then you 
decide on what you're going to vote on. Is that right? Or you 
decide how it's going to be voted on. And do you and Mr. 
Geithner and others in the administration have any kind of say 
on what happens with our votes? I mean--and how is that 
decided?
    Mr. Allison. What we'll do is to provide you with the 
information on how we intend to vote our shares--that is, the 
procedures that we'll be taking to make those decisions.
    Mr. Cummings. And when will we have that?
    Mr. Allison. In the first quarter.
    Mr. Cummings. OK.
    Listen, I was just reading a New York Times article this 
morning; it says, ``Four big mortgage backers swim in ocean of 
debt.'' And it's referring to AIG, Fannie Mae, Freddie Mac, and 
GMAC. And this is a very interesting statement. I just want to 
hear your reaction to this.
    It says, talking about those four companies, they ``appear 
at risk of getting onto a debt merry-go-round where they have 
to draw new money from the government just to keep up with 
their existing government debts. Fannie Mae recently warned, 
for example, that it could not pay the dividends it owes the 
Treasury, so future dividend payments will be effectively 
funded with equity drawn from the Treasury.''
    Now, I'm going back to some questions on the part of the 
chairman, the chairman asked a little earlier. You know, I'm 
just--it just seems like we almost have shell game going on 
here. In other words, we take from the Feds, and then--we take 
from one pot--it is sort of like having a line of credit. And 
so you take from your line of credit to pay your mortgage, but 
you're never really getting out of debt.
    I mean, is that an appropriate analogy?
    Mr. Allison. Well, first of all, the GSEs are not under 
TARP.
    Mr. Cummings. Right. I understand that.
    Mr. Allison. And with respect to AIG----
    Mr. Cummings. But you deal with these folks, right? I mean, 
I have to get you when I've got you. You're here. I may not see 
you again.
    Mr. Allison. Yeah. I don't have responsibility over the 
GSEs' funding.
    Mr. Cummings. OK.
    Mr. Allison. But let me say with regard to AIG, which is 
within TARP, we didn't anticipate making any further 
investments in AIG.
    Mr. Cummings. And why is that?
    Mr. Allison. Because we believe that the investments we 
made should be adequate. And we are monitoring that company 
carefully, and it is making progress against its plans, for 
example----
    Mr. Cummings. Does that mean we're going to get our money 
back?
    Mr. Allison. Again, currently, we would show, in our 
valuations, a loss on that investment. That is not a prediction 
of the outcome. And I wouldn't want to make a prediction, at 
this point. I think it is too soon. AIG is still in the midst 
of transformations that are intended to maximize value. The 
chairman of AIG has stated that he expects to pay back the U.S. 
Government every dollar, but we'll have to wait and see.
    Mr. Cummings. All right. Thank you.
    Mr. Kucinich. I thank the gentleman.
    The Chair recognizes Mr. Turner. He may proceed for 5 
minutes.
    Mr. Turner. Thank you, Mr. Allison.
    I want to get back to General Motors, but, before I do, I 
just want to touch briefly on this issue of whether the 
taxpayers are going to make a profit out of the bailouts or 
not.
    And I want to recognize that, to this point, you have been 
hesitant to speculate on the final outcome, which I certainly 
understand and respect. I understand that you're basically 
saying to us the final debits and credits have not been made, 
so I'm not going to predict what the outcome would be of losses 
and gains.
    And I think it's probably best that you're unwilling to do 
that as you're trying to look to manage the assets. And, 
wanting these assets to have value, you don't want to predict 
their non-value.
    Mr. Allison. Right.
    Mr. Turner. So I respect that.
    But I do want to say--and I want to ask you to correct me 
if I am wrong, which would not violate your lack of 
speculation--that to speak of profits is immature--excuse me, 
premature. I personally believe that to speak of profits is 
misleading. Because what we're really talking about is 
transactions from which there is revenue that will be offsetted 
by, I believe, massive losses in other areas. And that, when we 
talk in the aggregate, in the aggregate, I believe that there 
are going to be losses, but no one currently is predicting 
profit.
    So would you disagree that no one is currently predicting 
that, in the aggregate of our bailouts--AIG, General Motors, 
TARP--that there is going to be a profit? No one is currently 
predicting, in the aggregate, from these bailouts that there is 
going to be a profit, you agree?
    Mr. Allison. Well, sir, I've learned after 40 years in the 
financial business not to make predictions about markets or 
investment outcomes. However----
    Mr. Turner. But no one is predicting----
    Mr. Allison. Well, and I think, under the circumstances, if 
you look at our valuations, we are also currently valuing some 
of those investments at a loss. It's less of a loss, in a 
number of these cases, than it was even 6 months ago. I don't 
know the final outcome, but currently we are showing losses in 
some of those investments, yes, sir.
    Mr. Turner. And I appreciate you saying that, because I 
think when Members of Congress or members of the administration 
step forward and give selected pieces of information to give 
the public the perception that there are actually profits that 
are being generated, they are ignoring--and you have not done 
that.
    Mr. Allison. Thank you.
    Mr. Turner. Let me make it clear, Mr. Allison, you have not 
done that--that they are misleading the public on what the 
likely outcome will be.
    Mr. Allison. Well, I would invite the members of the 
committee as well as the public to take a look at our 
valuations, again published last week, as of the third quarter 
of this year. And they will get full information about our 
valuations of these investments by category.
    And, again, I would say that we are working very hard to 
preserve value for the taxpayer, and so far----
    Mr. Turner. I appreciate that. And we'll have to leave it 
there, because we've got to get to General Motors before my 
time is up.
    Mr. Allison. Yes, please, go ahead.
    Mr. Turner. Where I was last time was, the taxpayers have 
provided capital to General Motors.
    Mr. Allison. Yes.
    Mr. Turner. General Motors has used capital for the 
purposes of moving jobs offshore through partnerships, direct 
investment, and outsourcing.
    Isn't it true that, if the taxpayers are giving General 
Motors capital and General Motors is using capital to move jobs 
offshore, the taxpayers' funds are being used to move jobs 
offshore?
    Mr. Allison. Congressman, I don't believe that is a correct 
characterization of the use of our assets. These investments--
--
    Mr. Turner. Let me back up then.
    Mr. Allison. Please do.
    Mr. Turner. Because, is not capital fungible? I mean, if 
General Motors was starved for capital and they weren't able to 
undertake capital projects and you gave them money for capital 
and then they used capital money to move jobs offshore, you are 
enabling them, you are making it possible for them, you are 
providing capital that inherently is being used as capital to 
fund their program that results in jobs moving offshore. How 
can that not be the case?
    Mr. Allison. I think the most accurate characterization of 
our investment is that it saved hundreds of thousands of 
American jobs. Now, again, let me emphasize----
    Mr. Turner. So, Mr. Allison, you would deny that the 
taxpayers' moneys assisted General Motors in moving jobs 
offshore?
    Mr. Allison. I think that far more jobs would have been 
lost here in America had we not----
    Mr. Turner. That's not what I asked you. Would deny that 
General Motors moved jobs offshore, that the taxpayers assisted 
General Motors in moving jobs offshore? You're denying that?
    Mr. Allison. I think the taxpayers assisted General Motors 
in surviving and creating more American jobs down the road. And 
I think that was vital to not just the industry of the United 
States but to the financial system as well. I think that----
    Mr. Turner. And, Mr Allison, you've been very careful in 
your statements and in your credibility in this hearing, and I 
really wish that you would not diminish your credibility by 
trying to deny this aspect, which is a basic accounting and one 
which everyone knows is true, that taxpayers provided capital 
to General Motors, General Motors is using capital to move jobs 
offshore, the taxpayers' capital is facilitating moving jobs 
offshore.
    I would appreciate it if, for your credibility, you could 
acknowledge that.
    Mr. Allison. I do not agree, respectfully, sir, that they 
are using their capital to move jobs offshore. Let me also 
say--because I think what they are doing, and what we have 
done, is to save hundreds of thousands of American jobs by 
stepping in with Chrysler and General Motors.
    Let me also emphasize that the U.S. Government is not in 
the business of running companies. We are owning those shares 
not by our desire but by necessity. We'd like to shed ourselves 
of those investments as rapidly as we responsibly can, and 
that's precisely what we are about doing.
    But we are not going to run these companies. And I think 
that would be of great concern to many in the American public, 
if we were to take over the companies and start making 
management decisions. And I don't think we'd make the best 
management decisions.
    Mr. Kucinich. You know, your time has expired, but----
    Mr. Turner. Thank you, Mr. Chairman.
    Mr. Kucinich [continuing]. I just want to say, you know, 
again, because I have these same concerns: You can't, on one 
hand, say that you really don't want to be managing these 
companies and let a lot of American jobs be at stake and watch 
companies that are holding bailout funds move jobs out of the 
country and just say, ``Oh, you know, sorry, we don't really 
have anything to do with that. Pass the biscuits, please.'' No, 
no, no, no. That's not the way we look at it.
    I think it would be important for you, Mr. Allison, to take 
back to the Treasury Secretary the feelings of members of this 
committee about how people use these funds. And if jobs are, in 
fact, going to Korea and other countries, jobs are going and 
they are going with the help of companies that we've given a 
lot of money, I think that's a legitimate concern. And I just 
want to support the gentleman's line of inquiry.
    The Chair recognizes the gentleman from Illinois, Mr. 
Foster.
    Mr. Foster. Thank you.
    Let's see. At the point that the EESA authorization passed, 
do you recall what the estimate for the fraction--by the 
Congressional Budget Office of the fraction of money that would 
not be recovered? You know, what fraction was expected to be 
lost, when it got scored?
    Mr. Allison. The total program, at the beginning of the 
program early this year, the estimate was that the total loss 
would be over $340 billion in the TARP program.
    Mr. Foster. OK. And so, is that fairly excluded, at this 
point, unless there is something dramatic happens, that's going 
to be--end up being a gross overestimate of the loss.
    Mr. Allison. As I mentioned before, that estimate has been 
reduced by over $200 billion so far.
    Mr. Foster. OK. I would like to return, if I could, for a 
moment, of this historical question of whether or not Members 
of Congress understood what was actually in the EESA 
authorization. And I would like to quote, if I could, from my 
testimony to the Financial Services Committee on September 28, 
2008. This is the day before the first of the two House votes 
on the EESA authorization.
    So this is what I said at the committee at the time: ``This 
is not the time for ideological fighting about class warfare 
from the left or blind adherence to the principals of the 
unfettered free markets and zero government regulation from the 
right. This is the time for serious people from both parties to 
work fast, work smart, and map a way out of this crisis.
    ``And the second point that I would like to make is that 
there are two routes mapped out of this crisis by the 
legislation we are considering: the auction route and the 
equity route. I wish to express my strong preference for the 
equity route, and I believe that the American taxpayer and 
business owner will agree.
    ``In the auction route, taxpayer funds are used to buy off 
toxic assets left over from bad loans at a price well above 
anything you can get in the current market. Financial firms are 
bailed out, and life goes on pretty much as usual for these 
firms, with the exception that they have learned that whenever 
they make a whole batch of bad loans they can expect to be 
bailed out by the U.S. taxpayer.
    ``In the equity route, also allowed by this proposed 
legislation, the firms are bailed but at the price of 
government getting a big share of the company. I believe this 
is a far better deal for the taxpayer. The companies will be 
required to write down the value of their toxic assets, 
essentially admitting that their worthless paper is worthless. 
And, in exchange, the government injects cash by buying a large 
fraction of these banks. This is not dissimilar to the recent 
AIG bailout. Over time, the market recovers, and the banks are 
sold back to private investors.''
    And the testimony goes on, describing the advantages of 
this.
    So that the statement that Congress did not understand what 
was authorized by the EESA thing must come from people that 
either didn't read it or understand what was there. It was very 
clearly understood that there were two ways out of this and, at 
least on my part, very clearly understood that one of these was 
preferable because that was all that could happen in the 
emergency situation we're in. And I believe that those of us 
that, in fact, voted in favor of the EESA authorization were 
the adults in the room and have made a vote that we can be 
proud of forever.
    Anyway, that's, I guess, what I have to say there, and I 
yield back.
    Mr. Kucinich. I want to thank the gentleman.
    And I have a comment to make. I don't want to make it when 
you're out of the room; you should be in the room because I'm 
going to respond to what you said.
    The Treasury Secretary, Mr. Paulson, made a statement that 
the money was not going to be used to deal with the foreclosure 
crisis. He said that. Now, why would he do that unless there 
was some kind of a misimpression--or, not a misimpression--an 
impression that we were given? We had a hearing on this, Mr. 
Allison and Mr. Foster. We had a hearing on this.
    I just want to point out something that really does trouble 
me about what's happening with the way the wealth of the Nation 
is being accelerated upward. And that's one of the problems 
I've had with the bailout. You may say, well, it helped 
stabilize the American economy. But what I see is a separation 
between the real economy and Wall Street, that Wall Street--
stabilizing the markets, you know, a lot better. The banks are 
doing well. They parked their money at the Fed for a while so 
they could get higher interest rates.
    But they're not--you know, all across this country people 
are starved for capital. You have small businesses failing, you 
have shopping centers that are becoming vacant because people 
can't afford the rents anymore, because the people owning the 
centers or developers are getting cash calls or credits are 
evaporating. We're still--you know, we're in a deep recession 
that has not yet bottomed out, despite the statistical 
corrections in the November statistics.
    This separation between the finance economy and the real 
economy is real. This is not some fake idea. So you can't call 
that class warfare. That's a fact. And, you know, there is no--
the class warfare is over. We lost. I want to make that 
announcement here today. Working people lost. The middle class 
lost.
    Don't tell me about class warfare. Come to my neighborhoods 
in Cleveland, I'll show you class warfare. I will show you 
hollowed-out areas. I'll show you businesses that went down 
because they don't have access to capital. And, on Wall Street, 
it's fat city. Don't tell me about class warfare.
    Thank you for being here, Mr. Allison. We look forward to 
having an opportunity to hear more testimony from Treasury and 
look forward to having this subcommittee working with you.
    This is the Domestic Policy Subcommittee. It has been a 
hearing on ``The Government as Dominant Shareholder: How Should 
the Taxpayers' Ownership Rights Be Exercised?''
    Appreciate your presence. Have a good holiday.
    Mr. Allison. Thank you very much, Mr. Chairman.
    [Whereupon, at 11:50 a.m., the subcommittee was adjourned.]

                                 
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