think some of this you mentioned in your steps, the initial steps, you intend to take, but i would like you to expand on this and how you would assure this committee and the public at å

he's got a presumption in his favor. >> thank you. why don't you begin with that. you've been involved with complex entities in the past. >> absolutely. >> obviously at merrill and fannie and tiaa-cref. give us the background. because it seems every time we turn around there's a new program with the t.a.r.p. program and it's getting more and more complex in understanding how the resources are being used. give us some sense of how you would approach this. >> yes, sir. thank you very much for the question. actually one of my first steps as i joined the treasury was to contact the special inspector general, neil barofsky, and ask to meet with him. we've been meeting every week since. i think he plays a very important role in protecting american taxpayers, and i want to do all i can to work with him going forward. as you well said, this is an extremely complex and very large program. it requires vigilant control. one of my first acts will be to

meet with our people in compliance as well as our own internal audit people. people in the legal area, to re-examine all of our controls over the financial stability programs. secondly, we are building our information systems even further so we can monitor the performance of each of these programs, monitor these controls. i'm having -- will have, when i'm confirmed, weekly meetings with the management team to go over all those metrics. we're going to be inviting in members and meeting with the congressional oversight panel and the other oversight groups including the gao and seeking their guidance as well to make sure that this program is well controlled and highly transparent to all who have to oversee it. >> well, let me jump to the issue of foreclosures. there was an article in one of the leading newspapers in the country yesterday about concerns over whether or not the foreclosure mitigation program, which we've been so actively involved in on this committee

for the last several years, is working very well. we -- the administration is dedicated $50 billion of t.a.r.p. funds for foreclosure prevention mitigation through a loan modification program. most members of this committee strongly support that effort. we've had various ideas as to how this would work. and obviously when there are 23 of us up here trying to craft something, you get a lot of different ideas that can make up that decision, and all of us, i think, understand as well -- while we may debate about how many causes conflicted or contributed, rather, to this crisis, i think all agree that a majo cause was, of course, the residential mortgage market, subprime lending, the predatory lending that went on, and so any effort to address all of this absolutely demands, insists, that we to everything we can to try to keep as many people in their homes. 10,000 a people a day with foreclosure filings can every single day in this country and the numbers may increase in the

coming weeks and months. so, the concern about whether or not this program will work very well or not raises two issues in my mind, given the apparent resistance on the part of servicers to participate in this program. first, we need good data on how many loans are being modified or refinanced under the -- in the hope for homeowners program. how many are being rejected for assistance in order to hold the receiver -- servicers accountable for their promises, and we need that data made public on a servicer-by-servicer basis. i wonder if you might commit to doing that very quickly. and secondly, there needs to be some process by which homeowners or consumers can raise concerns about the way the process is working. i have two thoughts on this. either creating an ombudsman in a sense that gives people an opportunity to understand all of this, dedicated loan modification or programs we ought to ask the special inspector general to oversee compliance with foreclosure

prevention programs. i wonder if you might share some thoughts. this goes to the heart of this in so many ways. if this fails and we're not making the kind of effort -- not only making the effort, but iffest is not succeeded in this area and we end up with a new wave of foreclosure coming in, as we could, swamping the kind of efforts being made. this thing is beginning to gain traction. things are beginning to improve. confidence and optimism clearly seem to be getting better, and what none of us want to see is this all of a sudden stalling out and falling back. if it does, to regain that momentum again i think will be a lot harder than it was in the initial effort. so, this is a critical moment, it seems to me, not to lose that momentum, however slight it may be, but certainly momentum heading in the right direction for the first time, in months in my view. but failure in this area i think would throw us back in ways that i think would make it very difficult to recover. i'd be very interested in ideas how we can -- we don't want to wait weeks or months whether or

not it's working. the concern is it's not working as well as all of us up here would like it to work. what can we do and the administration do to get this back on track again. >> yes. >> yeah. >> thank you for your question and your thoughts, mr. chairman. i fully share your concerns about this crisis of foreclosures and defaults and mortgages across the country. millions of americans have been affected by this. there are many desperate households today anxious to hold on to their homes, and that's why the president and the treasury secretary have made this one of their top priorities. a home affordable program i think is an extremely effective tool. it will take time to really ramp up and reach full scale. as you well said, it's important that the congress and the public is informed about the performance of these programs. and i would pledge to you that if i am confirmed, one of my first acts will be to re-examine our information systems and our reporting.

and i know that the treasury has pulled together more information as we speak about this program. i think we have to be agile as we look at this program as well. let's see how it's working. if it's not working as effectively as it needs to, we'll make every effort to make it more efficient and more effective and to reach more people. what's extremely important in dealing with the mortgage crisis is to reach out to as many people as possible. people are fearful about losing their hopes. they're fearful of contacting their bank or their servicer to describe their problem, for fear that that could cause itself a foreclosure on their house. we have to reach out and tell people programs are available. banks are willing to work with you. fannie mae and freddie mac are willing to work with you. you can go to the financialstability.gov website if you're a homeowner who's concerned and get more information and contacts, people who can counsel homeowners about how best to hold on to their homes. >> but the servicers need to do

this as well. we carved out the safe harbor for these, which was controversial, to insulate them against lawsuits from investors. and we -- frankly the investor community broke up and said you're breaking contracts here. and they're right. but we understood if we didn't do that, the argument would be, look, we'd like to help out these homeowners but we can't face the possibility of an overwhelming number of lawsuits for investors that will sue us for engaging in modifications. so, we insulated them from the problems. what are the servicers doing? servicer by servicer, what are they doing out there? the homeowner is reluctant, you're right. the servicer shouldn't be reluctant in light of the safe hashers. we want to know what they're doing and whether or not we are probing the servicers if they are not, in fact, stepping up if, in fact, they are not doing that. >> mr. chairman, thank you for your question. at least 14 of the top servicers in the country have already signed up and already active in this program and they account, including fannie mae and freddie

mac, for over three-fourths of mortgages in america. so, this is moving ahead. i will say that this is an extremely complex, large-scale program. it will take time to get to speed. it's moving ahead rapidly. i think in the next few months we'll see it reaching out to more people. it's encouraging that offer mortgage modification offers have been sent out to people. we've received millions of contacts on the website. people wanting more information. so, again, this is a matter of outreach. it's a matter of taking some time so that these banks can reconfigure some of their systems and their capability to be able to handle the large volumes that we expect, but it is moving forward and i'll be happy to report to you often on the progress of that program. >> i appreciate it. senator warner wanted to make a comment on that. >> thank you, mr. chairman, and thank you for opening up this line of questioning. mr. allison, good to see you this morning. and i'm glad you raised the issue of 100,000, that's what aye heard as well. i know folks in my state know

when he was here. and a great deal of collaboration with hud. we told folks to call after march 4th and people in my state would call and they would then get a basic response that said, well, thanks, but we don't have any of the details ready. and i understand the complexity. i think the chairman's raised a good point about perhaps an ombudsman so that some kind of appeals or process so that if you can't get answers, a website alone may not be enough. i guess one of the things i think would be helpful from an information stand point, and this just may be one-off examples. but what i'm hearing in my state is that there are a number of banks that basically have stopped processing foreclosures, waiting for this loan modification program to be fully in place. and that while the wave of foreclosure has slowed, it's not slowed because necessarily economic conditions have

dramatically improved but everybody's just kind of taking a time-out while the loan modification program is put in great. it's great that 100,000 offers have been made, one, i'd like to know how many of those offers have been accepted. and, two, if all of these servicers don't get fully engaged, do we have this enormous, potentially multimillion backlog of foreclosures waiting to flood the system if these initiatives are not successful? do you have any sense on whether there's this backlog that's been created? is this just kind of a one-off example or -- my sense is it's probably going on around the country. >> yes, sir. thank you, senator, for your question and for your concerns about this. it certainly is true that the program had to be organized and during the organization period anxious homeowners were calling in trying to find out when they could get assistance. i think we see a much fully response today than just a couple of months ago. as to the foreclosure crisis,

there were moratoriums, many of those have been lifted now. but recently the government has instituted a couple of new programs that can ease this situation for homeowners. one is called deed in lieu, and also there are efforts to get out to as many people right now as possible to engage in mortgage modifications. and i think it's extremely important -- i'll say this again, that we all reach out to as many people as possible to alert them to these programs, that help is available for them. and -- and i think as we do that, we can help prevent many, many foreclosures. one of the prime objectives of this administration is to do all possible to keep people in their homes, and we need feedback. we need information systems. if i'm confirmed, i will come back to you and other members of the committee with fulsome reporting about the progress of carrying out mortgage modifications, the pace at which we're doing it, whether we're on

track and what more we can do going forward. >> thank you, sir. that will obviously include what percentage of the take-up of that 100,000 offers 45i s made, kind of backlog we're looking at. i'm just concerned we may have in a sense a false sense of progress because there are people in arrears, people about to be foreclosed upon. the actions haven't been taken. but, my gosh, if these -- if the bullets we've fired we haven't worked, we got to be prepared for what's next. >> i full hill share your concern about that, senator, and we will provide you with that information. thank you. >> senator schumer wanted to make a comment on this as well, too. >> i just had a quick question, and i apologize for having to go. i'm just curious, how much of the program capital funds do you anticipate to be paid next week, next six months, next year? how much are we going to get back, which gives you money to play with, i guess, but not play with, but have a need or an emergency. >> senator, i will have to await the final results on that.

that will be communicated as soon as possible. as the treasury has been communicating repayments over time. >> don't we expect a bump next week? >> i think that's quite likely that there will be a bump next week. >> do you have any idea a ballpark estimate? >> i wouldn't want to make an estimate, senator, as to what it will be. i will wait for the federal reserve and the treasury to complete that process. >> okay. and just one more quickie. >> yes, sir. >> several firms feel that they're going to be at a disadvantage if their competitors are approved for repayment before they are. there's always competition, of course. >> yes, yes. >> have you heard that concern? how are you going to address it? >> senator, i have heard that concern. and i'm sure that the administration is well aware of that. and it will be taken into account as the announcements are made. >> senator shelby? >> thank you, mr. chairman. mr. allison, thank you for taking on this responsibility.

i wish you well. what assurances have you been given from secretary geithner and the white house that you and the white house that you will have sufficient@@@@@@@ @ @y should manage its investments in gm and chrysler?

and how long do you believe treasury will be a shareholder of gm and chrysler, if you want to? >> thank you for the question, senator. >> i must say to you that i have not been involved directly in the auto initiatives. and at this point that would have been presumer erpresumtuou confirmed. >> but you plan to get involved. with both elbows. >> absolutely. i assure you i'll get involved in all the initiatives under the financial stability program. >> well, your number one goal here is to get confirmed. we all here under that. aig, the management of aig, what steps do you believe need to be taken, have you thought about this, for the federal government's oversight of aig? in other words, you got a big bear and you can't turn it loose. it's -- i hope we won't have to

put more money into it. i don't know. but it's -- it's -- seems -- i don't know how you discard it. >> senator, certainly i understand the importance of the aig situation. again, i have to tell you that aye n i've not been involved in aig, because, again, that would have been presummous if i had gotten involved in that. i'll turn to that issue as well and i'll be happy to come back and discuss it with you. >> just a generic thing. how do you believe -- what do you believe is the best way for the federal government to manage its equity investments in the t.a.r.p. recipients to, one, ensure that the management of these firms have the proper incentives in running these companies and hopefully paying back the money? you would have an interest in that, would you not? >> yes, sir. i think that's a very important question that you're asking, and

very shortly the administration will be announcing its policies as a shareholder in the companies. and we have all heard the president as well as secretary geithner say the government has no desire to be a day-to-day manager of those companies. it will be a shareholder. and its policies on governance as a shareholder will be made public soon. >> mr. allison, you well know this, we all do, government programs are quite often difficult to create and sometimes just about impossible to terminate. the t.a.r.p. has a statutory termination date that can be slightly extended. >> yes, sir. >> at the request of the treasury secretary. you know this. do you believe that the t.a.r.p. program should ultimately be terminated? and would you have any concerns if the program were converted into some kind of permanent revolving fund? >> senator, i think that's an important question, many

americans as well as people in congress are asking. as you said, the program is scheduled to terminate at the end of the year, although it could be extended by an act of the secretary until, i believe, as late as october of 2010. but i think it's important to point out that the programs within the financial stability area have themselves termination provisions, many of them. there are terms to the financing, end dates. there are also disincentives built into those programs that cause, should cause, banks to want to repay that money as fast as possible. we've already seen, and we will see, additional repayments. so, this program is designed to deal with extremely serious financial crisis. and it was not set up to be a long-term, permanent program. >> mr. allison, while the t.a.r.p. program has provided hundreds of billions of dollars to the banking sector, there

have been a lot of complaints, and we all hear it here in the senate, that the banks receiving t.a.r.p. funds are not making loans, at least not enough. what is being done, what do you intend to do, about ensuring that the t.a.r.p. recipients are making loans particularly to small businesses? we're not talking about making bad loans. i know you can't micromanage the daily activities of them. but as far as policy, it seems that small business community's really being squeezed in the financial sector in this country. >> yes, sir. well, we're acutely aware that in many small communities around the country, small businesses are still having difficulty getting access to credit. i think there are a number of reasons for that, but it's important to point out that the secretary recently directed that we would reopen the capital purchase program for small banks, which provide an outsize portion of lending to small

businesses around the country. >> you believe that will help a lot, don't you? >> i do. i think it's important. we're not forcing money on banks. we're making money available. and we are -- want to be helpful in every possible way to small business. where also the secretary has initiated a number of actions, and to small banks. i think what the first priority is to make sure that these banks are well capitalized. and over time that capital will turn in to more and more lending. i think we have to go through a period where there are concerns by borrowers as well, small companies in some cases are fearful about borrowing, because they're not sure about the economic environment. as the chairman said, we're not yet out of the woods with this economic crisis. we all have to be aware of that. we need to be vigilant. we can't be complacent. we need to be willing to modify the programs if necessary going forward. we have to have a constant dialogue with the senate, with the house, with the american people, and with the financial

community to make sure that these programs are as effective as they possibly can be. and i know that the secretary's completely dedicated to making sure thames. >> thank you. thank you, mr. chairman. >> thank you very much, senator shelby. senator tester? >> thank you very much, mr. chairman. kind of going back to when this program would end, assuming it would be extended. does that mean that the money would be paid back by october of 2010 for the program to end or does that mean that no more money would be lent out by october of 2010? >> senator, it would mean that no more money is going to be invested from this program, from that point on. >> okay. >> there still may be moneys outstanding. that's why it's also important that we have a strong and effective asset management capability within the office of financial stability. >> yes. >> and that will be one of my responsibilities if i'm

confirmed as well to make sure that happens. >> and you may or may not have looked at this. you're talking about aig, bank of america, gm, chrysler, those paybacks are probably going to take some time, or what's your perspective on that? >> senator, i don't think any of us can forecast exactly how long that will take. i think it will take some time. the purpose of putting capital in there is to enable, for instance, the auto companies to make that transition over some period. >> okay. jump back to the auto program. you had said that you're going to be jumping in waist deep at least, if not further, into this program. can you tell me, from your perspective right now, who is making the day-to-day decisions on that program, or will it be you? >> well, eventually, if i'm confirmed, i will be involved in making those decisions. >> the primary decision maker? >> the secretary is involved as well. >> yes. >> and i will report to the

secretary of the treasury as well. and i'm sure we'll have a continual dialogue about that, along with others in the treasury department and throughout the government. >> one of the -- one of the concerns that ranking member shelby brought up, i believe, or maybe it was chairman dodd brought up the fact that we're not -- the t.a.r.p. recipients aren't loaning money, or at least in some cases that's the case. yesterday it was brought up to me by a person who uses -- an industry, actually, that uses a lot of fuel that this t.a.r.p. money's being used to speculate in the oil market. would you have any control in your position to look at that? and, quite honestly, i've got some real problems with folks tinkering around in the oil industry that aren't taking delivery on the product, and maybe i'm alone in that, maybe i'm not. but it creates artificial balloons, when they pop, we have problems. would you have any ability in

your position to take a look if, in fact, they're doing something like messing around in oil speculation, driving the prices up artificially? >> senator, i should point out that already the treasury department is producing monthly reporting on the lending activities of the banks that are receiving financial stability funds, and that reporting was recently expanded to include all the banks that have received that funding. and we will work to make that reporting as fulsome as we possibly can. let me also point out that throughout this recession -- and i think back to the programs that have been put in place -- we've seen lending remain fairly steady throughout this period. and i think it's been important by injecting capital into these banks, as they wish to have it, that we've been able to sustain lending during this very difficult period. all of us want to see lending increased. may i also say, senator, that we will -- i will be glad to get

back to you on your question about whether these moneys are being used for oil speculation. we want to develop more reporting, both to the oversight committees as well as to the congress. >> if they are -- yes. >> -- is it within your capacity to say no? >> senator, we -- we are not going to be in the business of micromanaging these banks. we're there to help them be financially sound. >> i appreciate that. >> but the reports we can get, we can give direction on these reports. >> yes, sir. >> thank you. >> thank you. >> a couple questions, if i might, mr. chairman. your predecessor recently commented that firms deemed too big to fail have an unfair advantage over smaller competition because they can raise money more cheaply in the debt markets. what are your thoughts on that? >> senator, the administration's working right now on a proposal

on financial reregulation that is very much needed. and i'm sure that it will be addressing broadly the type of issue that you're raising. >> do you -- so you do think it is a concern? >> i think that there's a concern on behalf of the american public and certainly myself that we have a strong, stable financial system. >> yeah. >> and a system that's responsive to the long-term needs of the shareholders and the long-term needs of this country. >> okay. i'll let you off on that one. do you think -- well, just give me your opinion on the "too big to fail" thing as an overall perspective. and you know what mine is. i mean, i think if failure is not a possibility, that means the taxpayers are on the hook and that also means that there's not a lot of risk there, if you

know that you cannot fail and you're one of those banks that are too big to fail. what's your perspective on that? do you think it's healthy? do you think we need to do something about it? do you -- what would you do if you were in my boots? >> senator, i think one of the reasons for this initiative on financial industry reform and re-regulation is to deal with the fact of what we were confronted with as a country last year, when these huge institutions began to fail, and there was no real mechanism for an orderly resolution of those problems. i think what we need is to have a mechanism in place to -- if -- if that type of event should ever recur again, we're going to try very hard to make sure it wouldn't, that there's a mechanism for dealing with it. the other is to make sure that these organizations have a framework of regulation that will allow for transparency and

active interaction between regulators and the financial institutions to try to prevent some situation like this from happening again. >> okay. very good. thank you, thank you, mr. allison. thank you, mr. chairman. >> thank you very much. senator warner? >> thank you, mr. chairman. i want to go back to comments that both senator schumer and senator shelby made. senator shelby raised the point of, like your analogy, we got this bear, aig, and we don't know what to deal with it. and senator corker and i when secretary geithner was in recently -- >> senator warner, let me apologize. i did not see bob corker walk into the room. my colleague from tennessee. >> i was about to say good thins and you cut me off. >> no, my apologies, and my apologies to my colleague from my colleague from tennessee. senator corker? >> i'll let him ask his first question and come back. >> he thinks so highly of you.