if you can help us in that, i think that the sooner we can deal with that, the better off this country is going to be in general. with that, mr. chairman, i look forward to the testimony of herbal i son, and i look forward to a quick confirmation. . >> thank you.@@@@@@@ @ @ opening comments at all on the case of our nominee? >> i think -- thank you, mr. chairman. i would just like to thank you, mr. allison, for being here, mr. allison, for being here, willingness to serve. i unfortunately have an agriculture committee hearing i have to go to. but i want to stress as i was coming in, i heard senator tester say this, how important small business and community banks are to this recover

effort. we have had a number of conversations here with treasury secretary on that subject. we have a case of our own in colorado relating to a bank failure of one of our agricultural banks that is -- that is under review by the treasury department. and my perspective is the same as senator tester's, which is that until we begin to see this involvement beginning to take place at the local level, our public is still going to wonder how we're spending our taxpayers' money. i want to underscore that for you. i'm sure you know that and i look forward to hearing your thoughts about that and to working with you as a member of this committee. >> thank you, senator. >> thank you, mr. chairman. >> thank you, senator, very much. and mr. allison, welcome, again, to the committee and we'll be happy to hear your opening comments. >> thank you very much, chairman dodd and other members of the committee. i'm honored to be before you today. first, wasn't to thank presidi t

obama and treasury geithner to asking know serve. and the staff and your time for acquainting me with your perspectives on the crisis and the measures to address it. before i review my background and my plans for the office of financial stability if confirmed, i want to thank my wife, again, of 35 years and my sons john and andrew for their steadfast support support over those years. i began my career as the chairman said as an officer in the u.s. navy, spending four years in active duty including a year in vietnam. after attending business school, i joined merrill lynch and spent 28 years leaving as president in 1999. the merrill i held many positions in finance, human resources and investment banking and capital markets and general management. in 1998 i played a central role in unwinding long-term capital management, the hedge fund that a decade ago presented a systemic risk to our banking system. i learned from my experiences at merrill that the long-term

success of financial institutions includes sound corporate governances including independent checks and balances, tight control over risk and executive compensation geared to long-term performance on behalf of clients as well as shareholders. at merrill lynch i contributed to strengthening the governance practices in the 1990s. since leaving merrill lynch a decade ago i've led two other major financial institutions through transitions necessary for their long-term success. in 2002 i became chairman and ceo of tiaa-creff, a leading retirement and asset management service. we adapted t ed ed the company changing climates. as a result, tiaa-cref is one of very few financial companies that carry aaa ratings. and during my tenure, the company became the first company in the fortune 100 to allow its

stakeholders an advisory role on executive compensation. in september of 2008 i was named ceo of the federal national mortgage association, as that company was placed into government conservatorship. the crisis that devastated fannie mae's liquidity and capital base also threatened millions of american homeowners with foreclosure. new management had to shift the company's focus from maximizing profit and market share to helping hard-pressed american families stay in their homes. as a result fannie mae is the agent for the president's home affordable refinance and modification programs which offer financial relief to millions of americans. members of the committee, the financial stability program is essential to president obama's and secretary geithner's plans for recovery. our economy declined sharply last year, in part because credit stopped flowing. without access to credit, small businesses cannot buy the new equipment, raw materials and

inventory that they need to expand. and larger businesses need well-functioning credit markets as they adjust to the changing nature of the global marketplace. if confirmed, i will keep in mind that the financial crisis isn't mainly about banks. it's about alleviating the real hardships americans are facing every day. i will strive to be a prudent investor on behalf of the american people. to protect the taxpayers who have entrusted us with so much of their money. so, let me tell you what my top priorities will be if you decide to confirm me. first, i will carefully review the controls over managing the taxpayers' money. giving special attention to compliance with laws and directives, managing risks, and internal audits. i will work closely with the special inspector general, the government accountability office, the financial stability oversight board, the congressional oversight panel and the committees of congress

to ensure the accountability and oversight that the american people demand. second, under the direction of secretary geithner, i will continually strive to maximize the effectiveness of financial stability programs, restoring soundness to financial institutions and liquidity to our markets. and, finally, as secretary geithner has directed, i will emphasize transparency and interaction with congress so that you and the american people will know what we're doing with their money, why we're doing it, and how it's making a difference to our economy. members of the committee, let me close by thanking you for considering my nomination as assistant secretary of the treasury for financial stability. i was raised by a family that has always valued public service. my father spent much of his career as a special agent in the fbi. my dad's father worked in the u.s. department of agriculture here in washington, d.c. my mother's father was sheriff of sioux falls, south dakota,

and my brother, george allison, with me today, retired with the rank of captain after 28 years in the u.s. navy. having started my own career in the navy, i'm honored and inspired by the opportunity to return to public service. thank you very much. >> thank you very, very much. in our conversation i didn't know that your dad had been in the fbi. my father was an fbi. >> really, really? >> in fact, his first post was in sioux falls, south dakota. long before i was born, by the way. i might have been raised there. over the years. thank you. we are joined by mark warner, senator warner of virginia. mark, do you have any opening comments you'd like to make? >> senator tester told me since i was late i had to reserve my comments. >> well, john runs the show around here, so we appreciate it. let me start with some questions. i'm going to leave the clock off. i'll invite my colleagues sings there are three or four of us here to have a more informal conversation.

if i start a line of questioning and you have a thought along the same line, jump right in here, so we make this in a way more cohesive in that sense. so many places to start. let me start with this. since t.a.r.p.'s inception the program's scope, size and complexity have dramatically increased. i made note of this in my opening comments when i noted the 12 separate initiatives under t.a.r.p. today. some of these interact with the federal reserve, some with the fdic, some obviously with private investors as we discussed as well. i wonder if you could begin, i 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 large the effective management of such a complex program that involves already interaction with almost every other federal agency that's direct or indirectly involved with economic recovery in the country. and i wonder if you might share

those thoughts. and i've been joined by my colleague from alabama and let me interrupt myself and ask my friend and colleague if he'd like to make opening comments. >> mr. chairman, i've been late. i've been in the appropriations committee meeting, and we had a very important hearing on this nomination here in the committee. i would ask that my opening statement be made part of the record. i might have a question in a few moments. >> okay. terrific. we just heard, by the way, that herb allison's father is an fbi agent for many years. it's a timely connection. >> very good. 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 major 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@@@@@@@@)@ @ h )r, take time to really reach full scale, and as you said, it is important that the congress and the public perform these programs. i would pledge to you that if i am confirmed, one of my first acts will be to reexamine our ie reporting. 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 will have sufficient ought tautn your decision making for this program? >> senator, first of all, i understand my responsibilities. if i'm confirmed for this position.

and my role is to carry out the treasury secretary's directives as well on this program. he and i will be consulting frequently. i know how concerned he is about making sure that these programs are successful. i see him daily about these issues. and those contacts will probay grow even closer if i am confirmed. >> what's your view, if you have one, at the moment of how the treasury, which you'll be right in the central role there, 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? youould 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 p