all vied the congress with critical evaluations of the financial recovery efforts and rational oversight panel's latest monthly report its seven is an impressive assessment of the stress tests conducted by treasury and the federal reserve on the one thousand lives is bank holding companies report observes that the basic methodology and economic assumptions underlying the stress tests are reasonable and conservative the report goes on to identify logical and important criticisms of the chess panel's findings that concerns me most is it calls for increased transparency have long been an advocate for the highest levels of accountability in visibility in all aspects of the economic recovery i was and said that in order for the obama administration to come out of this crisis the public must have a sense of confidence they must feel that they are what they must feel that they are informed time and time again the public is as been as take the notion that disability of the global economy depended on the injection of unparalleled public funds a willingness to be accountable for their use of taxpayer dollars the washington post reported yesterday that repeated requests by the largest banks to return tarp funds will likely be honored for most if not all of the banks that have been adequately capitalized have been doing that under the stress test now we are asked to accept the contention of the banks and they are regulated that stability of the global economy is not jeopardized by withdrawal of the same public funds from private firms that were considered so critical to the survival of our economy just a few months ago accordingly in order to accept these claims we again require transparency regarding the actions of all the players the oversight panel's report indicates that more openness is still required moving forward the panel notes that while there has been an unprecedented level of disclosure of information regarding it is at the same time impossible others to replicate the same tests using different assumptions and scenarios or to apply these same assumptions and  banks i believe that the credibility of the banking supervisors tarnished their findings cannot be recreated by observers and critics alike the oversight panel also knows that the results of stress tests only been released under the adverse economic scenario was having to be the result of the adverse an aerial is preferable to having only results under the baseline scenario the credibility of the supervisors is again blemishe be helpful to us i can't i should start by saying i am not scripted since i don't have a pre approved script you should take my comments as my comments alone and not necessarily reflecting  special inspector general what we try to do analysis of the operation under the toxic asset relief program and the impact of that program we're really trying hard to see what the effectiveness is and to make recommendations that might make it more effective we return to the same thing that we started with our very first report about transparency accountability and clarity throughout the system and they appear again in the report that we so i thought i'd start with just a brief overview of that report and then very quickly a little earlier reports to remind you what they've been about and to be here then for whatever questions might be useful you may remember that back in early february treasury and the federal reserve announced s cap yet another  acronym this time to assess the ability of the nineteen largest bank holding companies to remain well capitalized even under adverse circumstances the results were reported just recently and for our june oversight report we examined the stress tests we went back and took a hard look at as we've been working on it now for over a month since the program was initially announced and here's sort of our headline findings i know  that you've had a chance to look at the report but i want to make sure it's out there as part of our conversation we looked first at the model for calculating the report we looked at the economic assumptions in it we looked at the question about replicability  told but it's also good to verify them independently so we were very concerned about the model of the stress test you know there's a lot of a lot of dispute in the economic world in the academic world about take a look at the model that treasury used and the way treasury constructed its model and give us an idea of what they thought about it and they came back and said it was a very conservative model it was a conservative meaning  dependable model a good model for stress testing they gave it a lot of support we got a long and detailed report from them and we put it into our report as part of appendix one and very much integrated into our work trying to figure out what would happen you've got to think what are your worst economic assumptions that you're going to be laid off that your credit card interest rates may go up that you may be in default on your mortgage what what is it you need to worry about here well the stress test said for two thousand and nine one of the key economic assumptions under the worst case scenario would be an eight point nine percent unemployment rate we're now at nine point four percent now the projection made back in february it seemed like a reasonable projection at the time more quickly than we had anticipated the average for the year to this point counting the earlier months when it was lower is eight point five percent which means we have not actually broken through the worst case scenario but let's face it the numbers are bad and they have headed in the wrong direction so this is a a real concern the worst case scenario right here in two thousand and nine is in fact not the worst case we're going to see worse numbers and then the second concern is the limited time horizon modeling is always the further out you tr ignore that future time only at your peril the point of a stress test tell us about the financial health of these institutions and whether or not they're going to be able to survive going forward our concerns do not stop with the ember of two thousand and ten but the stress test does the period of time that is particularly worrisome because of the state of the commercial real estate mortgages they are on a longer period for when they will come out to be refinanced so that numbers we were we were supplied numbers by representative from deutsche bank there in our report on an annual basis the numbers for tw and twelve twenty thirteen are deeply worrisome and the question about the adequacy of capital reserves wireman looking at potential losses on into the future really does  the stress test would be stronger and more meaningful if they reached across a longer period of time and with this issue the third problem that we are concerned about is the inability to replicate the test i'm afraid i'm going to expose once again my academic background i do a lot of incurable work and one of the most important things that you want to do in any model is  slightly relatively similar results different results but within the same ballpark if you do then you have a lot of confidence that the test is measuring something real that it's robust the problem is you can't rerun us unless you have enough details about that we've pressed very hard on the fed who is really the custodian of this test for more information not about specific banks but about the operation how how exactly i mean denigrated level how these mathematical formulas work how the pieces link into each other we have not been able to get that information and without that information others outsiders are not able to push on the stress tests in the same way and then finally we would be remiss if we fail to note this is self reported information it is not independently verified information and it is overseen by the same regulators that we have had in place throughout the process and this raises questions about confidence overall so that brings us to our recommendations  here we recommend that the stress test should be repeated under more difficult economic sir and over a longer time period for obvious reasons the way to test it to see these tests we recommend that banks be required to run internal stress test between official reporting periods and share those results with their regulators in other words i want to make it clear here while we have concerns about the rest we think there are ways to strengthen them and we embrace the stress test stress test was a good move by treasury and the fed and that is brought us important information  as i push for more transparency because that's the second big category of recommendation more transparency more accountability in the system treasury should release more details of their methodology and the results and publicly track the status of the macroeconomic assumptions is just an important part of doing this we want the analysts to be able to run these tests independently i really want to put this on a spectrum  trouble when we first started the congressional oversight panel back in november and in december that we had a treasury department that was not forthcoming with information that has changed the treasury department has been forthcoming they have given far more information and i don't just mean to the congressional oversight panel they have made available information under the stress test on a precedent amount mean that we are continuing to run risks mark to market is not the only way to develop confidence in the value of the help of the financial institution but there is understand what happened so that we have better policy going forward and possibly this research and accountability disclosure act could be expanded to other information in the financial system so that we could possibly better prevent such actions in the future i welcome your support thank you very much mr comey i join you to medicare the last thing i want to do is abolish oversight as i think we need to most and the american people watching this i hope that they understand that this congress is going to turn about oversight and i can understand mr brady's point of affective any patient oversight but the fact is is that we've got a we've got to make sure we do what needs to be done and people who were losing their homes came in to morgan state university eyepiece wanted it and an interesting thing happened we were able to i would venture to guess out of that thousand people we were able to help at least say for  five hundred at least modify their mortgages they had an opportunity to literally sit down professor with nineteen banks or mortgage companies service companies and in doing  a exit during my exit interviews we discovered that the banks were reducing mortgage payments by anywhere between three hundred dollars per month and eleven hundred a month and i'm trying to figure i think congress and the answer is you know this is one where we kept thinking the mortgage modifications would occur because they made economically yeah it hurts to take the hit you know that you're not going to get a payment of one hundred twenty thousand dollars nineteen percent interest over time some of these crazy mortgages that it was better to cut down take less but keep the homeowner in place from the homeowner point of