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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

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.oversight.house.gov

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

EDOLPHUS TOWNS, New York, Chairman

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

MARCY KAPTUR, Ohio

ELEANOR HOLMES NORTON, District of

Columbia

PATRICK J. KENNEDY, Rhode Island

DANNY K. DAVIS, Illinois

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

DARRELL E. ISSA, California

DAN BURTON, Indiana

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

BRIAN P. BILBRAY, California

JIM JORDAN, Ohio

JEFF FLAKE, Arizona

JEFF FORTENBERRY, Nebraska

JASON CHAFFETZ, Utah

AARON SCHOCK, Illinois

BLAINE LUETKEMEYER, Missouri

ANH ‘‘JOSEPH’’ CAO, Louisiana

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

JOHN F. TIERNEY, Massachusetts

DIANE E. WATSON, California

JIM COOPER, Tennessee

PATRICK J. KENNEDY, Rhode Island

PETER WELCH, Vermont

BILL FOSTER, Illinois

MARCY KAPTUR, Ohio

JIM JORDAN, Ohio

MARK E. SOUDER, Indiana

DAN BURTON, Indiana

MICHAEL R. TURNER, Ohio

JEFF FORTENBERRY, Nebraska

AARON SCHOCK, Illinois

JARON R. BOURKE, Staff Director

(III)

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

(1)

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

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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 ripoff 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

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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.’’

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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:]

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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.

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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 leadVerDate 11-MAY-2000 13:01 May 26, 2011 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\65131.TXT KATIE PsN: KATIE
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ership 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

11

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.

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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

13

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:]

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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.

28

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

29

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

30

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 foreVerDate 11-MAY-2000 13:01 May 26, 2011 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\65131.TXT KATIE PsN: KATIE
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closures. 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 ownerVerDate 11-MAY-2000 13:01 May 26, 2011 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\65131.TXT KATIE PsN: KATIE
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ship, 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

33

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

34

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——

35

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, curVerDate 11-MAY-2000 13:01 May 26, 2011 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\65131.TXT KATIE PsN: KATIE
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rently 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

37

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.

38

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——

39

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.

40

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.

41

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?

42

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.

43

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——

44

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.

45

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

46

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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