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H.R. 3068, TARP FOR MAIN 

STREET ACT OF 2009 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JULY 9, 2009 

Printed for the use of the Committee on Financial Services 

Serial No. 111–54 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

July 9, 2009 ....................................................................................................... 1 

Appendix: 

July 9, 2009 ....................................................................................................... 31 

WITNESSES 

THURSDAY, JULY 9, 2009 

Apeseche, Frank, Chief Executive Officer, Berkshire Property Advisors and 

The Berkshire Group, on behalf of The National Multi Housing Council 

and the National Apartment Association ........................................................... 18 

Apgar, Hon. William C., Senior Advisor to the Secretary for Mortgage Finance, U.S. Department of Housing and Urban Development ......................... 9 

Calabria, Mark A., Ph.D., Director, Financial Regulation Studies, Cato Institute ........................................................................................................................ 13

Crowley, Sheila, MSW, Ph.D., President, National Low Income Housing Coalition ........................................................................................................................ 15

Engel, Gary T., Director, Financial Management and Assurance, U.S. Government Accountability Office .................................................................................. 12 

Hudson, Brian A., Sr., Executive Director & CEO, Pennsylvania Housing 

Finance Agency .................................................................................................... 19 

Silvers, Damon A., Associate General Counsel, AFL–CIO ................................... 21 

Warren, Chris, Chief of Regional Development, City of Cleveland, Office of 

the Mayor .............................................................................................................. 23 

APPENDIX 

Prepared statements: 

Bachmann, Hon. Michele ................................................................................. 32 

Apeseche, Frank ............................................................................................... 33 

Apgar, Hon. William C. .................................................................................... 43 

Calabria, Mark A. ............................................................................................. 48 

Crowley, Sheila ................................................................................................. 51 

Engel, Gary T. ................................................................................................... 61 

Hudson, Brian A., Sr. ....................................................................................... 74 

Silvers, Damon A. ............................................................................................. 79 

Warren, Chris ................................................................................................... 83 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Crowley, Sheila: 

‘‘What We Mean By Housing: An Open Letter to Congress and the 

Administration,’’ dated April 2009 .............................................................. 92 

Engel, Gary: 

Written responses to questions submitted by Chairman Frank and Representative Neugebauer ................................................................................ 123 

Written statement of The Partnership to Preserve Affordable Housing ............. 126 

(1) 

H.R. 3068, TARP FOR MAIN 

STREET ACT OF 2009 

Thursday, July 9, 2009 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The committee met, pursuant to notice, at 10:02 a.m., in room 

2128, Rayburn House Office Building, Hon. Barney Frank [chairman of the committee] presiding. 

Members present: Representatives Frank, Kanjorski, Waters, 

Maloney, Gutierrez, Velazquez, Watt, Ackerman, Sherman, Meeks, 

Moore of Kansas, Capuano, Hinojosa, Clay, McCarthy of New York, 

Baca, Lynch, Miller of North Carolina, Scott, Green, Cleaver, Bean, 

Moore of Wisconsin, Hodes, Ellison, Klein, Wilson, Perlmutter, 

Donnelly, Foster, Carson, Speier, Childers, Minnick, Adler, Kilroy, 

Driehaus, Kosmas, Grayson, Himes, Peters, Maffei; Bachus, Castle, 

Royce, Biggert, Hensarling, Garrett, Barrett, Neugebauer, Bachmann, Marchant, McCarthy of California, Posey, Jenkins, Paulsen, 

and Lance. 

The CHAIRMAN. We are about to start the hearing. 

People over on the left, there is a three-way conversation going 

on. Please take it outside. If you are not here for the hearing, 

please leave. Let’s have people be seated. There are plenty of seats. 

I am hurrying because we have, unfortunately, a lot of votes 

coming up, so I want to get this started. We will have the members’ 

opening statements. We may get through the Administration. And 

I apologize, but we may have to do our opening statements, take 

off for about an hour, and come back. I apologize, but that is the 

nature of our business. 

So I will begin with my opening statement. 

This is a hearing on H.R. 3068. We are receiving in repayments 

from the TARP—there were actually three revenue streams. 

Let’s have people leave. If you are leaving, leave. Close the doors. 

The bulk of it, of course, is principal repayment. And, I have to say, for those who have counted the whole $700 billion advanced 

under the TARP, or authorized under the TARP, as lost, the facts 

obviously are clearly to the contrary. Of $200 billion advanced to 

banks since this program began, $68 billion has already been repaid in less than a year in principal. 

There are warrants that are still unredeemed that will be a revenue source. And there is a source of interest and dividends and 

some warrants which by now amount to about $6.5 billion. This is 

a bill that would expend that $6.5 billion to deal with the ongoing 

foreclosure and mortgage problems we still have and to fund an 

2 

item that has been frequently supported by the House in the past 

couple of years, the National Affordable Housing Trust Fund. 

The National Affordable Housing Trust Fund is very important 

because I believe there was a preference for homeownership over 

rental housing, and for lower-income people, that was a contributing factor to the crisis we are in. We did too much in pushing 

people into homeownership when they were in lower-income brackets and we did not do nearly enough in terms of rental housing. 

Beyond that, the great bulk of the money goes to dealing with 

the ongoing foreclosure crisis. We have a program that was supported by the Congress in two separate bills, signed last year by 

President Bush and this year by President Obama as part of overall bills, which provide money—pardon me, but this microphone 

does not appear to be on. And I apologize. I will try to keep that 

in mind. 

The program is one where money is provided to communities to 

buy up property that is foreclosed. Property that is foreclosed, residential property, goes from being a tax payer to a tax eater. It is 

a serious problem for municipalities, and, as we know, foreclosures 

are not randomly geographically distributed. They become serious 

problems for particular neighborhoods. 

This is a very successful program, broadly supported by local officials, to give them funds with which they can buy up the foreclosed 

property, take a blight off their rolls, not have to send out their police and their fire, already overtaxed by the need for layoffs, unfortunately, by budget crises, and put them to more productive use. 

It also begins a new program. We clearly face a new wave of foreclosures, not because there were problems with the initial mortgage, but because people who took out mortgages, conventional 

mortgages overwhelmingly, have lost their jobs. 

In 1994, this House passed a bill that was authored by our 

former chairman, Mr. Gonzalez, who peers at us from over my 

right shoulder, to provide loans, not grants, but loans to mortgage 

holders who would face the loss of homes because they have lost 

their jobs. That never passed the Senate. And there is, of course, 

a lot of that going around. 

But it now seems to me an appropriate thing to do because a new 

wave of foreclosures will be tragic not just for the individuals who 

will lose their homes because they lost their jobs through no fault 

of their own at a time of great unemployment, but it will add to 

the downward pressure on housing and housing assets that contribute to this crisis. 

And it is not the role of this committee or this Congress or anybody else to try to artificially prop up housing prices. But to the 

extent that we can prevent another artificial drop that comes because people who had good mortgages and were in good standing 

now have lost their jobs in unprecedented numbers for recent 

times, we should step in. 

So that is what this bill does. It is an effort to prevent bad situations from getting worse in ways that will add to the economic crisis that we now face. 

And I recognize the gentleman from Alabama for 4 minutes. 

Mr. BACHUS. Thank you, Mr. Chairman. 

Mr. Chairman, I oppose this legislation for several reasons. 

3 

I will start with the Constitution. Article I, section 9, of the Constitution requires that all drawdowns of the general fund of the 

Treasury must go through the appropriations process. However, 

this bill circumvents the appropriations process by sending funds 

directly from the general fund of the Treasury to the Housing Trust 

Fund. And that is $6.2 billion. 

According to the minority staff on the Senate Committee on 

Budget, the Federal Government has pledged more than $9.7 trillion to address our economic credit crisis, including billions for foreclosure mitigation initiatives. For instance, the Treasury has committed $75 billion for loan modification and foreclosure prevention. 

Instead of using the TARP dividends to offset these obligations, 

Chairman Frank’s bill spends them. 

It also increases the Federal debt. Any new Federal commitment 

would come on top of our existing $10.9 trillion national debt and 

an estimated 2009 budget deficit of $1.8 trillion, despite the fact 

that dividend provisions in TARP were intended to make taxpayers 

whole from any bailout committed. This bill obviously flies in the 

face of that commitment. 

Today, soaring deficits are the biggest threat to financial stability, economic recovery, and job growth. Vice President Biden acknowledged that the Administration had misread the economy. But 

the solution of the Administration is more deficit spending, including potentially another multi-billion-dollar government stimulus, a 

new $1.5 trillion government-run health care plan, and now the 

chairman’s new legislation to divert $6.2 billion from TARP to finance an Affordable Housing Trust Fund. 

Most disturbingly, this legislation transfers $1.5 billion to the 

Neighborhood Stabilization Program, which could be accessed by 

ACORN, a community group notorious for its efforts to commit 

voter fraud. Ironically, this approach also undermines the flexibility that Treasury Secretary Geithner indicated is necessary for 

the Treasury to carry out TARP’s authorized legislation. 

In a June 30th letter, this last week, Secretary Geithner said, 

‘‘We believe it is critical that the Treasury maintain full flexibility 

to strengthen our financial system, promote the flow of credit, and 

permit a rapid response to unforeseen economic threats.’’ Yet, here 

we consider legislation that undermines that flexibility. 

Mr. Chairman, one of the best things we can do to stabilize the 

credit markets and promote long-term economic growth is to restore fiscal discipline and stop the reckless government spending. 

Just this week, Morgan Stanley’s chief economist characterized our 

trillion-dollar-a-year deficits as ‘‘America’s fiscal train wreck’’ and 

offered this dire warning: ‘‘Soaring debt will force up real interest 

rates, reducing credit and productivity and boosting debt service. 

Not only will these factors steadily lower our standard of living, 

but they imperil our economic and financial stability.’’ 

This bill adds $6.2 billion to that deficit. As institutions begin to 

pay back their TARP assistance, we need to end the bailouts and 

return that money to the taxpayers, thereby reducing the deficit. 

Republican members of the committee, including the gentleman 

from Texas, Mr. Hensarling, and the gentleman from California, 

Mr. McCarthy, have introduced legislation to do that. I urge the 

4 

members of this committee to support that legislation, not this legislation—$6.2 billion added to the deficit. 

I am very interested in hearing the witnesses’ perspectives on 

this legislation. Thank you, Mr. Chairman. And I yield back the 

balance of my time. 

The CHAIRMAN. The gentlewoman from California is recognized 

for 3 minutes. 

Ms. WATERS. Thank you very much, Chairman Frank, for arranging this hearing on the TARP for Main Street Act of 2009, 

which we, along with Representatives Cardoza and Velazquez, introduced at the end of June. I believe this legislation represents an 

important step towards ensuring our economic stability. 

Let me just say, Mr. Frank, that I have been very, very concerned that the foreclosure problem is larger than we thought it 

was, and that RealtyTrac data indicates that foreclosure filings 

were reported on more than 320,000 properties in May. They also 

report that, at the end of May, there were over 460,000 properties 

that have completed the foreclosure process and are now real estate owned. So, no matter how you measure it, the foreclosure 

problem far exceeds current resources. 

I am very pleased about your leadership on this legislation for 

the three areas that will now be supported. Additional money for 

Neighborhood Stabilization—as you know, this is a program that I 

worked very hard to establish and get funding for, to assist communities in mitigating the negative impacts of foreclosed and abandoned housing. 

And I am very pleased that cities around the country are taking 

advantage of this program. They are so pleased that they are able 

to clean up their neighborhoods and to rehabilitate these homes 

and put them back on the market. It is a real way by which to help 

not only our cities but families get back into housing. 

And of course the Housing Trust Fund that you, Mr. Chairman, 

have been in the leadership of, because we do need to expand housing opportunities. People are homeless, increasingly, because of 

this economic crisis. And we have people standing in line for assistance and for opportunities. The Housing Trust Fund will help to 

expand our ability to create new housing. 

And, of course, the most innovative portion of this, the Emergency Homeowner Relief Fund. And this is very important because, 

despite everything that we have done, there are people who are losing their jobs, and they need some help. And, with this fund, we 

will be able to help them stay in their homes and pay those mortgages with a creative arrangement that will allow them to pay 

back once they get re-employed. 

So I thank you, Mr. Chairman, and I yield back the balance of 

my time. 

The CHAIRMAN. The gentleman from California, Mr. Royce, is not 

here, so we will go to the gentlewoman from Illinois, Mrs. Biggert. 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

The CHAIRMAN. A minute-and-a-half, because we have one 

more— 

Mrs. BIGGERT. You know, I think we should rename the bill 

under discussion today, call it, ‘‘Another Bailout Paid for by Main 

Street.’’ 

5 

Who is Main Street? If you could drive down any Main Street in 

my district, you will see the storefronts of family-owned small businesses such as a hardware store, a bakery, and a shoe repair shop, 

and the block behind Main Street are family homes. 

These Americans pay taxes, and over 90 percent of them are paying their mortgages and paying them on time. They can’t afford another big-government, big-spending bill—so that the Federal Government can build more housing? Our families and home builders 

can’t sell the housing on the market right now. And bailout programs are not making money, and if they do it should help put our 

fiscal house in order. 

Our budget deficit could reach $1.8 trillion this year. Our current 

national debt is $10.9 trillion. And who is loaning us this money? 

China holds 25 percent of U.S. Treasury securities, and Japan 

holds over 20 percent. 

Spend, spend, spend. Who pays for it? During these tough economic times, when credit is less available, the family budget is 

tight, and small businesses are making tough decisions to keep 

their employees in a job, they simply can’t afford more Washington 

spending. We can’t afford to lose more jobs, we can’t afford to tax 

to death the American family, and we can’t afford another bailout 

bill or a free-for-all housing spending bill. 

I yield back. 

The CHAIRMAN. The gentleman from Texas. The time will be the 

same, but the membership is different, in terms of numbers. So the 

gentleman from Texas is recognized for 1 minute. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

‘‘TARP for Main Street’’ is an ironic title for this hearing, since 

95 percent of Main Street either rents their homes, own them outright, or are current on their mortgages, which means that 95 percent of Main Street taxpayers are being forced to bail out the other 

5 percent, many of whom acted irresponsibly. 

TARP was established as emergency legislation to stabilize our 

financial markets. Regardless of what good may have been 

achieved last October, the program has since morphed into a $700 

billion revolving bailout slush fund. 

And what do we have to show for the current TARP in this Administration’s failed economic policies? 9.5 percent unemployment, 

the greatest in a quarter of a century; 2.6 million jobs lost since 

February alone; and trillions of debt for our children to repay, debt 

the likes of which we haven’t seen since World War II. 

Section 103 of the TARP legislation lists as the first consideration for the Secretary of Treasury, ‘‘protecting the interests of taxpayers by maximizing overall returns and minimizing the impact 

on the national debt.’’ The taxpayer wants his money back. Washington led him to believe that he would get his money back. What 

a cruel hoax it is to take it from him now. 

It is not time to recycle TARP; it is time to terminate TARP. It 

is time to quit borrowing money from the Chinese and sending the 

bill to our children and grandchildren. 

I yield back the balance of my time. 

The CHAIRMAN. The gentleman from Illinois is recognized for 3 

minutes. 

6 

Mr. GUTIERREZ. I would like to thank Chairman Frank for calling this hearing to discuss the TARP for Main Street Act of 2009. 

I think it is vital for both our economy and our communities that 

we find ways to reinvest, repay TARP funds into our local neighborhoods. 

I supported, along with the chairman, the TARP money, primarily to unfreeze our credit markets and get capital flowing on 

Main Street. But, under no circumstance, do I want the money held 

up in the vaults of Wall Street firms. I am pleased this committee 

is shifting its focus away. We have had hearings in my subcommittee where we know that banks aren’t lending people money 

that we hoped would become unfrozen because of the TARP money. 

But we also have heard very innovative ways that TARP money is 

being used to stimulate our economy. 

To that end, using TARP dividends to finance the redevelopment 

of abandoned and foreclosed homes, as the chairman’s bill proposes, 

is an excellent step. However, we must also consider expanding the 

scope of this idea to assist our local businesses and nonprofits. 

Mr. Chairman, while I support your legislation, I would like to 

see the committee take a lead in pushing TARP funds that are returned to Wall Street banks to be set aside for the funding of CDFI 

loans and SBA loans, to make them directly to people out of private 

lenders’ hands. These simple steps would allow TARP funds to directly reach those businesses which help create jobs and help keep 

people in their homes. 

Another way to increase it is to do this—I mean, in my home 

State of Illinois, 49 percent of the workforce is employed by small 

businesses. Without a vibrant small-business community, this recession will continue to linger. Investing TARP funds resources in 

small businesses and nonprofits is one of the fastest routes, I believe, to economic recovery. 

I do not regret my vote. Sometimes it would have been probably 

a little easier to have said ‘‘no’’ to the TARP money and then 

watched the consequences to our economy and to our financial 

structures had we not responded. But that would have been irresponsible. 

So, Chairman Frank, I want to thank you again for showing 

leadership and ingenuity in these ideas, and I look forward to 

working with you on them. 

The CHAIRMAN. I thank the gentleman. And I think many of us 

look back to the days when we thought the TARP was what you 

used to cover the infield when it rained, but we are beyond that. 

The gentleman from New Jersey, Mr. Garrett, for 1 minute. 

Mr. GARRETT. Thank you, Mr. Chairman. 

You know, there seems to be a competition here by the Democrats, and especially in this committee, as to who can come up with 

the most outlandish way to spend taxpayers’ dollars and to do it, 

as the ranking member said, maybe outside the Constitution and 

outside the regular appropriation process. 

You know, the current proposal is to take the TARP program and 

to turn it into something of a Madoff-like Ponzi scheme. It goes 

something like this. They assume that because a portion of the 

$700 billion TARP programs turns out a return, they call it a profit. This, despite the fact, you know, the CBO says the majority of 

7 

the money, the $700 billion, is still outstanding, and the CBO says 

that the majority will most likely result in a loss. They still consider it a profit and say they want to spend it on their pet projects. 

Now, the lady from California said that she had misread the 

housing situation. The Vice President said the Administration misread the unemployment and the economic situation. I would suggest the other side of the aisle has misread the American public, 

who is tired of all the bailouts, tired of all the big spending. And 

the simple solution that they are really looking for from this committee and from Congress is to return these dollars to the American taxpayers, to the Treasury, pay down the debt, and not one 

more big spending program. 

The CHAIRMAN. The gentleman from Texas, Mr. Marchant, is 

next for 1 minute. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

Mr. Chairman, one of the main reasons why I was concerned 

about the TARP vote back in October was the fact that I did not 

see in the bill any provision for the TARP money to ever be paid 

back to the Treasury. In fact, it was my impression, when the vote 

was passed, that the money would go back into general Treasury, 

and my fear at that time was that it would just be spent for general programs. 

I think the disagreement that I have on this particular proposal 

is that it is, in my opinion, the first step towards spending the 

money outside of the appropriations process and spending the 

money on new programs. The people in my district, I think, expect 

this money to be paid back to the Treasury. And I think my fears 

have been realized, in that it looks like our plan is to spend the 

money. 

The CHAIRMAN. The gentleman from California, Mr. Royce, is 

again recognized. 

Mr. ROYCE. Thank you, Mr. Chairman. 

You know, let’s start with a basic premise here. The TARP is not 

profitable. We had to go out and borrow that money, plus the interest. We have forgotten about the interest that we are paying on 

that borrowed money. There are no TARP profits. We have spent 

$643 billion; we have gotten back $70 billion. That is a $573 billion 

hole. 

There is no new money to spend. The dividends should be used 

to pay down the enormous national debt with interest that is accruing. And they should not be recycled, they should not be churned. 

Pay down the debt. It is the only fiscally responsible thing to do. 

A couple of other points here. This obviously would violate Article I, section 9, of the Constitution, requiring that all drawdowns 

of the general fund going through Treasury must go through the 

appropriations process. That would be circumvented here. And, lastly, the proposed $1.5 billion transfer of funds to Neighborhood Stabilization Programs would be accessible by ACORN. 

And ACORN, frankly, is notorious for its efforts to commit voter 

fraud. 

So you increase the Federal debt, you worsen the problem in 

terms of already having too much supply in terms of housing on 

the market, so you have a continued depreciation in home prices. 

Building new apartments, which this fund would do for affordable 

8 

housing, would further decrease the value of existing homes, potentially leading to even more defaults and foreclosures. 

The CHAIRMAN. The gentleman from California, Mr. McCarthy, 

for 1 minute. 

Mr. MCCARTHY. Thank you, Mr. Chairman. 

Mr. Chairman, I oppose this legislation. I believe that any funds 

repaid to the government from the TARP program should go to pay 

down our immense debt, which is projected to double in 5 years 

and triple in 10 years. In fact, this Administration will compile 

more debt than all the 43 previous Administrations combined. That 

is from the creation of this country, to the World Wars, to the Depression, to Hurricane Katrina, to Iraq, the building of the highway 

system, and so on. 

That is why I have introduced legislation to have repaid TARP 

funds go down to pay the debt, to help relieve our children and 

grandchildren of the burden of the crushing debt. The government 

borrowed the money to pay for the TARP program when it began, 

so we need to repay them first, rather than establishing a revolving 

line of credit for Washington bureaucrats and politicians. 

And I yield back. 

The CHAIRMAN. We have 1 minute remaining. I am going to yield 

to myself. 

First of all, there has been a total misreading of the Constitution. 

There was no Appropriations Committee when the Constitution 

was adopted. Somebody’s history is fairly deficient. What it says is, 

no expenditure, except by appropriation, made by law. That meant 

a statute. This has already been litigated. Apparently, members 

here have never heard of the Highway Trust Fund, which spends 

a lot of money without going through the Appropriations Committee. 

So the notion that the founders of the Constitution, bright as 

they were, anticipated the existence of the Appropriations Committee, and therefore said everything had to go through the appropriations process, is historical nonsense. And, of course, members 

here have voted consistently for spending money outside the appropriations process—for example, the Highway Trust Fund. 

Second, as to ACORN, it is true that under the Bush Administration, ACORN consistently received over a million dollars a year to 

no objection from my colleagues. Apparently there was no partisanship there. It was okay for the Bush Administration to give 

ACORN a total of $8 billion during its presidency. I am not aware 

of how much they have gotten under the NSP. I am not aware they 

got any. I would think, given the mighty obsession from little 

acorns that grow, if they had gotten a nickel we would have heard 

about it. And if they had registered a voter on a vacant property, 

we probably would have heard about that. 

But this ACORN thing, let’s be clear, this is not the Bush Administration, and the pattern of millions of dollars to ACORN, in 

my experience, has not yet been repeated. And, again, I would urge 

members to look at a little history when they look at the Constitution; know, when the Constitution was drafted, the founders who 

wrote the Constitution did not have Dave Obey in mind. 

With that— 

Mr. BACHUS. Mr. Chairman? 

9 

The CHAIRMAN. The gentleman’s time has expired. I used an 

equal amount of time. 

Mr. BACHUS. Oh, that was your opening. 

The CHAIRMAN. That was my last minute. 

We will begin now. We will start our witness statements. I hope 

we can get through them. I apologize, but we will have to go vote. 

Let’s begin with Mr. Apgar. 

STATEMENT OF THE HONORABLE WILLIAM C. APGAR, SENIOR 

ADVISOR TO THE SECRETARY FOR MORTGAGE FINANCE, 

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Mr. APGAR. Chairman Frank, Ranking Member Bachus, and 

members of the committee, thank you for the opportunity to talk 

today on H.R. 3068, the TARP for Main Street program. 

My name is William Apgar, and I serve as a Senior Advisor for 

Mortgage Finance for HUD Secretary Shaun Donovan. In this capacity, I have worked closely on the development and implementation of the Obama Administration’s Homeowner Affordability and 

Stability Plan, as well as other initiatives. 

Working together, Congress and the Administration have undertaken a number of initiatives designed to prevent foreclosures and 

mitigate the impact of foreclosures and abandoned properties on 

local neighborhoods and the broader economy. Yet the magnitude 

and evolving nature of the foreclosure crisis has necessitated the 

development and use of innovative tools. 

Congress has provided additional legislative authority on a number of occasions, most notably to improve the initial HOPE for 

Homeowners Program, provide FHA with additional tools to mitigate foreclosures, and increase the flexibility under the Neighborhood Stabilization Program. HUD is pleased that the Financial 

Services Committee is once again examining a range of options for 

responding to the housing crisis. 

We believe the goals of H.R. 3068 are commendable, as the proposed legislation attempts to help borrowers and communities in 

need of assistance. HUD stands ready to work with you and others 

in Congress to build upon these objectives, as we seek to refine the 

Administration’s overall response to the current foreclosure crisis. 

I want to talk about each of the four main elements of the bill 

in turn. 

First, the Neighborhood Stabilization Program. We applaud 

Chairman Frank and other sponsors for recognizing the magnitude 

of the foreclosure problem and the need to continue to mitigate 

foreclosure. 

Last week, Secretary Donovan witnessed firsthand the devastation that concentrated foreclosures can wreak on formerly stable, 

middle-class communities when he toured hard-hit areas in Nevada, California, and Alabama. Secretary Donovan has challenged 

HUD to do all we can to work with Congress and the Administration to ensure that the nearly $6 billion appropriated to date for 

the NSP program is deployed quickly and used wisely and well. 

Emergency mortgage relief is the second important component. 

HUD would like to commend the committee for placing a spotlight 

on the negative impacts that rising unemployment can have on the 

ongoing foreclosure crisis. The centerpiece of the Obama AdminisVerDate Nov 24 2008 18:25 Dec 03, 2009 Jkt 053235 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\53235.TXT TERRIE
10 

tration’s Making Home Affordable Program offers significant relief 

to at-risk borrowers by reducing mortgage-related payments to 31 

percent of monthly income. 

Unfortunately, many individuals who have lost their jobs or experienced a significant drop in income generally do not have the income sufficient to qualify for the program. Once again, HUD looks 

forward to working with the committee to better understand the 

approach on these issues taken in this bill and to forge a series of 

programmatic options that can help unemployed workers get the 

mortgage assistance they need. 

The third component is for troubled multi-family properties. Over 

the last year, while the spotlight has been on single-family home 

mortgage foreclosures, there is mounting evidence of a pending 

multi-family crisis, as well. As in the single-family market, investors and individuals, enabled by loosening underwriting standards, 

purchased multi-family properties at sales prices that were not 

supportable by existing income from the property. As the real estate market has cooled off, these owners are finding that they are 

underwater, with outstanding mortgages greater than the value of 

the properties that they own, and unable to pay both maintenance 

and debt services. 

Numerous analyst reports indicate that these loans are increasingly falling behind in their debt service payments. More troubling, 

however, is that once these loans reach maturity, borrowers will be 

unable to repay the mortgages and will not be able to qualify for 

refinancing. 

Equally problematic is that many of the loans are held on individual bank balance sheets, including many smaller regional and 

community banks, and, hence, the turmoil in this sector threatens 

to undermine the safety and soundness of many of the smaller community and regional banks. 

In short, we are now seeing the early signs of a looming multifamily foreclosure crisis, a crisis that could have significant negative impacts on the economy, as well as on families living in these 

multi-family properties and who will likely experience worsening 

housing conditions. 

Recognizing this impending crisis, HUD has already taken action. For example, Secretary Donovan has led the Administration 

review of potential means to expand access to bond financing to assist State and local housing finance agencies continuing to pursue 

the important financing role to expand both affordable homeownership and rental housing opportunities. 

HUD has also created an internal task force to develop better understanding of the emerging crisis, reached out to Treasury and the 

Federal Housing Finance Agency to explore new approaches to confront this situation, and is now completing a top-to-bottom review 

of HUD’s own multi-family initiatives. 

Building on these efforts, HUD looks forward to working with the 

committee to explore various options for stabilizing the multi-family housing sector. 

Finally, the capitalization of the Housing Trust Fund. Foreclosure is adding to the already overwhelming need for affordable 

rental housing. Many individuals who lose their homes to foreclosure lack housing alternatives and often become at risk for 

11 

homelessness. An estimated 12 million renters and homeowner 

households now pay more than 50 percent of their annual incomes 

for housing. Families with this high a rent burden not only tend 

to reside in marginal dwelling units, but also may have difficulty 

affording necessities such as food, clothing, transportation, and 

medical care. 

HUD’s effort to increase the supply of affordable housing received a big boost last year with the authorization of the Housing 

Trust Fund in the Housing and Economic Recovery Act of 2008. 

The Housing Trust Fund represents a bipartisan enactment of perhaps the most significant new Federal housing production program 

since the creation of the Home Investment Partnership Program in 

1990. 

Originally authorized with a dedicated funding stream from assessments of Fannie Mae and Freddie Mac, the financing difficulties these entities have encountered have eliminated this revenue 

stream. In response, the Administration included a billion dollars 

to fund the initial capitalization of the trust fund in this year’s Fiscal Year 2010 HUD budget request, now being considered by the 

Senate and House Appropriations Committees. 

Given the uncertainty over the level of funding and the severity 

of the affordable housing crisis, HUD welcomes further discussion 

with Congress to identify the best method to secure funding needed 

to make the trust fund a reality. 

Once again, and in conclusion, I would like to thank you for the 

opportunity to participate in today’s hearing and commend the 

committee for proposing enhanced efforts to address the growing 

foreclosure crisis. I want to reiterate HUD’s willingness to work 

with the committee to achieve the objectives highlighted in this bill 

as we seek to improve the Nation’s overall response to the housing 

crisis and address the continued need to expand access to decent 

and affordable housing for all Americans. 

Thank you for your consideration. 

[The prepared statement of Mr. Apgar can be found on page 43 

of the appendix.] 

The CHAIRMAN. Thank you, Mr. Apgar. 

Mr. Engel, my apologies, but we are going to break now. I don’t 

want your statement to be rushed. It is the nature of our business. 

We will be back probably in about an hour. 

I will apologize because I have an important meeting involving 

part of my district that I have to be at in the Senate. I will be back 

shortly after that. One of my colleagues will be presiding. We will 

get to Mr. Engel’s testimony and into the questioning. 

The other witnesses, this is an important issue, we have all day, 

so we hope to see you. Get some lunch and do whatever else, and 

we will see you later. 

We are in recess. 

[recess] 

The CHAIRMAN. Let me get your attention with another apology. 

A very important subcommittee hearing is scheduled at 1:30. We 

have a very jammed calendar. I am, therefore, going to have to 

postpone the second panel until a further time. I apologize, but— 

well, let me think about this. We may—no, I think what we will 

do—I take it back. Let me consult with the minority. 

12 

With concurrence, we won’t do that. But when we reconvene, we 

will have the second panel testify and we will deal with it as one 

panel. We are going to have to break at about 1:30. So, as soon as 

Mr. Engel is through, we will get the other witnesses to testify, and 

then we will question them all as one panel. 

If Mr. Apgar and Mr. Engel have to leave, they can do that, but 

then we will be through by 1:30. So we will reconvene, and we will 

ask all the witnesses on the second panel to join the first set of witnesses, and they will all testify together. 

[recess] 

The CHAIRMAN. We have your statements for the record. We will 

ask questions. 

Mr. Engel, you have been very gracious, and let’s begin with you. 

STATEMENT OF GARY T. ENGEL, DIRECTOR, FINANCIAL MANAGEMENT AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. ENGEL. Thank you. I am pleased to be here today to discuss 

the status of participants’ dividend payments and repurchases of 

preferred stock and warrants in connection with the Troubled Asset 

Relief Program, commonly referred to as TARP. 

According to Treasury’s records, since the inception of TARP and 

through June 30, 2009, Treasury had received approximately $6.7 

billion in dividend payments on preferred stock acquired through 

various programs such as the Capital Purchase Program and the 

Targeted Investment Program. 

Treasury’s agreements under these programs entitled it to receive dividend payments on varying terms and at varying rates. 

For example, publicly held institutions participating in the Capital 

Purchase Program pay quarterly dividends at a rate of 5 percent 

per year for the first 5 years. After the first 5 years, the preferred 

shares pay quarterly dividends at a rate of 9 percent per year. 

Importantly, the dividend payments to Treasury are contingent 

on each institution declaring dividends. Dividend payments received, other than for the Asset Guarantee Program, are deposited 

into the general fund of the U.S. Treasury. The dividend payments 

received for the Asset Guarantee Program, which totaled about 

$108 million, are deposited into the Troubled Asset Insurance Financing Fund to fulfill obligations of certain guarantees. Dividend 

payments to Treasury from participants other than for the Asset 

Guarantee Program are not to be used to reduce the outstanding 

balance under the almost $700 billion TARP limit. 

According to Treasury records, from March 21, 2009, through 

June 30, 2009, 17 Capital Purchase Program participants had not 

declared or paid dividends of approximately $6.6 million. Treasury 

officials told us that, of these 17 institutions, 13 informed Treasury 

that State or Federal banking regulations or policies restricted 

them from declaring dividends, one indicated concerns about its 

profitability, and three did not provide a reason for not declaring 

dividends. 

Under the standard terms of the program, after 6 nonpayments 

of dividends by a participating institution, Treasury and other 

holders of preferred stock equivalent to Treasury’s can exercise 

13 

their right to appoint two members to the board of directors for 

that institution. 

As permitted by the Act as amended, participants may at any 

time repurchase or buy back their preferred stock and warrants 

issued to Treasury under the Capital Purchase Program. This is 

subject to consultation with the participant’s primary Federal 

banking regulator. According to Treasury records, as of June 30, 

2009, 32 institutions had repurchased their preferred stock from 

Treasury, for a total of about $70.1 billion, including 10 of the largest bank holding companies that are participating in the program. 

Funds received from the repurchase of preferred stock are deposited into the general fund of the U.S. Treasury and reduce the outstanding balance under the TARP limit. 

After all the preferred stock is repurchased, the financial institution may repurchase all or part of its warrants held by Treasury. 

According to Treasury records, as of June 30th, 11 of the 32 financial institutions that had repurchased their preferred stock had 

also repurchased their warrants, and three others had repurchased 

their warrant preferred stock at an aggregate cost of about $20.3 

million. 

As of June 30, 2009, none of the 10 largest bank holding companies that had repurchased their preferred stock had repurchased 

their warrants. Like the dividend payments, any amounts received 

from the repurchase of warrants are deposited in the general fund 

of the U.S. Treasury and are not to be used to reduce the outstanding balance under the TARP limit. 

Certain financial institutions that had repurchased their preferred stock had informed Treasury that they did not plan to repurchase their warrants. For these institutions, Treasury may attempt 

to sell the warrants in the financial markets. According to Treasury officials, Treasury had not yet, as of June 30, 2009, liquidated 

any Capital Purchase Program warrants in the financial markets. 

Treasury has received billions of dollars from TARP participants 

from dividend payments and repurchases of participants’ preferred 

stock and warrants. Treasury has also continued to disburse funds. 

As of June 30, 2009, Treasury had disbursed almost $339 billion 

of TARP funds. In addition, as of that date, Treasury’s projected 

use of TARP funds totaled about $643 billion, without taking into 

account any repayments. 

Mr. Chairman, this concludes my oral statement. I would be 

pleased to respond to any questions. 

[The prepared statement of Mr. Engel can be found on page 61 

of the appendix.] 

The CHAIRMAN. Thank you, Mr. Engel. 

Let me say to all the panelists that any material you have will 

be submitted in full. 

Mr. Calabria has to leave and go talk to the Judiciary Committee. And they are always in need of instruction, so we will go 

to you now so you can do that. 

STATEMENT OF MARK A. CALABRIA, PH.D., DIRECTOR, 

FINANCIAL REGULATION STUDIES, CATO INSTITUTE 

Mr. CALABRIA. Thank you, Mr. Chairman. I appreciate that. And 

I will be testifying there on mortgage modifications, which I know 

14 

is a topic that this committee is interested in as well. I want to 

thank you and thank all of the members of the committee for the 

invitation to appear today. 

The first part of my testimony is that, despite the repayment of TARP funds from a number of banks and the receipt of over $6.2 

billion in dividends from TARP institutions, the TARP overall has 

not been profitable. CBO’s most recent estimate is that the overall 

subsidy of the cost of the TARP will be $356 billion. This is $356 

billion lost to the taxpayer that will not be recovered. In addition to the $356 billion in losses from the TARP, we are 

also likely to see between $200 billion and $300 billion absolute 

losses from the bailouts of Fannie Mae and Freddie Mac. We may 

also see losses in the tens of billions from the Federal Reserve’s 

mortgage-backed securities purchase program. So we are ultimately likely to see taxpayer losses from the bailouts approach 

$700 billion. 

While any dividends received will only make a small dent in 

these losses, diverting these dividends for purposes other than offsetting TARP losses will leave a deeper hole for the taxpayer. If, 

however, Congress chooses to use TARP dividends or any other 

funds to support the housing market, I believe Congress should 

focus on stimulating the demand side of the housing market rather 

than the supply side. 

The fundamental problem facing our Nation’s housing market is 

an oversupply of housing rather than a lack of housing. The Nation’s oversupply of housing is documented in the Census Bureau’s 

housing vacancy survey. The Census reports a national rental vacancy rate for the first quarter of 2009 at 10.1 percent. This is only 

slightly below the record rate of 10.4 percent and is almost 40 percent higher than the average rental vacancy rate for the last 50 

years of 7.2 percent. 

The record vacancy rates are not an issue of specific geographic 

areas, but are found almost everywhere throughout the country. 

The highest vacancy rates and also the areas seeing the largest increases in rental vacancy rates are in our Nation’s central cities. 

All the increases over the last year can be attributed largely to the 

increase in central-city vacancies. Vacancies in suburban and rural 

areas, while near historic highs, have moderated over the last year 

and remain below those of the central cities. 

I raise this fact because of the way it relates to our tendency of 

Federal housing production programs to concentrate new production and rehabilitation in central cities, and I think that is something that needs to be very much considered with any production 

program going forward. 

Even in parts of the country with traditionally tight rental markets, such as California, while they remain tighter than the Nation 

overall, have seen significant increases in rental vacancy rates over 

the last year. Interestingly, those States with the lowest vacancy 

rates—Vermont and Wyoming—are concentrated in rural areas, 

those very areas where our production programs have been least 

effective, in my opinion. 

Our production programs also tend to build almost exclusively 

multi-family properties, as would be the case of a production-focused trust fund. However, over two-thirds of vacant rental units 

15 

are current in multi-family properties. This fact isn’t simply the result of older units based in older urban areas. For instance, the 

rental vacancy rate for units constructed in the 2000’s is almost 

twice that of units constructed in the 1990’s. 

Despite an almost 1 million increase in rental households associated with the meltdown of our mortgage markets, the overall number of vacant rental units has actually increased by over 400,000. 

Currently, there are over 4.1 million vacant rental units in this 

country. The glut in our housing markets is not simply one of single-family units intended for homeownership, but also one of recently constructed multi-family units. 

I recognize that was a considerable amount of data, so, to summarize, my main point was that, if we are going to subsidize additional housing, it should really be focused on stimulating demand. 

The most obvious method of doing so would be additional rental 

vouchers. I am concerned that additional production actually runs 

the risk of adding to supply, which would put downward pressure 

on house, particularly condo, prices, which could actually have the 

reverse effect of increasing mortgage defaults. Additional production could also increase multi-family mortgage defaults. 

In addition to directing any additional housing assistance only at 

tenant-based subsidies, I would also encourage Congress to re-examine the feasibility of redirecting current unit-based subsidies 

which are not already committed to specific housing units toward 

increased vouchers. Such a move would help increase the demand 

for rental housing while also providing much-needed assistance to 

the recently unemployed, many who are renters and probably 

would prefer to stay in the unit they are in. 

A final concern I would have with H.R. 3068 is the precedent it 

sets for redirecting TARP funds and its potential to erode the 

checks and balances that come with the appropriations process. 

Once the line has been crossed to redirect TARP dividends to nonTARP uses, I am concerned that it will only be a matter of time 

before TARP repayments start to be redirected. So, while H.R. 3068 

represents just over $6 billion, it could easily become the first step 

in a process that results in hundreds of billions being diverted. I 

think such would leave the taxpayer with a much bigger hole to 

fill. So I would strongly urge any additional housing subsidies, 

trust fund or otherwise, to be subject to either appropriations or 

PAYGO. 

Once again, I thank you for this opportunity and appreciate your 

attention. 

[The prepared statement of Dr. Calabria can be found on page 

48 of the appendix.] 

The CHAIRMAN. We will now go to Sheila Crowley, who is the 

president of the National Low Income Housing Coalition. 

SHEILA CROWLEY, MSW, PH.D., PRESIDENT, NATIONAL LOW 

INCOME HOUSING COALITION 

Ms. CROWLEY. Thank you, Chairman Frank, and members of the 

committee. I am glad to have the opportunity to testify today on 

H.R. 3068, the TARP for Main Street Act of 2009, and specifically 

on section 2 that designates a billion dollars from dividends paid 

16 

by financial institutions that receive TARP funds to the National 

Housing Trust Fund. 

It was almost 2 years ago that this committee held a hearing on 

H.R. 2895, the National Affordable Housing and Trust Fund Act of 

2007, that was introduced by Chairman Frank with eight Democratic and eight Republican cosponsors. The bill passed the House 

in October of that year by a vote of 264–148. With similar bipartisan success in the Senate, President Bush signed the Housing 

and Economic Recovery Act on July 30, 2008, that included the National Housing Trust Fund. This victory was not possible without 

the championship of you, Mr. Chairman, and we thank you. 

The original proposal for the National Housing Trust Fund was 

developed in the 1990’s, under the leadership of the founder of the 

National Low Income Housing Coalition, the late Cushing 

Dolbeare. And I would like to acknowledge the presence here today 

of Louis Dolbeare, who was married to Cushing and who remains 

a very strong supporter of the Coalition and of the trust fund. 

The National Housing Trust Fund is intended to produce, preserve, and rehabilitate rental homes that are affordable for extremely low- and very-low-income households. HUD will distribute 

funds to States based on the need for rental homes affordable for 

this income group. States will make grants to qualifying public 

nonprofit and for-profit entities that produce and operate the rental 

homes. All the funds must benefit households with incomes at or 

below 50 percent of the area median, and 75 percent of the funds 

must benefit households who are extremely low income, or at 30 

percent of the area median income. 

The goal that we have set is to build or preserve 1.5 million rental homes over the next 10 years, and HUD is now completing the 

interim regulations for the trust fund for implementation this fall. 

But before the trust fund can be implemented, it must be capitalized. 

A key feature of the National Housing Trust Fund is its reliance 

on dedicated sources of revenue, not discretionary appropriations. 

Contributions from Fannie and Freddie were designated as the 

first funding source for the trust fund, but they have obviously 

been suspended in light of the financial difficulties of the companies. We are confident that someday they will be restored, but it 

is important to know that Fannie and Freddie were never intended 

to be the sole sources of revenue, and the legislation actually allows 

Congress to direct any appropriations, transfers, or credits that it 

may choose to into the National Housing Trust Fund. 

So, use of TARP dividends for the National Housing Trust Fund 

is a welcome proposal, from our perspective. And, as you just 

heard, Treasury has received approximately $6.2 billion in TARP 

dividend payments as of mid-June. And we certainly recommend 

that the committee claim all current and future dividends that the 

TARP program yields for ‘‘Main Street’’ purposes, including the National Housing Trust Fund. 

The longstanding shortage of rental homes that are affordable to 

the lowest-income households in the United States is well-documented. The recession has only made the problem worse. But some 

people assert, like my colleague Mark Calabria, that because we 

have an excess supply of housing now, housing production is not 

17 

necessary and, he says, unwise. This analysis does not account for 

the mismatch between housing supply and housing need, which is 

causing both high housing vacancy rates and growing housing cost 

burdens. 

A new analysis of the American Housing Survey shows that the 

number of rental units in the United States actually increased by 

3.5 percent between 2005 and 2007. The number of units affordable 

to households with incomes over 50 percent of the area median income grew by 16 percent. For households with incomes over 100 

percent of the area median income, the number of units grew by 

34 percent. However, for units affordable to households with incomes at 50 percent of the area median income or less—that is the 

folks who would be served by the National Housing Trust Fund— 

the number of units actually fell by 7 percent, for a loss of 1.5 million homes. That was between 2005 and 2007. 

The ultimate consequence of this particular part of the failure of 

our housing market is that some people will have no home at all. 

The New York Times reports this week about the surge in homelessness now that school is out. Earlier this year, when the unemployment rate was expected to reach just 9 percent, we were able 

to predict that 800,000 new people would become homeless. And we 

now know, of course, that the unemployment rate is going to go 

higher. 

So, in the absence of new resources to expand the supply of 

homes that people who are elderly, disabled, employed in the lowwage workforce, or out of work altogether can afford, we will see 

a growth in homelessness that rivals or exceeds the recession in 

the early 1990’s. We made the mistake then of thinking that it was 

a temporary shelter problem that we could solve by building shelters, not permanent housing. We should not make that mistake 

again. 

In closing, more than 1,000 organizations across the country 

have signed an open letter to Congress and the Administration urging greater balance in our approach to the mortgage crisis by also 

attending to the housing shortage for the lowest-income people. I 

ask, Mr. Chairman, that this letter be entered for the record, and 

that we will make copies available to all the members. 

TARP for Main Street will help achieve this balance that we are 

seeking, and I urge the committee to move forward with this. 

Thank you for the opportunity to testify. 

[The prepared statement of Dr. Crowley can be found on page 51 

of the appendix.] 

The CHAIRMAN. Thank you. And, as I said, everything will be 

made a part of the record. 

And next—if I mispronounce the name, I apologize—Mr. Frank 

Apeseche, who is chief executive officer of the Berkshire Property 

Advisors Group, here for the National Multi Housing Council. 

Mr. Apeseche, please go ahead. 

18 

STATEMENT OF FRANK APESECHE, CHIEF EXECUTIVE OFFICER, BERKSHIRE PROPERTY ADVISORS AND THE BERKSHIRE GROUP, ON BEHALF OF THE NATIONAL MULTI HOUSING COUNCIL AND THE NATIONAL APARTMENT ASSOCIATION 

Mr. APESECHE. Thank you, Chairman Frank, and distinguished 

members of the committee. 

I am chief executive officer of Berkshire Property Advisors, based 

in Boston. We are a fully integrated multi-family investor owner 

and operator. We currently operate more than 26,000 units 

throughout the United States and have an employee base of 800 

personnel servicing our assets. 

I am testifying on behalf of the National Multi Housing Council 

and the National Apartment Association. Both represent the Nation’s leading firms participating in the multi-family housing rental 

industry. 

First, I would like to say that we fully support the Federal efforts 

to help preserve the Nation’s supply of affordable housing and to 

provide liquidity to the apartment sector. And we thank you for 

taking such important steps in the right direction. 

As the committee begins its debate on provisions of H.R. 3068, 

I would like to take the opportunity to offer some key recommendations in order to keep the legislation focused where we believe it 

is most needed. We have five significant recommendations for section 5 of the legislation. 

First, we encourage any program to support the following three 

items. The first item we recommend is that this program should 

not compete with or crowd out private-sector investors but, instead, 

direct investment capital to areas currently not appropriately 

served by private investors, and to support and preserve the properties developed using low-income housing tax credits or other public subsidies which have limited cash flow and have exhausted operating and repair reserves, especially if they have material deferred maintenance or are in poor condition. 

Second, we would like to see an appropriate definition of mortgage loan default and at-risk properties. We believe it is critical to 

appropriately define what constitutes a mortgage default that 

would trigger any government assistance, because government action prior to a well-defined economic default would not only interfere with contractual obligations between the borrower and mortgage lender but would also create future uncertainty and concern 

about the sanctimony of the legal transaction process. 

We recommend here only multi-family properties that are in economic default be eligible for government assistance. Economic default should be defined as mortgage payments delinquency of 90 

days beyond applicable notice and cure periods. And government 

intervention in any economic default situation should be limited to 

actions to support and stabilize the property by providing capital 

for necessary repairs or to fund maintenance reserves. In addition, 

it should, in all circumstances, be undertaken in consultation with 

the lender and property owner. 

It is also important to define at-risk properties, too, since the 

term ‘‘at-risk’’ can be broadly interpreted or even misconstrued. We 

believe that it is prudent for at-risk to specifically be linked to maVerDate Nov 24 2008 18:25 Dec 03, 2009 Jkt 053235 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\53235.TXT TERRIE
19 

terial deferred maintenance and physical distress as evidenced by 

significant structural problems, system integrity failures, and 

health and safety issues. 

Third, the multi-family housing industry does not, under any circumstances, support the transfer or taking of a property without 

the consent of both the property owner and lender. Privately contracted property assignments, assumptions, and transfers are significantly negotiated arm-length provisions of any mortgage contract and have economic value. If such provisions are countermanded through government intervention, this action could have 

profound, unpredicted negative impact on both multi-family capital 

and investment market stability. It can also have profound negative impact on investors’ reliance that future property ownership 

rights will be respected. 

Fourth, we support assistance to Federal Government-financed, 

sponsored, or assisted multi-family properties. However, we support a more tailored assistance to properties financed without government ownership or sponsorship. 

Here, we recommend that the government assistance should be 

kept to borrowers and lenders who participated in reasonable 

underwritings and financing. We do not believe that borrowers and 

lenders who took undue risks upfront should be rewarded by government assistance at this time. We specifically recommend that 

assistance eligibility here be limited to those properties with originating loan-to-value ratios at or below 80 percent, debt service coverage at or above 1.2 times, and current deferred maintenance at 

or below $2,000 per unit. 

Lastly, we enthusiastically support active government response 

to mortgage refinance needs. Here, we urge the committee to use 

its resources to add liquidity to the refinance markets. We support 

the use of government funds to provide insurance to lenders who 

will extend current loans for periods of 12 to 36 months, allowing 

the cash flows of properties to recover as the economy does. 

Thank you very much for your time. I appreciate the opportunity 

to represent the multi-family industry before the committee and 

look forward to any questions. 

[The prepared statement of Mr. Apeseche can be found on page 

33 of the appendix.] 

The CHAIRMAN. Thank you, Mr. Apeseche. 

Next, we have Mr. Brian Hudson, who is the executive director 

of the Pennsylvania Housing Finance Agency. 

And I should tell you that, some months ago, Representative 

Fattah talked proudly about the program, and more recently, Representative Schwartz mentioned it. And we were guided, to some 

extent, by the successful work you have been doing in Pennsylvania. 

Please go ahead. 

STATEMENT OF BRIAN A. HUDSON, SR., EXECUTIVE DIRECTOR 

& CEO, PENNSYLVANIA HOUSING FINANCE AGENCY 

Mr. HUDSON. Thank you, Mr. Chairman, and members of the 

committee, for the opportunity to talk to you today on behalf of the 

Pennsylvania Housing Finance Agency on H.R. 3068, the TARP for 

Main Street Act of 2009. 

20 

I also wanted to recognize members of the Pennsylvania delegation who are members of your committee, Congressman Paul Kanjorski and Congressman Tim Gerlach. 

Mr. Chairman, thank you for your early and persistent efforts to 

revive with Federal help the struggling municipal bond market. 

Your legislative initiatives, including the previous Troubled Asset 

Relief Program bill, and your appeals to the Administration over 

the last several months have succeeded in focusing critical attention on the needs of the municipal bond market and particularly 

the tax-exempt housing bond market. 

Because of your encouragement, the Administration is now on 

the verge of announcing a plan to support State and local housing 

finance agencies’ affordable housing lending by purchasing HFA 

housing bonds and providing liquidity to support HFA variable rate 

debt. With this assistance, HFAs will finally be able to put our 

housing bond resources to work to produce hundreds of thousands 

of affordable housing, sustainable homes, and jobs, as well as tax 

revenues, in support of our Nation’s economic recovery. 

We understand that the Administration’s HFA initiatives as currently conceived do not rely on TARP resources. However, since the 

HFA plan has not been finalized, we urge you to leave open the 

possibility of committing TARP resources to it, should that become 

necessary to the plan’s successful implementation. 

Mr. Chairman, we would also like to thank you for your leadership in creating the Housing Trust Fund and for dedicating 

through this legislation TARP funds to its initial capitalization. My 

agency and my fellow State agencies are eager to help address with 

these new resources housing needs as we struggle to meet existing 

resources, particularly those of extremely low-income families. 

Finally, we are pleased that your new TARP legislation reauthorized and allocates funding to the Emergency Mortgage Relief Program. As you consider the optimal design of this program, we urge 

you to look at PHFA’s Homeowners’ Emergency Mortgage Assistance Program, HEMAP, as a model. We also encourage you to consider making HFAs eligible for direct funding under this program 

so that a program such as HEMAP may benefit and be replicated 

around the country, 

Senator Casey was successful in getting an amendment accepted 

in the Senate during deliberations on Neighborhood Stabilization 

Program funding as reauthorized in the American Recovery and 

Rehabilitation Act of 2009. Mr. Casey’s amendment would have allowed the use of NSP funds for foreclosure prevention activities, 

such as HEMAP, in the Commonwealth. Opening up the NSP for 

these type of activities may be another option to stem the tide of 

foreclosures as a result of temporary economic conditions. 

Pennsylvania’s Act 91 of 1983 authorized PHFA to develop 

HEMAP to help certain homeowners in danger of losing their 

homes to foreclosure. Pennsylvania created this program to address 

the large number of foreclosures, particularly in the southwestern 

part of the State as a result of the downturn in the steel industry 

early economic recession in the 1980’s. 

HEMAP has been very successful. It has saved almost 43,000 

homes from foreclosure by providing $442 million in loans to atrisk homeowners. Over 20,000 loans have been repaid in full, and 

21 

HEMAP has received over $246 million in principal and interest repayment from homeowners. They are structured as loans, not 

grants. These repayments are recycled into HEMAP loans assisting 

additional Pennsylvanians. 

State appropriation has totaled $225 million. The average 

HEMAP loan to a distressed homeowner is $10,500, much less than 

the $35,000 it costs to complete most foreclosure actions. Additionally, it is estimated that average foreclosure costs do not consider 

the impact of foreclosures on families, neighborhoods, and communities. HEMAP prevents mortgage foreclosures only from defaults 

caused by circumstances beyond a homeowner’s control. It provides 

loans to bring delinquent mortgage payments current, and may 

also provide continuing help with mortgage payments. Total assistance under the current environment cannot exceed 36 months. 

Unlike programs that have been created by other States and 

other structures to address unsound or predatory lending, HEMAP 

is focused on helping homeowners who are facing a short-term financial setback. The number one reason for a HEMAP applicant’s 

delinquency under the HEMAP is loss of a job. The second reason 

is illness. In all instances, there has been a reasonable likelihood 

that a homeowner will be able to resume making his mortgage payment without State help, since HEMAP assistance is temporary. 

In the current economic environment of unemployment at 9.5 

percent and the State over 7, HEMAP would be a great complement-like program with other Federal initiatives. With over 25 

years of experience, PHFA has refined the operation of this primarily unemployment driven program. Lenders in the Commonwealth are some of its most ardent supporters because of the seamless nature of this operation. These results have led Harvard University to directly recognize HEMAP as a top innovation in American government. 

A number of States have developed HEMAP-like programs. Delaware has DMAP; North Carolina has a pilot; Tennessee is exploring it also. With creative legislation and creative language and ending current TARP legislation to allow States the flexibility to operate a model like HEMAP, we think that would help many homeowners across the Nation. 

I have provided more explicit details on our programs, and I 

would be more than happy to answer any questions that the committee would have. And, again, thank you for the invitation. I look 

forward to working with you. 

[The prepared statement of Mr. Hudson can be found on page 74 

of the appendix.] 

The CHAIRMAN. Thank you. 

Next, we have Mr. Damon Silvers, who is associate general counsel of the AFL–CIO and, relevant today, a member of the oversight 

board of the Troubled Asset Relief Program. 

Mr. Silvers? 

STATEMENT OF DAMON A. SILVERS, ASSOCIATE GENERAL 

COUNSEL, AFL–CIO 

Mr. SILVERS. Thank you, Chairman Frank. It is a pleasure to be 

here with you this afternoon. 

22 

As you mentioned, in addition to serving at the AFL–CIO, I am 

Deputy Chair of the Congressional Oversight Panel. I have the 

honor of serving with Congressman Hensarling of this committee 

in that capacity. My testimony today, however, reflects my views 

and those of the AFL–CIO. 

The CHAIRMAN. And not Mr. Hensarling. 

Mr. SILVERS. I believe he speaks for himself. Nor is it the view 

of the panel, its staff, or its Chair. 

Let me begin by saying that there is an urgent need to help 

American families address the financial crisis. We can no longer 

continue the pretense that simply putting money in at the top of 

this financial system is going to achieve very much unless we stabilize the other end of the system, the household balance sheets. 

For that reason, the AFL–CIO strongly supports H.R. 3068, the 

TARP for Main Street Act of 2009. And we want to congratulate 

you, Mr. Chairman, for your leadership in moving this bill forward 

at this time. 

In March, the Obama Administration announced its intention to 

devote significant TARP resources to assisting families facing foreclosure. In our March report, the Congressional Oversight Panel 

was supportive of this effort but noted that it had limitations, particularly around situations where homeowners’ mortgages were 

deeply underwater and where unemployed families were facing 

foreclosure. 

It is now very clear today that what began as a foreclosure crisis 

driven by falling real estate values and exploitative mortgage products is now being very significantly compounded by accelerating 

rates of unemployment. 

As was mentioned by the prior witness, the official national rate 

of unemployment is now 9.5 percent, with higher rates in many 

States. Estimates of real rates of effective underemployment are 

now well into the teens in many States. And even more troubling 

projections by the International Monetary Fund and the OECD for 

the U.S. economy are for rates going significantly higher than current levels and remaining over 10 percent through next year. Most 

recently, the OECD’s June economic outlook shows that the United 

States has added 6 million unemployed people since December of 

2000 and projects unemployment at the end of 2010 to be 10.1 percent. 

Yesterday, the mortgage insurer PMI Group cited rising unemployment as the leading cause of a projected continued rise in home 

foreclosures. The result, according to PMI, is a likely continuing 

fall in housing prices in the majority of U.S. cities driven by unemployment-related foreclosures through the first quarter of 2011. 

Rapidly rising unemployment and its consequences for the quality of bank assets, particularly home mortgages, substantially 

threaten what progress has been made in stabilizing our financial 

system. In these circumstances, the AFL–CIO believes there is an 

urgent need to pursue all paths necessary to halt both the rising 

tide of unemployment and consequent home foreclosures, including 

a second, more job-targeted stimulus, the restoration of the ability 

of homeowners in bankruptcy to get relief from mortgage debt, and 

a more vigorous effort to restructure bank balance sheets to avoid 

the zombification of our major financial institutions. 

23 

H.R. 3068, though, is an immediate step that could help this rapidly deteriorating situation, using resources already allocated to 

the TARP program. While the AFL–CIO believes the scale of funding for the bill could be larger, there are competing and serious 

concerns that Treasury should continue to have enough headroom 

in the TARP to act should an acute crisis develop in the near term. Substantively, in addition to providing $2 billion in funding for emergency relief to the unemployed, H.R. 3068 would provide $1 

billion in funding to assist State and local government in redeveloping abandoned and foreclosed homes, $1 billion for the Housing 

Trust Fund, and $2 billion in the multi-family sector. These provisions are targeted toward clear needs with broad economic impact, 

particularly the aid to unemployed and the moneys targeted toward 

rehabilitating foreclosed and abandoned properties. 

H.R. 3068 will not end our economic crisis or halt the broader 

foreclosure epidemic, but it will help the unemployed stay in their 

homes and deliver help to those communities most affected by the 

foreclosure crisis. The AFL–CIO urges this committee to move the 

bill forward. 

I thank you for the opportunity to appear this morning and look 

forward to working with the committee to address this crisis. 

[The prepared statement of Mr. Silvers can be found on page 79 

of the appendix.] 

The CHAIRMAN. And our final witness is Mr. Chris Warren, who 

is chief of regional development for the city of Cleveland. 

Mr. Warren? 

STATEMENT OF CHRIS WARREN, CHIEF OF REGIONAL 

DEVELOPMENT, CITY OF CLEVELAND, OFFICE OF THE MAYOR 

Mr. WARREN. Thank you, Mr. Chairman, and members of the 

committee. 

It is not hyperbole to say that the subprime mortgage crisis has 

hit Cleveland with the force of a natural disaster. Call it ‘‘Hurricane Greed’’: 24,000 residential foreclosures since 2005, 70 percent 

attributable to subprime loans; an overwhelming concentration of 

those foreclosures in inner-city neighborhoods; over 10,000 vacant, 

distressed residential structures; $35 million spent by our City 

since 2006 to eliminate life-threatening nuisances. This is demolition, this is weed cutting, this is pulling out tires, this is dealing 

with abandoned properties. 

Mr. Chairman, the predatory practices of unregulated mortgage 

brokers and originators was made possible by complex investment 

schemes hatched by giant companies. The most active participants 

in this subprime fiasco that has hit Cleveland are among the highest recipients of TARP. And I have provided a chart of that in my 

written testimony. Six institutions alone have accounted for 40 percent of the foreclosure-related sheriff sale filings in Cleveland since 

2005. All, except Deutsche Bank, have received TARP investments. 

Their total TARP take—$96 billion. 

Mr. Chairman, Cleveland’s response to the unnatural disaster in 

our City is predicated on three principles. 

Collaboration: To devise an act on a common strategy, we have 

brought together under one umbrella our city, our county, suburbs, 

court system, our housing authority, community organizations, 

24 

counseling agencies, foundations, and a newly formed countywide 

land bank. A $74 million application for Neighborhood Stabilization 

II funds, in fact, will be submitted to HUD next week by a consortium comprised of these entities. 

Principle two: gaining control of abandoned property. Earlier this 

year, our Ohio general assembly enacted legislation establishing 

the Cuyahoga County Land Bank. The land bank has the statutory 

powers and recurring revenues needed to acquire, responsibly 

maintain, and position for redevelopment thousands of mortgageand tax-foreclosed properties. 

Principle three: intensely targeted resources. Last year, we 

launched what we called the Opportunity Homes Program in six 

Cleveland neighborhoods. Over 3 years, through this program, we 

will acquire, rehabilitate, and sell 450 homes; demolish 300 condemned structures; convert 600 vacant lots into useful public assets; and provide foreclosure counseling to 450 at-risk homeowners. 

Funds made possible through a $25 million NSP I grant to Cleveland and hopefully a successful NSP II application will allow expansion of this approach to 14 more neighborhoods, including five 

in inner-ring suburbs. 

Mr. Chairman, without question, passage of the TARP for Main 

Street Act will advance our efforts that I just described. On behalf 

of Mayor Jackson, I thank you for your leadership. 

I have included in my written testimony recommendations for 

technical improvements to the Neighborhood Stabilization Act. But, 

in closing, I want to also bring to your attention two troubling recent phenomenons in our City. 

First, financial institutions are unloading unsalvageable REO 

properties in bulk sales to out-of-town, faceless investors. This 

sounds familiar. The City is put in the position often of proceeding 

with demolitions of these properties with little chance of recovering 

our costs. TARP recipients need to be held to strict standards with 

respect to disposition of uninhabitable condemned properties. 

And we are seeing walkaway foreclosures. This practice involves 

the decision by creditors to forgo sheriff sales because, we suspect, 

they determine the cost of abating— 

The CHAIRMAN. Your time is up, Mr. Warren. 

Mr. WARREN. —the nuisances in our communities are in excess 

of liquidation values. This needs to be dealt with by this legislation. 

[The prepared statement of Mr. Warren can be found on page 83 

of the appendix.] 

The CHAIRMAN. Thank you. 

I am going to try to—we have a hearing coming up. I am not 

going to ask questions. 

I just want to be sure, Mr. Apeseche, nothing in this legislation 

tries to take property over the objection of the owner. There is 

nothing like that on the table. You were concerned about it. There 

is nothing there that would do it. 

Mr. APESECHE. The current wording of the legislation, you are 

absolutely correct. 

The CHAIRMAN. Well, okay. It is not going to get any—don’t 

worry about it. 

I will go to Mr. Green. 

25 

Mr. GREEN. Thank you, Mr. Chairman. And I will be as brief as 

you have been. I will just make a couple of points. 

It has been my observation that all persons on this committee 

are persons of good will, but we do have different points of view. 

And, in my brief tenure on the committee, I have noticed that some 

of the things that we would like to do to be of assistance—the Affordable Housing Trust Fund, for example—in good times, this was 

a bad time to do it; and in bad times, it is not a good time to do 

it. It appears that there will never be a time that is a good time 

for an Affordable Housing Trust Fund. 

And this is not to demean any of my colleagues. It is just that 

we have different points of view about the role of government, especially when people are at risk by way of unnatural disasters. I will 

borrow that term, if I may. 

I would also want to observe that I am a bootstrap guy. I think 

folk ought to pull themselves up by their bootstraps. But I find it 

very hard for many people to do this when they don’t have bootstraps. I think that what we are trying to do is afford people bootstraps so that they can help themselves. 

The language is pretty explicit. We are talking about people who 

have lost their jobs due to no fault of their own, due to economic 

circumstances, and they are being foreclosed on. What do we do? 

Do we continue to allow the foreclosure rate to escalate? Do we continue to have people placed out of their homes on the streets? Or 

do we, as responsible agents and trustees of the government, take 

affirmative, positive action to assist people? That is my position. 

I don’t, in any way, find fault with my friends who have a different position. I just find that those of us who believe that this is 

the right thing to do have to have the courage to do the right thing. 

This is a moment of courage in this country, and those of us who 

are in leadership and in positions of responsibility, we have to have 

the courage to act now. 

We may not have the chance to act in such a responsible way 

again in our lifetimes, and I think that we have to take advantage, 

not of a bad circumstance, but advantage of an opportunity to be 

our brothers’ and our sisters’ keepers and to afford people who really are trying the opportunity to succeed. 

Finally, I would say that, Mr. Chairman, this is a great piece of 

legislation. I will be supporting the legislation. I think that it is 

timely, it is targeted, and it impacts the people who need it the 

most. 

I yield back the balance of my time. 

The CHAIRMAN. The gentleman from Texas, Mr. Neugebauer. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. And I will try to 

be brief, as well. 

Mr. Engel, is it your understanding that the two different TARP 

tranches were intended to be a program to inject and/or lend capital or loan money to entities with the intention of getting that 

money back? 

Mr. ENGEL. The TARP program was intended to put capital out 

into the financial markets. I am not sure there was an understanding that we would get every dollar back. 

Mr. NEUGEBAUER. But, obviously, the scoring was such that you 

wouldn’t get all the money back. Is that correct? 

26 

Mr. ENGEL. One of the programs, the Making Home Affordable 

Program, the way that is structured currently is a direct disbursement program. They haven’t disbursed any money yet, but once 

they do, that is a direct disbursement out. So, there will be no 

money coming back for that particular program at all. 

Mr. NEUGEBAUER. But if I could just get an answer. Was it, by 

and large, the intent of the original legislation to get most of that 

money back for the taxpayers? 

Mr. ENGEL. I am not sure I can respond to that. 

Mr. NEUGEBAUER. Well, obviously you haven’t yet. 

Mr. ENGEL. I would have to get back to you for the record on 

that. 

Mr. NEUGEBAUER. So, on $700 billion, do you know what the interest at prevailing rates would be on that on an annual basis? 

Mr. ENGEL. You mean the borrowing rate by Treasury? 

Mr. NEUGEBAUER. Yes. 

Mr. ENGEL. I am not sure what the current borrowing rate is. It 

is not real high. 

Mr. NEUGEBAUER. For a 30-year right now, I think it is around 

4 percent. Is that correct? 

Mr. ENGEL. We haven’t borrowed the whole $700 billion. 

Mr. NEUGEBAUER. But, at some point in time, we will. That is $28 billion a year, if I am not mistaken. So it would be premature 

to call the dividends that we have received up to this point a profit, 

would you say? 

Mr. ENGEL. We haven’t looked at it from a profit-loss standpoint. 

The dividends are intended to go into the general fund and then 

to be used to basically bring down the debt. 

Mr. NEUGEBAUER. To bring down the debt. And so, but if you 

haven’t even paid the interest yet, it is a little difficult to bring 

down the debt, right? 

Mr. ENGEL. Yes. 

Mr. NEUGEBAUER. And so, what is the current estimate of the— 

if the full $700 billion is disbursed, what is the expected potential 

return to the taxpayers? 

Mr. ENGEL. That hasn’t been determined yet. The Office of Financial Stability, which is responsible for accounting for the activities, will be developing their models and things to be able to do 

that as part of their financial statements. But right now there is 

no estimate of what that would be. 

Mr. NEUGEBAUER. And based on your understanding of the original legislation that was passed, is it allowable to use any of the 

dividends for the purposes under this bill? 

Mr. ENGEL. Under the bill, the money for the dividends are to 

go into the general fund to be used to pay down the debt. 

Mr. NEUGEBAUER. But if this legislation were not to pass, could 

you fund money for these purposes? 

Mr. ENGEL. Without the legislation, no. That money is to be used 

to go into the general fund to pay down the debt. 

Mr. NEUGEBAUER. So you don’t have—are you familiar with the 

money that we put into the auto industry? 

Mr. ENGEL. Somewhat, yes. 

Mr. NEUGEBAUER. And how much of that money have the American taxpayers put in so far for that? 

27 

Mr. ENGEL. You mean, what has come back? 

Mr. NEUGEBAUER. Well, none of it has come back. But, I mean, 

how much money have we put in? 

Mr. ENGEL. It has been announced as an $80 billion program, but disbursed so far is about $54 billion. 

Mr. NEUGEBAUER. And do we think we are going to get all that 

back? 

Mr. ENGEL. It is hard to determine at this point how much of 

that would be recouped. For example, in the Chrysler situation, we 

have equity shares, and it would probably be dependent upon what 

we would get back in selling those equity shares. There is a possibility we would not recoup all that we have put in. 

Mr. NEUGEBAUER. Both on the Chrysler and the GM? 

Mr. ENGEL. The GM is just now going through the restructuring 

process. But if it had a similar type situation, it would be dependent upon what we are able to get by selling those shares of equity 

that we received. 

Mr. NEUGEBAUER. But you would not characterize the $6.5 billion as a profit to the American taxpayers at this point? 

Mr. ENGEL. Not at this point. 

Mr. NEUGEBAUER. Thank you. 

I yield back. 

The CHAIRMAN. The gentleman from Missouri, Mr. Cleaver. 

We are going to try and do two more, and then we do have to 

relinquish this for the 1:30 hearing on the Fed. So Mr. Cleaver and 

Mr. Hensarling, and we will have to cut it to that. I apologize. 

Mr. CLEAVER. Very briefly, do any of you believe that H.R. 3068 

represents a poor or improper use of TARP funds? And, if so, why? 

That does it. I have no other questions, Mr. Chairman. 

The CHAIRMAN. All right. The record should show that no one responded. The record is not very good at charades. 

The gentleman from Texas, Mr. Hensarling. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

And let me welcome my fellow member of the Congressional 

Oversight Panel and thank him for his service to his country on 

that panel. 

I would like to also acknowledge the comments of my colleague 

from Texas, who—my respect for him is only equaled by my disagreement with him on a number of public policy matters, although 

I certainly respect his views. 

I have heard a number of panelists today speak of the housing 

crisis, which we all acknowledge. I am somewhat disappointed, 

though. I don’t believe, perhaps with one exception, did I hear any 

mention of the debt crisis. 

I think, I trust, the panel is aware that recently Congress passed 

a budget that will triple the national debt in the next 10 years, create more national debt in the next 10 years than in the previous 

220 years. The Federal deficit has increased tenfold in just the last 

2 years. We are presently borrowing 46 cents on the dollar, principally from the Chinese. We are sending the bill to our children 

and grandchildren, who either: one, cannot vote; or, two, have yet 

to be born. 

A number of economists believe that one of the great drags on 

our economic recovery today is this debt overhang. And so I am 

28 

troubled by the underlying legislation that finally, finally, the taxpayer sees a little money coming back that potentially could be 

used for either taxpayer relief or to pay off the deficit, and, instead, 

it is going right out the door. 

So my question is, number one, does anybody on the panel acknowledge the debt crisis? And, if so, do you see any link to the 

housing crisis to it? 

I would be happy to hear any comments from anybody on the 

panel. Mr. Hudson? 

Mr. HUDSON. Yes, that is one of the reasons why I advocated for 

HEMAP as a loan program. It has been a model that existed since 

1983, funded by the Commonwealth legislature. The State has set 

aside $225 million; it has gotten repaid $246 million, in terms of 

repaying. They are actually appropriations. It is set up as a loan. 

It is meant to be repaid. The fund has lent $442 million under that 

fund, and not to be a grant, but actually a loan to be repaid. 

Mr. HENSARLING. Now, Mr. Hudson, as I understand your testimony, apparently the Pennsylvania Homeowners’ Emergency Mortgage Assistance Program, you loan to people who ‘‘have a reasonable likelihood that the homeowner will be able to resume making 

the mortgage payment without State help,’’ is what you said in 

your testimony. Correct? 

Mr. HUDSON. Resume their payment within 36 months in the 

current environment without continuing assistance, correct. 

Mr. HENSARLING. Then do you believe that government should 

only provide assistance, then, to those who have a demonstrated 

ability to repay their mortgages without further government assistance? Is that the conclusion I should draw from your testimony? 

Mr. HUDSON. Well, it is designed as temporary assistance, given 

that we now have a high unemployment rate at 9.5 percent in the 

Nation, and for our Commonwealth it is over 7 percent. Yes, it is 

temporary assistance, that they should show the prospect of getting 

back on their feet, get the jobs, and be paired with the other programs that are designed to create those jobs. 

Mr. HENSARLING. As I look at a number of the programs of this 

Congress and the Administration, I don’t see that they are working 

particularly well. For example, congressionally authorized programs for foreclosure mitigation and for housing: The Neighborhood Stabilization Program costs $5.8 billion, although no money 

has been spent on eligible activities. Stimulus homelessness prevention programs, $1.5 billion. National foreclosure mitigation 

counseling, HOPE for Homeowners, up to $300 billion authorized. 

Supposedly we were going to see 400,000 homeowners being 

helped. As of June 15th, 945 applications, one loan has closed. Administration programs, making homes affordable, $75 billion, $50 

billion from TARP. FHA Secure, 4,000 loans financed. 

What I see is either a bunch of programs that don’t seem to work 

or a bunch of programs that still have money in the pipeline. Now, 

the latest data I see is that foreclosure rates are still increasing. 

So why do we want to put money into a failed agenda? Why have 

you concluded that somehow these programs, if we simply give 

them more money, are going to work? 

Anybody who cares to take that one? 

The CHAIRMAN. We don’t have much time. 

29 

Mr. HENSARLING. Well, there may not be an answer to that one, 

Mr. Chairman. 

I will tell you what, Mr. Chairman. I see the red light has come 

on. I will yield back the balance of my time. 

The CHAIRMAN. I thank the witnesses. 

We have to give this over to a hearing that is very important on 

the Federal Reserve. We will be continuing this. And I will ask the 

GAO—I have some differences with the estimate of borrowing costs 

that my colleague Mr. Neugebauer gave, so we are going to be asking the GAO to give us the figures on the borrowing costs for the 

TARP. 

Obviously, the whole $700 billion hasn’t been borrowed because 

it hasn’t been disbursed. It is not all on the 30-year bonds, etc. But 

rather than debate that, I would ask them for what the figures are. 

I believe they are far less than was indicated. Mr. Neugebauer 

thinks they are that, perhaps. We are going to ask that we get 

those figures. 

The hearing is adjourned. 

[Whereupon, at 1:36 p.m., the hearing was adjourned.] 

(31) 

A P P E N D I X 

July 9, 2009 

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