Hearing of the Senate Banking, Housing and Urban Affairs Committee - The State of the United States Economy and Financial Markets

Statement

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SEN. CHUCK HAGEL (R-NE): Thank you, Mr. Chairman.

Gentlemen, welcome. Just a note regarding the line of questioning that Senator Allard reviewed with the three of you. We are all aware that recently S&P and Moody's warned that if we do not deal with this entitlement issue, then our U.S. AAA bond ratings are in jeopardy, and we could see that as recently as over the next few years.

And I add that to the comments that you have made just to reconnect with not only the urgency of this issue, but the reality of the consequences if we don't deal with these entitlement challenges that are ahead of us.

I'd like to talk for a moment about infrastructure. Senator Dodd and I have an infrastructure bill that we have introduced, and it would essentially leverage public and private capital, a little different approach than what we've seen in the past.

And the reason for that is, it is very clear to me that with the kind of deficits that we are running, will continue to run; with the obligations that you have noted here over the last few minutes, and most Americans are aware of, that the necessary capital for our infrastructure if not going to be there. I don't know where we're going to get it.

And I noted, Secretary Paulson, that you did not think it should be included in the stimulus package, which I agree with, by the way. I think it's far larger than dropping rebate checks from an airplane. And I would be very interested in first understanding if the Treasury Department has looked at this infrastructure issue. We'll be making recommendations on what we should be doing.

We clearly have an inadequate structure, and as we look down the road, again, I don't know where we're going to find that capital when the rest of the world is devoting an astounding amount of their resources to their infrastructure, and in a time when we are living at the most competitive time in the history of man. Without an adequate infrastructure it will certainly have consequences on our ability to compete in the world.

Secretary Paulson.

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SEN. HAGEL: Thank you.

I would also like to return to a line of questioning that in particular Senator Shelby has had with the -- regarding the GSEs, and we are all familiar with the fact that Fannie and Freddie are currently holding -- either they own or are guaranteeing over $5 trillion in mortgage-backed securities, which are not registered with the Securities & Exchange Commission.

I asked a question at a hearing last week on this, and I quoted your response back to me, Chairman Cox, on whether it would be important to have the GSEs registering their debt as well with the SEC, and one of the assistant secretaries of the Treasury noted it would be helpful.

And I would like to address that issue specifically with you, Chairman Cox, as well as you, Secretary Paulson, on the importance of registering that debt and understanding what the securities are that Fannie and Freddie own or guarantee, $5 trillion worth. Do we really understand what they have? And would that registration with the SEC help us understand it.

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