Hearing Of The Subcommittee On Financial Services Of The House Committee On Appropriations - Financial Crisis And TARP

Statement

The subcommittee will come to order. Today, the subcommittee will examine the
Treasury's responses to the financial crisis and the implementation of TARP. We
are pleased to have two key witnesses on this topic. Leading off will be Herbert
Allison, Assistant Secretary of the Treasury for Financial Stability, who oversees
the TARP program. He will be followed by Neil Barofsky, the Special Inspector
General for TARP.

The financial crisis caused the deepest economic decline since the Great
Depression in the early 1930s. Although the economy has stabilized since the
freefall of late 2008 and early 2009, credit continues to shrink and unemployment
remains near 10 percent. We have a long way to go before most Americans will
feel that the economy is back on its feet again. We need to understand what role
TARP has played or could play in responding to our economic problems.

TARP funds have been used for a variety of purposes. Roughly 700 banks have
received capital infusions totaling more than $200 billion. With several major
modifications along the way, TARP funds have been used to provide mortgage
modifications to homeowners. Support for the auto industry has totaled more than
$80 billion. Funds were set aside to back up efforts to revive flows of credit for
small businesses, students, and consumer credit cards. TARP funds have also
provided a backstop for Federal Reserve actions with AIG.

There is also a budget angle to today's hearing. The TARP legislation allows
Treasury to spend on administration whatever it decides, without further
Congressional check. To decide how much to appropriate for Treasury, however,
this subcommittee needs to understand how much Treasury is spending because of
TARP and where it draws the line between appropriated funds and TARP-related
money.

In addition, the TARP legislation created the SIGTARP and provided it with $50
million that authorizers tell us they expected to last the life of the TARP. They
were granted another $15 million last spring. Last October, SIGTARP came to our
subcommittee with an urgent request for $23 million to avoid having to shut down
this spring. In other words, SIGTARP had made hiring and other commitments
that far exceeded the funds that the authorizers thought sufficient to last through
the life of TARP. We provided those funds for FY 2010 and SIGTARP has
requested another $49 million for FY 2011, far more than the $30 million annual
budget for the Treasury Department's IG.

We look forward to hearing from our witnesses how effective each of the various
TARP initiatives has been in restoring a healthy flow of credit, a growing
economy, and relief for worthy borrowers.

With those opening remarks, I would like to recognize Ms. Emerson for any
opening statement that she wishes to make.

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