While Taxpayers Will Likely Profit, Guarantees Carry Enormous Risk and Created Significant Moral Hazard

WASHINGTON, D.C. - The Congressional Oversight Panel today released its November oversight report, "Guarantees and Contingent Payments in TARP and Related Programs." The Panel found that the programs' income will likely exceed their direct expenditures, and that guarantees played a major role in calming financial markets. These same programs, however, exposed American taxpayers to trillions of dollars in guarantees and created significant moral hazard that distorts the marketplace.

During the financial crisis, the federal government dramatically expanded its role as a guarantor. Treasury, the FDIC, and the Federal Reserve Board together negotiated to secure hundreds of billions of dollars in assets belonging to Citigroup and Bank of America. In addition to increasing the deposit insurance coverage of bank accounts, the FDIC established the Debt Guarantee Program (DGP) to stimulate the market for banks to issue debt and raise capital, and Treasury acted to reassure anxious investors by guaranteeing that money market funds would not fall below $1.00 per share.

Altogether, the federal government's guarantees have exceeded the total size of TARP, making guarantees the single largest element of the government's response to the financial crisis. At its high point, the federal government was guaranteeing or insuring $4.3 trillion in face value of financial assets under the three guarantee programs discussed in the Panel's report. The enormous scale of these guarantees played a significant role in calming the financial markets last year. Lenders who were unwilling to risk their money in distressed and uncertain markets became much more willing to participate after the U.S. government promised to backstop any losses.

The Panel found that Treasury took an aggressive stance in protecting taxpayer interests, and the Panel did not identify any major flaws with their implementation of the guarantee programs. Even so, these programs carried significant risk. In many cases, the American taxpayer stood behind guarantees of high-risk assets held by potentially insolvent institutions.

These guarantee programs also created significant moral hazard. Guarantees create price distortions and can lead market participants to engage in riskier behavior than they otherwise would. In addition to the explicit guarantees analyzed in the Panel's report, the government's broader economic stabilization effort may have signaled an implicit guarantee to the marketplace: the American taxpayer stands ready to provide a financial backstop for certain markets and large market players to avert possible economic collapse. To the degree that investors, lenders and borrowers believe that such an implicit guarantee remains in effect, moral hazard will continue to distort the market.

The extraordinary scale of these guarantees, the significant risk to taxpayers, and the corresponding moral hazard leads the Panel to conclude that these programs should be subject to extraordinary transparency. The Panel specifically identified the guarantee of Citigroup assets under AGP -- the largest single guarantee offered to date -- and strongly urges Treasury to provide regular, detailed disclosures about the status of the assets backing up this guarantee. Treasury should disclose greater detail about the rationale behind guarantee programs, the alternatives that may have been available and why they were not chosen, and whether these programs have achieved their objectives. This should include an analysis of why Citigroup and Bank of America were selected for AGP and not others.

Recommendations are provided in the full report, which can be found at cop.senate.gov.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: former Securities and Exchange Commissioner Paul S. Atkins, Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Policy Director and Special Counsel for the AFL-CIO and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

WASHINGTON, D.C. - On Thursday, October 22, the Congressional Oversight Panel will hold a hearing with Herbert M. Allison, Jr., the Assistant Secretary of the Treasury for Financial Stability, to conduct oversight of the Troubled Asset Relief Program.

WHAT: Congressional Oversight Panel Hearing with Herbert M. Allison, Jr., Assistant Secretary of the Treasury for Financial Stability

WHO: Members of the TARP Congressional Oversight Panel

WHEN: Thursday, October 22, 2009, 10:00 a.m.

WHERE: Dirksen Senate Office Building, Room 562

The hearing is open to press and public and will be webcast on our website at www.cop.senate.gov.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: former Securities and Exchange Commissioner Paul S. Atkins, Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.]]>Wed, 21 Oct 2009 10:34:47 -0400release-101509-allison http://cop.senate.gov/press/releases/release-100909-foreclosure.cfmCongressional Oversight Panel Releases Assessment of Foreclosure Mitigation Efforts

Treasury's Strategy is 'Inadequate' to Address Coming Wave of Foreclosures; For Many Homeowners, Foreclosure Will Be Delayed, Not Avoided

WASHINGTON, D.C. - The Congressional Oversight Panel today released its October oversight report, "An Assessment of Foreclosure Mitigation Efforts after Six Months." The Panel expresses concern about the limited scope and scale of the Making Home Affordable program and questions whether Treasury's strategy will lead to permanent mortgage modifications for many homeowners.

Rising unemployment, weak home prices, and impending mortgage rate resets still threaten to cast millions of Americans out of their homes, with devastating effects on families, local communities, and the broader economy. One in eight mortgages is currently in foreclosure or default, and this crisis is estimated to produce 10 to 12 million foreclosures. While Treasury is still in the early stages of implementing its centerpiece foreclosure mitigation program, called the Home Affordable Modification Program (HAMP), the Panel has three concerns with the current approach.

The Panel found, "It increasingly appears that HAMP is targeted at the housing crisis as it existed six months ago, rather than as it exists right now." The program is limited to certain mortgage configurations. Many of the coming foreclosures are likely to be payment option adjustable rate mortgage and interest-only loan resets, many of which exceed HAMP eligibility limits. Treasury's strategy also makes no provision for foreclosures due to unemployment, which now appear to be one of the biggest drivers of foreclosure.

Foreclosures continue every day as Treasury ramps up the program, with foreclosure starts outpacing new HAMP trial modifications at a rate of more than two to one. Some homeowners who would have qualified for modifications may have lost their homes before the program could reach them. Even once the program is fully operational, Treasury's own projections indicate, in the best case, fewer than half of the predicted foreclosures would be avoided.

The Panel found, "The result for many homeowners could be that foreclosure is delayed, not avoided." HAMP modifications are often not permanent: For many homeowners, payments will rise after five years, and although the program is still in its early stages, only a very small proportion of trial modifications have converted into longer term modifications. The Panel is also concerned about homeowners who face negative equity or are "underwater" - that is, the value of the loan exceeds the value of their home. For many borrowers, HAMP modifications increase negative equity, a factor that appears to be associated with increased rates of re-default.

The full report can be found at cop.senate.gov. The Panel held a field hearing in Philadelphia with senior executives of Treasury, Fannie Mae, Freddie Mac, representatives for major financial institutions and housing advocates to inform the findings of this report. Testimony from the hearing can be found on the Panel's website.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: former Securities and Exchange Commissioner Paul S. Atkins, Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School. ]]>Fri, 09 Oct 2009 00:00:01 -0400release-100909-foreclosure http://cop.senate.gov/press/releases/release-091709-philadelphia.cfmCongressional Oversight Panel to Hold Mortgage Foreclosure Hearing in Philadelphia

WASHINGTON, D.C. - The Congressional Oversight Panel today announced that it will hold a field hearing to examine foreclosure mitigation efforts under the Troubled Asset Relief Program (TARP) on Thursday, September 24 at 10:00 a.m. in the Kirby Auditorium of the National Constitution Center in Philadelphia, Pennsylvania.

The Panel is currently scheduled to hear from the following witnesses:

Seth Wheeler, Senior Advisor, U.S. Department of the Treasury
Edward L. Golding, Senior Vice President, Economics and Policy, Freddie Mac
Eric Schuppenhauer, Senior Vice President and CFO/Program Executive for the Home Affordability and Stability Plan, Fannie Mae
The Honorable Annette M. Rizzo, Judge, Philadelphia Court of Common Pleas and Co-Chair, Philadelphia Mortgage Foreclosure Steering Committee
Eileen Fitzgerald, Chief Operating Officer, Neighborworks America
Deborah Goldberg, Director, Hurricane Relief Project, National Fair Housing Alliance
Irwin Trauss, Supervising Attorney, Consumer Housing Unit, Philadelphia Legal Assistance
Dr. Paul Willen, Senior Economist and Policy Advisor, Research Department, Federal Reserve Bank of Boston
Joe Ohayon, Vice President for Community and Client Relations, Wells Fargo Home Mortgage
Bank of America (invited)
Saxon Mortgage (invited)

In establishing the Congressional Oversight Panel in the Emergency Economic Stabilization Act of 2008, Congress charged the Panel to examine, among other subjects, "the effectiveness of foreclosure mitigation efforts." The Philadelphia hearing will inform the Panel's forthcoming October oversight report, which will consider foreclosure mitigation programs under TARP, including the Making Home Affordable program.

WHO: Members of the TARP Congressional Oversight Panel

WHAT: Field Hearing on Foreclosure Mitigation

WHEN: Thursday, September 24, 2009; 10:00 a.m.

WHERE:
Kirby Auditorium (Google Map)
The National Constitution Center
Independence Mall
525 Arch Street
Philadelphia, Pennsylvania 19106

The Congressional Oversight Panel was created to oversee the expenditure of Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA). The Oversight Panel members are former Securities and Exchange Commissioner Paul S. Atkins, Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School. ]]>Thu, 17 Sep 2009 17:17:24 -0400release-091709-philadelphia http://cop.senate.gov/press/releases/release-090909-auto.cfmCongressional Oversight Panel Releases Report on TARP Use for Auto Industry

Treasury Tough Negotiator, but Unlikely to Recover Full Investment

Recommends Placing Chrysler, GM Shares in Independent Trust

WASHINGTON, D.C. - The Congressional Oversight Panel today released its September oversight report, "The Use of TARP Funds in Support and Reorganization of the Domestic Automotive Industry." In protecting the interests of taxpayers, the Panel found Treasury negotiated aggressively with all the players in the automotive industry. While Treasury has conceded that it is unlikely to recover the entire amount invested, other goals also influenced Treasury's overall strategy.

Even before last year's financial crisis, the American automotive industry was facing severe strains. In 2008, U.S. automotive sales fell to a 26-year low. By the end of the year, a long-term slump became an acute crisis, with Chrysler and General Motors (GM) unable to secure credit and facing reduced consumer demand. Without new financing, they faced collapse – a potentially crippling blow to the American economy that could eliminate nearly 1.1 million jobs. Facing this prospect, the Troubled Asset Relief Program (TARP) was used to provide American automotive companies with short-term financing and additional loans to finance the bankruptcy reorganizations of Chrysler and GM.

American taxpayers now own 10 percent and 61 percent of the new Chrysler and GM companies respectively. Treasury's support for the automotive industry differed significantly from its assistance to the banking industry. The bulk of the funds were available only after the companies had filed for bankruptcy, wiping out their old shareholders, cutting their labor costs, reducing their debt obligations and replacing some top management. The government's role raises serious oversight issues, particularly Treasury's conflict between competing objectives.

The Panel recommends that, to mitigate the potential conflicts and political issues inherent in owning Chrysler and GM shares, Treasury should take exceptional care to explain its decision making and provide a full, transparent picture of its actions. The Panel also recommends that Treasury consider placing its GM and Chrysler shares in an independent trust that would be insulated from political pressure and government interference.

Given the questions about whether Treasury had the authority to use of TARP funds to aid the ailing domestic automotive industry, Treasury should provide a legal analysis justifying this decision. The Panel found that further questions about the propriety of the bankruptcy proceedings – accusations of illegal behavior and allegations that statutory bankruptcy priorities were overturned – are overblown and inaccurate. The full report can be found at cop.senate.gov.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: former Securities and Exchange Commissioner Paul S. Atkins, Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

###

WASHINGTON, D.C. - The Congressional Oversight Panel announced today that it will hold a hearing with Treasury Secretary Timothy Geithner on Thursday, September 10 at 1:00pm on Capitol Hill.

WHO: Members of the Congressional Oversight Panel on TARP
WHAT: Congressional Oversight Panel Hearing with Secretary Geithner
WHEN: Thursday, September 10, 2009; 1:00pm
WHERE: 485 Russell Senate Office Building

The Congressional Oversight Panel was created to oversee the expenditure of Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA). The Oversight Panel members are former Securities and Exchange Commissioner Paul S. Atkins, Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

### ]]>Tue, 08 Sep 2009 09:29:55 -0400release-090309-geithner http://cop.senate.gov/press/releases/release-082009-atkins.cfmChair Elizabeth Warren Welcomes Paul Atkins to the Congressional Oversight Panel

WASHINGTON, D.C. - Congressional Oversight Panel Chair Elizabeth Warren released the following statement welcoming former Securities and Exchange Commissioner Paul S. Atkins to the Panel:

"Paul Atkins will bring valuable insights to the Congressional Oversight Panel's efforts to increase the accountability of the Troubled Asset Relief Program. I look forward to working with him and I welcome his service on behalf of the American people."

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are former Securities and Exchange Commissioner Paul Atkins; Congressman Jeb Hensarling (R-TX); Richard H. Neiman, Superintendent of Banks for the State of New York; Damon Silvers, Associate General Counsel of the AFL-CIO; and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

###

Financial Stability is at Risk if the Underlying Problem of Troubled Assets Remains Unresolved

WASHINGTON, D.C. — The Congressional Oversight Panel (COP) today released its August oversight report, "The Continued Risk of Troubled Assets," which examines the economic implications of troubled assets and assesses Treasury's strategy for removing these assets from bank balance sheets. The Panel found that the future performance of the economy and the performance of the underlying loans, as well as the method of valuation of the assets, are critical to the continued operation of the banks.

Last fall, as increasing numbers of subprime mortgage-holders defaulted on their loans, the financial markets for these assets effectively ceased to function. In response to the crisis, Treasury proposed a major government program to move hundreds of billions of dollars in troubled assets off the banks’ books. But by the time the Troubled Asset Relief Program (TARP) was signed into law in early October, Treasury had decided to use TARP funds to pursue a different strategy: providing banks with a capital buffer to write-down many of their troubled assets and to build reserves for the future. Today, ten months later, substantial troubled assets remain on banks' balance sheets.

Treasury has launched the new Public-Private Investment Program (PPIP) in an effort to restart the mortgage-backed asset market. The Panel's report raises several questions about the program, including whether accounting rules that allow banks to carry assets at higher valuations will diminish their willingness to sell, and whether potential buyers may decline to participate due to concerns about political interference or government restrictions. PPIP could help to jump-start the troubled asset market, but serious questions remain about its effectiveness.

For smaller banks, those not among the 19 stress tested bank holding companies, troubled assets pose special challenges that have not been acknowledged. These banks' troubled assets are generally whole loans, which are not currently being addressed by Treasury's PPIP program. These banks also hold greater concentrations of commercial real estate loans, which pose a threat of high defaults. These banks also have more difficulty accessing the capital markets, which heighten concerns about their stability.

Treasury and relevant government agencies should move toward greater disclosure of the terms and volume of troubled assets on banks' balance sheets. Because banks typically disclose few details about the toxic assets on their books, it is difficult to gauge the magnitude of the risk that these assets pose to the financial system. Greater transparency would allow for better judgments about the scale of the problem and the adequacy of the government's response.

If the economy worsens beyond the levels considered in the recent stress tests, these tests should be repeated. Stress tests have the potential to gauge the impact of troubled assets on bank capitalization and to measure the risk that troubled assets could once again trigger instability. The Panel recommends that stress tests be adapted to consider the challenges facing smaller banks, including the adequacy of these banks' capital.

The full report can be found at cop.senate.gov.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former U.S. Senator John E. Sununu (R-NH) and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.]]>Tue, 11 Aug 2009 00:00:01 -0400release-081109-troubled http://cop.senate.gov/press/releases/release-072309-detroithearing.cfmCongressional Oversight Panel to Hold Farm Credit Hearing in Greeley, Colorado

WASHINGTON, D.C. - The Congressional Oversight Panel announced today that it will hold a field hearing on the Auto Industry Financing Program (AIFP) under the Troubled Asset Relief Program (TARP) on Monday, July 27 at 10:00am in the Spencer M. Partrich Auditorium at the Wayne State University Law School in Detroit, Michigan.

The Panel is currently scheduled to hear from the following witnesses:

• Ron Bloom, Senior Advisor, U.S. Department of the Treasury
• Jan Bertsch, Senior Vice President, Treasurer, and Chief Information Officer, Chrysler
• Walter Borst, Treasurer, General Motors Company
• Sean McAlinden, Executive Vice President and Chief Economist, Center for Automotive Research
• Barry Adler, Charles Seligson Professor of Law, New York University School of Law
• Stephen Lubben, Daniel J. Moore Professor of Law, Seton Hall University School of Law
• Richard Mourdock, Indiana State Treasurer

In the Emergency Economic Stabilization Act of 2008 (EESA), Congress created the Congressional Oversight Panel to "review the current state of financial markets and the regulatory system" including the "impact of purchases made" and the "extent to which information made available on transactions under the program has contributed to market transparency." The Department of Treasury announced the creation of AIFP on December 19, 2008, to support the domestic automobile industry through TARP in order to further stabilize the nation's economy.

The Panel will release a report on Treasury's use of its authority under TARP with respect to the automobile industry on September 9, 2009, and the field hearing in Detroit will allow the Panel to gain a better understanding of the use of TARP in the government's intervention in the auto industry.

WHO: Members of the TARP Congressional Oversight Panel

WHAT: Congressional Oversight Panel Hearing: Field Hearing on Auto Industry Financing Program

WHEN: Monday, July 27, 2009; 10:00 a.m.

WHERE:
Wayne State University Law School
Spencer M. Partrich Auditorium
471 W. Palmer St.
Detroit, MI 48202

Campus Map Courtesy of Wayne State University available at: http://www.campusmap.wayne.edu/location/LAW

Audio will be streamed online during the hearing and later posted in its entirety on the Panel's website at cop.senate.gov.

The Congressional Oversight Panel was created to oversee the expenditure of Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA). The Oversight Panel members are Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former US Senator John E. Sununu (R-NH), and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

WASHINGTON, D.C. - The Congressional Oversight Panel today released its "Special Report on Farm Loan Restructuring" fulfilling a mandate under the Helping Families Save Their Homes Act of 2009 to analyze "the state of the commercial farm credit markets and the use of loan restructuring as an alternative to foreclosure by recipients of financial assistance under the Troubled Asset Relief Program (TARP)."

The Panel's report first examines the state of the agricultural sector and notes that, in general, it has fared somewhat better than the broader economy. The balance sheets of farmers and agricultural lenders have remained relatively strong, though some parts of the agricultural economy, most notably dairy are in crisis. Rural areas were generally less exposed to the housing bubble, providing some protection for rural community banks from the shock of the financial crisis, until more recently.

Recent trends and projections in farm lending are troubling. The U.S. Department of Agriculture (USDA) expects net farm income to decline by 20 percent in 2009, which may reduce some farmers' ability to repay loans later in the year, although the impact may be mitigated by an increasing reliance on off-farm income. Demand for direct operating loans from the agricultural lender of last resort, the Farm Service Agency (FSA), increased 81 percent over the last year, and demand for direct ownership loans increased 132 percent.

Congress asked the Panel to examine the possibility of establishing a farm loan restructuring mandate for TARP-recipient commercial banks in order to prevent agricultural foreclosures. The Panel looked at several existing programs: the Farm Service Agency's process, the Farm Credit System and the Home Affordable Modification Program (HAMP) as possible models for actions under TARP to aid farmers.

The report notes that the effects of any loan restructuring mandate for TARP recipient commercial banks could be limited, as TARP-recipient banks only hold about 10 percent of total farm real estate debt. That share could shrink when more banks exit TARP.

In addition to actions under TARP, the Panel noted that Congress could also choose to help struggling farmers by creating a voluntary restructuring program, funded through TARP, and open to wider participation, or by expanding existing farm assistance programs to target assistance to struggling sectors.

The full report can be found at cop.senate.gov. The Panel held a field hearing on July 7 in Greeley, Colorado to take testimony from local farmers and agriculture lenders - including the USDA, the Farm Credit System and commercial banks - in order to gain a better understanding of farm credit markets. Testimony from the hearing can be found on the Panel's website.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former U.S. Senator John E. Sununu (R-NH) and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School. ]]>Tue, 21 Jul 2009 00:00:01 -0400release-072109-report http://cop.senate.gov/press/releases/release-070109-greeleyhearing.cfmCongressional Oversight Panel to Hold Farm Credit Hearing in Greeley, Colorado

WASHINGTON, D.C. - The Congressional Oversight Panel announced today that it will hold a field hearing on commercial farm credit markets on Tuesday, July 7 at 10:00 am in the Weld County Centennial Center in Greeley, Colorado.

The Panel is currently scheduled to hear from the following witnesses:

• Mike Flesher, Executive Vice President, Farm Credit Services of the Mountain Plains
• Bryan Cook, Farm Loan Manager, Weld County Farm Service Agency
• Lonnie Ochsner, Senior Vice President, New West Bank
• Marc Arnusch, Owner, Marc Arnusch Farms
• Les Hardesty, Owner, Cozy Cow Dairy and Chairman, Dairy Farmers of America Mountain Area Council

In the Helping Families Save Their Homes Act of 2009, Congress required the Congressional Oversight Panel to issue a report that "analyzes the state of the commercial farm credit markets and the use of loan restructuring as an alternative to foreclosure by recipients of financial system under the Troubled Asset Relief Program." The report is scheduled for release on July 20, 2009, and the field hearing in Greeley will inform the Panel's recommendations on farm credit issues that will be put forth in the report.

At the hearing, the Panel members intend to hear testimony from local farmers and agriculture lenders, including the USDA's Farm Service Agency, Farm Credit Services and commercial banks, in order to gain a better understanding of farm credit markets.

WHO:
Members of the TARP Congressional Oversight Panel

WHAT:
Congressional Oversight Panel Hearing: Field Hearing on Farm Credit

WHEN:
Tuesday, July 7, 2009
10:00 am

WHERE:
Weld County Centennial Center
County Commissioners Meeting Room
915 10th Avenue
Greeley, Colorado 80631

The Congressional Oversight Panel was created to oversee the expenditure of Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA). The Oversight Panel members are Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former US Senator John E. Sununu (R-NH), and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.]]>Wed, 01 Jul 2009 14:01:03 -0400release-070109-greeleyhearing http://cop.senate.gov/press/releases/release-062209-hearing.cfm WASHINGTON, D.C.—On Wednesday, June 24, the Congressional Oversight Panel will hold a hearing with Herb Allison, the newly confirmed Assistant Secretary of the Treasury for Financial Stability, to conduct oversight of the Troubled Asset Relief Program.

WHAT:
Congressional Oversight Panel Hearing with Herb Allison, Assistant Secretary of the Treasury for Financial Stability

WHO:
Members of the TARP Congressional Oversight Panel

WHEN:
Wednesday, June 24, 2009, 2:30 p.m.

WHERE:
Dirksen Senate Office Building, Room 538

The hearing is open to press and public and will be webcast on our website at www.cop.senate.gov.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former U.S. Senator John E. Sununu (R-NH) and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.]]> Mon, 22 Jun 2009 12:00:00 -0400 cop-announces-hearing-with-herb-allison http://cop.senate.gov/press/releases/release-060909-report.cfm Panel finds that stress test models were reasonable, but serious concerns remain

WASHINGTON, D.C.— On June 9, 2009, the Congressional Oversight Panel released its June Oversight Report, “Stress Testing and Shoring Up Bank Capital,” which examines the recent stress tests conducted on America’s 19 largest bank holding companies (BHCs).

In early February, Treasury and the Federal Reserve Board announced an effort to conduct comprehensive and simultaneous reviews of the nation’s largest BHCs– those with more than $100 billion in assets – to determine their ability to remain well capitalized if the recession leads to deeper than expected losses.  The effort, called the Supervisory Capital Assessment Program (SCAP), is referred to more informally as the stress tests.  BHCs found to be in need of an additional capital buffer were given six months to raise the necessary capital.  By ensuring that America’s largest banks could weather the financial storm, stress testing aimed to restore market confidence and help put the economy back on track.

The Panel’s report examines how effectively Treasury and the Federal Reserve conducted the stress tests, specifically reviewing the government’s economic assumptions, their methods of calculating bank capitalization, their release of information to the public, and whether the stress tests should be repeated in the future.  To help make these assessments of the stress tests, the panel engaged two internationally renowned experts in risk analysis, University of California at Berkeley Professors Eric Talley and Johan Walden, to review the stress test methodology.

The Panel finds that, on the whole, the stress tests were based on a solidly designed working model.  However, serious concerns remain, and the Panel offers several recommendations for consideration moving forward:

• The unemployment rate climbed to 9.4% in May, bringing the average unemployment rate for 2009 to 8.5%.  If the monthly rate continues to increase, the 2009 average may exceed the  8.9% assumed under the more adverse scenario, suggesting that the stress tests should be repeated if that occurs. 
• Stress testing should also be repeated so long as banks continue to hold large amounts of toxic assets on their books.
• Between formal tests conducted by the regulators, banks should be required to run internal stress tests and should share the results with regulators.
• Regulators should have the ability to use stress tests in the future when they believe that doing so would help to promote a healthy banking system. 

This report strives to provide Treasury and the Congress with the necessary context and comparative analysis to understand the possible policy choices.  The Panel hopes to assist Congress and Treasury officials in weighing the available options as the nation grapples with the worst financial crisis it has faced since the Great Depression.

The full report can be found at http://cop.senate.gov/documents/cop-060909-report.pdf.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform.

The Panel members are:  Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former U.S. Senator John E. Sununu (R-NH) and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

The panel is currently scheduled to hear from the following witnesses:

• Congresswoman Carolyn Maloney (NY-14) Chair, Joint Economic Committee, U.S. Congress
• Congressman Jerry Nadler (NY-8)
• Til Schuermann, Vice President, Bank Supervision, Federal Reserve Bank of New York
• Richard Parkus, Head of Commercial Mortgage-Backed Securities Research, Deutsche Bank – Americas
• Kevin Pearson, Executive Vice President, M&T Bank
• Jeffrey DeBoer, CEO, The Real Estate Roundtable
• Mark Rogus, Senior Vice President and Treasurer, Corning Incorporated

Additions or changes to the witness list will be announced when they become available.

Event Details

What

Congressional Oversight Panel Hearing: The Impact of Economic
Recovery Efforts on Corporate and Commercial Real Estate Lending

Who

Members of the TARP Congressional Oversight Panel

When

Thursday, May 28, 2009 at 10:00 a.m.

Where

Kimmel Center for University Life, Rosenthal Pavilion, 10th Floor,
New York University
60 Washington Square South
New York, NY

For more information on the Congressional Oversight Panel’s hearing, please contact the Panel at 202-224-9925.

The Congressional Oversight Panel was created to oversee the expenditure of Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. It is required by law to assess the “effectiveness of foreclosure mitigation efforts and the effectiveness of the program from the standpoint of minimizing long-term costs to the taxpayers and maximizing the benefits for the taxpayers.” The Oversight Panel members are: Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former US Senator John E. Sununu (R-NH), and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

###

WHO: Members of the TARP Congressional Oversight Panel

WHEN: Tuesday, April 21, 2009, 10:00 am *Doors will open at 9:30 am

WHERE: Dirksen Senate Office Building Room 628, Washington, D.C.

This hearing is open to press and public and will be webcast on our website at www.cop.senate.gov.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former U.S. Senator John E. Sununu (R-NH) and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

Panel sees mixed results.

WASHINGTON, D.C.—April 7, 2009, the Congressional Oversight Panel released its April Oversight Report, “Assessing TARP Strategy.”  This report comes on the six month anniversary on the passage of the Emergency Economic Stabilization Act of 2008 (EESA). 

Over the last six months, Treasury has spent or committed $590.4 billion of the TARP funds.  Treasury has also relied heavily on the use of the Federal Reserve’s balance sheet which has expanded by more than $1.5 trillion (not including expected TALF loans) in conjunction with the financial stabilization activities it has undertaken beyond its monetary policy operations.   This has allowed Treasury to leverage TARP funds well beyond the funds appropriated by Congress. 

The total value of all direct spending, loans and guarantees provided to date in conjunction with the financial stability efforts (including those of the FDIC as well as the Treasury and the Federal Reserve) now exceeds $4 trillion.  This report reviews in considerable detail specific criteria for evaluating the impact of these programs on financial markets. 

Evaluating the wisdom and success of these efforts requires an understanding of the available options open to policymakers to solve banking crises.  To provide a review of these potential policy options, the Panel reviewed historical responses to other banking crises including the Great Depression in the 1930s, the Savings and Loan Crisis in the 1980s, and the banking crises in Sweden and Japan in the 1990s to reveal that each successful resolution of a financial crisis involved four critical elements: 

• Transparency.  Swift action to ensure the integrity of bank accounting, particularly with respect to the ability of regulators and investors to ascertain the value of bank assets and hence assess bank solvency.
• Assertiveness.  Willingness to take aggressive action to address failing financial institutions by 1) taking early aggressive action to improve capital ratios of banks that can be rescued, and 2) shutting down those banks that are irreparably insolvent. 
• Accountability.  Willingness to hold management accountable by replacing—and, in cases of criminal conduct, prosecuting—failed managers. 
• Clarity.  Transparency in the government response with forthright measurement and reporting of all forms of assistance being provided and clearly explained criteria for the use of public sector funds.  

This report strives to provide Treasury and the Congress with the necessary context and comparative analysis to understand the possible policy choices.  The Panel hopes to assist Congress and Treasury officials in weighing the available options as the nation grapples with the worst financial crisis it has faced since the Great Depression.

The full report can be found at www.cop.senate.gov.  The Panel held a companion hearing to this report in Washington, D.C. “Learning from the Past—Lessons from the Banking Crises of the 20th Century.”  Materials from the hearing can be found on the Panel’s website.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. 

The Panel members are:  Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former U.S. Senator John E. Sununu (R-NH) and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School. 

WASHINGTON, D.C.—The Congressional Oversight Panel announced today that it will hold a public hearing on the lessons that can be learned from government responses to major banking crises of the 20th century. The hearing will be held on Thursday March 19th, 2009 in Washington, D.C., and will provide an opportunity for the Panel members hear from experts on prominent banking crises of the last 100 years. The Panel hopes to achieve a better understanding of the effectiveness of prior government efforts to stabilize banks and restart economic growth in order to better assess responses to the current economic situation.

The Panel will hear testimony from experts on the banking crises in Japan and Sweden during the early 1990s, the Savings and Loan collapse in the 1980s, and the Great Depression of the 1930s.

The following witnesses are expected to testify at Thursday’s hearing:

• Bo Lundgren
  
  • Director General, Swedish National Debt Office
  • Former Swedish Minister of Financial and Fiscal Affairs
• Richard Katz
  
  • Editor-in-Chief, The Oriental Economist
  • Author, Japan: The System That Soured—The Rise and Fall of the Japanese Economic Miracle and Japanese Phoenix
• David C. Cooke
  
  • Former Executive Director, Resolution Trust Corporation
• Dr. Eugene White
  
  • Professor of Economics, Rutgers University
  • Research Associate, National Bureau of Economic Research

The Congressional Oversight Panel was created to oversee the expenditure of Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former US Senator John E. Sununu (R-NH), and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

Additional details will be released as soon as they are available.

Event Details

WHO:
Members of the TARP Congressional Oversight Panel

WHAT:
Congressional Oversight Panel Hearing:
Learning from the Past – Lessons from the Banking Crises of the 20th Century

WHEN:
Thursday March 19th, 2009
10:00 am

WHERE:
US Capitol Visitor Center
Room SVC 208/209
Washington, D.C.

WASHINGTON, D.C.—March 6, 2009, the Congressional Oversight Panel released its March Oversight Report, The Foreclosure Crisis: Working Toward a Solution.
Like the crisis in the banking system, the foreclosure problem has grown so large that it threatens the entire economy. Foreclosures are depressing housing and commercial real estate prices throughout the country, imposing costs on those who are not even a party to the mortgage transaction through lower tax revenues, increased crime and depressed home prices.

The Emergency Economic Stabilization Act of 2008 required the Panel to look into the current state of the foreclosure crisis and gauge the adequacy of current programs to address the crisis. The Panel’s report examines the causes of the foreclosure crisis and the impediments to its resolution and develops a checklist that provides a roadmap for foreclosure mitigation program success.

“The foreclosure crisis seems to be getting deeper every day. Despite everyone’s good intentions, nothing seems to be working. The Panel wanted to examine why this was the case,” said Elizabeth Warren, Chair of the Panel. “We looked at the causes of the crisis and the impediments to sensible foreclosure mitigation. We were able to create a roadmap for policy makers to use to create successful programs to address this crisis.”
The Panel’s roadmap can be used by those who are developing programs to address foreclosure mitigation whether they are local, state or federal policy makers or private groups looking to help. Any successful program to address this crisis must address the following issues:

• Will the plan result in modifications that create affordable monthly payments?
• Does the plan deal with negative equity?
• Does the plan address junior mortgages?
• Does the plan overcome obstacles in existing pooling and servicing agreements that may prevent modifications?
• Does the plan counteract mortgage servicer incentives not to engage in modifications?
• Does the plan provide adequate outreach to homeowners?
• Can the plan be scaled up quickly to deal with millions of mortgages?
• Will the plan have widespread participation by lenders and servicers?

“By identifying current impediments to successful foreclosure mitigation efforts, the Panel hopes to advance efforts for sensible modifications that will help put the American family and the American economy back on a strong footing,“ said Warren.

This report also includes an initial assessment of President Obama’s Homeowner Affordability and Stability Plan, and outlines the extent to which it addresses many of the impediments identified in the report.

The full report can be found at www.cop.senate.gov. The Panel held a companion hearing to this report in Prince George’s County, Maryland, the materials from that hearing can be found on the Panel’s website.

The Congressional Oversight Panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former U.S. Senator John E. Sununu (R-NH) and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

# # #

WASHINGTON, D.C.—The Congressional Oversight Panel today announced its second field hearing—“Coping with the Foreclosure Crisis: State and Local Efforts to Combat Foreclosures in Prince George’s County, Maryland.” The hearing will take place this Friday, February 27, 2009. Prince George’s County has the highest rate of foreclosures in Maryland. Overall Maryland has taken aggressive steps to address the foreclosure crisis. The state’s approach coordinates state and local government action with community organizations and is one of the reasons that Maryland as a whole is doing better than the national average on home foreclosures.

The Panel is required by law to review the “current state of the market and the regulatory system” and provide reports to Congress and the American public on the effectiveness of the Treasury Department’s management of the Troubled Asset Relief Program (TARP), the “effectiveness of foreclosure mitigation efforts and the effectiveness of the program from the standpoint of minimizing long-term costs to the taxpayers and maximizing the benefits for the taxpayers.” At the Maryland hearing, the Panel will explore state and local efforts at foreclosure prevention and home price stabilization in Prince George’s County with an emphasis on identifying the economic and institutional barriers to loan modifications and refinancing.

The Panel will hear testimony from members of the public who have faced the threat of foreclosure, community-based providers of foreclosure mitigation and other housing servicers, and a state official. Congresswoman Edwards, Congressman Van Hollen, and a representative from Prince George’s County will also address the Panel.

In addition to the hearings, the Panel is encouraging all Americans to pose their own questions, make their own suggestions, and share their personal stories through the website at www.cop.senate.gov.

WASHINGTON, D.C.—TODAY, February 6th, 2009, the Congressional Oversight Panel released its February Oversight Report, in which the Panel presents the results of a detailed, technical analysis of the value of Treasury’s largest transactions under the Troubled Asset Relief Program (TARP). The report, entitled Valuing Treasury Acquisitions, concludes that Treasury paid substantially more for the assets it purchased under the TARP than the market value of those assets at the time the deal was announced. The Panel’s analysis revealed that in the ten largest transactions made with TARP funds, for every $100 spent by Treasury, it received assets worth, on average, only $66. This disparity translates into a $78 billion shortfall for the first $254 billion in TARP funds that were spent.

The report acknowledges that Treasury may have had valid policy reasons for making these transactions, and that it is possible that the value of the investments may eventually be worth more than the amount Treasury paid—or they may be worth much less. The report does not take a position on whether Treasury pursued the correct strategy, instead focusing on the contrast between the quantitative results of the study and the statements made by Secretary Paulson last year.

“Last fall, Treasury sold the American public on the TARP program by claiming that it would help banks while protecting taxpayers. Secretary Paulson described the transactions as ‘at or near par’ – that the value the assets Treasury received was roughly equal to the money being spent. But that didn’t happen. Treasury got less than it spent.” said Elizabeth Warren, the Chair of the Oversight Panel. “Treasury should have leveled with the American people about the purpose of the program. It’s time to explain what’s happened so that we can have a good, old-fashioned debate about whether this is the smartest way to spend our money.”

The report reaches its conclusions by reviewing ten of the largest TARP investments the Treasury made during 2008. The analysis revealed that:

• In the eight deals made under the Capital Purchase Program—which is the program designed for so-called healthy banks—Treasury received $78 for every $100 spent.
• In the two deals made under the programs designed to provide aid to important financial institutions that pose a higher risk of failure, Treasury spent $100 to get back assets worth only $41.

Using the same valuation techniques to analyze three large transactions made by private investors during the same time period, the report reveals that, unlike Treasury, private investors received securities worth as much or more than they invested.

Additionally, the February report also provides an update on the Panel’s previous work, and a review of the key actions and changes at Treasury since the Panel’s last report.

The full report can be found at COP.Senate.gov.

In March, The Congressional Oversight Panel will release its fourth monthly report which will focus on home mortgage foreclosures.

The Congressional Oversight Panel was created to oversee the expenditure of Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The Panel members are: Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former US Senator John E. Sununu (R-NH), and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.

WASHINGTON, D.C.—TODAY, January 29th, 2009, the Congressional Oversight Panel released a special report on regulatory reform. The report discusses how regulation would have helped avert the crisis that we are in today, and how the implementation of smart regulation will help the United States prevent another financial crisis and protect our economic future.

WASHINGTON, D.C.—TODAY, January 9th, 2009, the Congressional Oversight Panel released its second monthly report on the expenditure of Troubled Asset Relief Progam (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA). The report documents the efforts to get answers to the questions posed in the Panel’s first report, and details both the answers received from Treasury, and the many questions that remain un-addressed or un-answered.