tv State Waste Fraud Abuse of Federal TARP Funds CSPAN May 23, 2018 8:03pm-9:50pm EDT
roselyn gates brewer, and nikki haley. wednesday 8:00 p.m. eastern, hillary clinton, rex tillerson, james mattis, and canadian prime minister, justin trudeau. thursday jim cook, governor john kasich, kate brown, and congressman luis gutierrez. friday at 8:00 p.m. eastern, jimmy carter, betsy devos, representative mark meadows, and atlanta mayor tisha lance-bottom. next week on c-span, c-span.org and on the c-span 3 radio app. two house oversight and government reform subcommittees held a joint hearing to review the effectiveness of a program using federal funds intended to help people with their home loans and debt. the hearings marked the 10th anniversary of the asset relief program known as tarp. this is about an hour and 45 minutes.
>> subcommittee on intergovernmental affairs and government operations will come to order. without objection, the presiding members are authorized to declare recess at any time. on today's hearing marks the 10th anniversary of the troubled asset relief program also known as tarp. since 2009, this committee has conducted an oversight of tarp products on management. tarp, which was created in 2008 in the aftermath of the economic's worst in modern history. referred to as the bank bailout program. tarp was a $400 billion programintended to stabilize the u.s. financial system and preserve homeownership. in 2010 the treasury department created the tarp program known as the hardship fund to mitigate the impact of the housing crisis and prevent
foreclosures. all through 2020. earlier in the program, the government accountability office and inspector general for tarp reported some state implementation challenges in the program's lack of established merit in goals. in 2017 the office of the special investigator general of tarp issued a report questioning $3 million to administrative expenses charged by the state housing finance agents. those expenses included bonuses, barbecues, jim memberships -- gym memberships, severance payments, trips to the zoo, and others funded through tarp. the treasury department determined approximately 70% of these expenses are allowable under the terms of the participation agreement with the state. in other words less than 30% of the $3 million questioned by tarp was deemed recoverable by treasury. it is the duty of federal and
state partners to ensure taxpayer dollars for programs used for their intended purposes. none of the payments identified by the tarps report the main purpose of the program, to prevent foreclosure and provide assistance to homeowners most affected bit housing crisis. although many states have treasurers voluntarily returning $450 to the program since tarp's report. all over questions on appropriate expenditures remain. according to tarp's 2017 semi- annual report, half of all home own homeowners who sought assistance were reported to the program. nearly $2 billion in remaining funds dispersed by the treasury of the state, it is necessary to ensure proper safeguards are in place. i thank the witnesses from the treasury department, tarp, and representatives from three states including my home state of alabama, for being here
today. i now recognize the ranking member of the intergovernmental affairs committee mr. raskin for five minutes for his opening statement. >> governor palmer, chairman meadows, thank you for coming to today's hearing. thank you to all the witnesses for coming. the tarp's program was set up to provide aid to families in states that were decimated by the downturn of the housing market funded by the feds, but administered by state government. the hardest hit fund has financed mortgage modifications, unemployment assistance, transition assistance, mortgage reinstatement, and late elimination. since 2010 when it was created, the fund has assisted over 350,000 families and removed 24,000 blighted properties in washington, d.c. i don't want to understate the contributions made. although it has helped many people avoid losing their homes, the diligent work of the special inspector general or tarp has provoked a lot of
bipartisan anxiety about how state agencies are administering the program. i have a number of profound concerns i look forward to addressing today. the first is why my state, maryland, and other states where people were hit very hard during the financial crisis, were excluded completely from the hardest hit fund. it's very tough for me to read reports about scandalous abuses of the program, waste of money taking place. and bloated budgets while my state was completely excluded from it. i would like somebody to explain that to me. why did the treasury department exclude maryland? and in addition, why do we still have the analysis from the treasury belt with the success and the potential explosion of the program now seven years into it? while states like these receive $0 under the program, others received millions of dollars that ended up going to fund
excessive and egregious wasteful expenditures uncovered in the audit. and so i want to know along with the chairman, why did all of this money go and why is this money going to lavish catered barbecue parties, visa gift cards, employee bonuses, catered lunches with treasury employees, fancy cars, and employees trips to the zoo. i know a lot of states did not break the rules in any way. the hardest hit program seems to have the highest rate of homeowner approval with over 73,000 americans that have been assisted with apparently no wasteful expenditures reported. and so i look forward to today and digging into the work of the special inspector general and her team at tarp who uncover the fact federal dollars meant to help people recover from the greatest economic catastrophe since the depression were being wasted on
things like a car allowance of $11,000 for a a mercedes benz for a coo. in september, the audit report found nevada's affordable housing corporation misspent $8.2 million. in 2017 treasury reported hhf did not meet a threshold and will have their allocations reduced by $6.2 million. nevada is the only state participating in the program to have funds cut. the georgia department of community affairs provided the hardest hit funds to only 9,000 homeowners in rejected two- thirds of the applicant. and so mr. chairman, there are a lot of questions here that i want to get to the bottom of today. i thank you for calling this hearing. >> i now recognize the chairman of the subcommittee on government operations. five minutes for his opening
statement. >> thank you, mr. chairman. i'll be very brief. inspector general romero, thank you so much for being here. it was a pleasure to not only visit, you know, your workplace with so many dedicated individuals that see your leadership. i just wanted to go on record to recognize that and thank you for that. welcome, you know, this isn't raleigh. actually if we could operate dc as well as we do raleigh, then we might be in a better position. but i want to just say welcome. i also want to acknowledge your thoughtful insight on some of the issues that we may be talking about not today, but in terms of your proactive stance there. i want to acknowledge that, thank you. and my good friend who is actually in the audit, it's billed as a constituent. so i want to thank him for his advocacy on this particular area. as we look at all of this, this is all about being accountable for the hard working american
taxpayer dollars, making sure those priorities go and are invested in those areas that best help those that are in need. and so as we would look at that, it's critically important that we do that. mr. chairman, i want to thank you for your leadership on that particular area. i'll yield back. >> i will now recognize the ranking member of the government operations subcommittee mr. connellly for five minutes for his -- connely for five minutes for his comments. >> looking at this management and wasteful spending in the hardest hit programs. thank you to our witnesses for being here. the oversight and government reform committee has broad jurisdictions. when you look at fraud, waste, abuse throughout the government, including federal dollars that go to state government. taxpayer dollars should not be used as a slush fund, and i welcome the committee's oversight into this issue
today. to ensure accountability wherever the taxpayer dollars are spent, it is also important for this committee to look into wasteful spending elsewhere in the federal government. i would welcome a deeper look at the wasteful spending for the environmental protection agency, for example. and $43,000 of the soundproof booth for administrator scott pruitt in violation of spending laws. $105,000 on administrated pruitt first class blight for the first year on the job. $1 is 00,000 -- $100,000 for a four-day trip to moscow. $120 ,000 in a four-day trip to italy. $45,000 for epas to fly to australia, and for another trip that had to be canceled because of the hurricane, hurricane harvey. five salary increases for preferred staff, even after the white house office personnel denied the request. this is not to mention
administrative pruitt's ethical challenges including his cozy relationship with lobbyists of the industry's regulated by the epa. this committee should also look into how the department of interior was able to spend $139,000 on new doors. secretary zinke's office, which makes the $130,000 dining set look like small potatoes. this is just what we know from publicly reported expenditures. i'm sure it's the committee f they took on -- committee, if they took on a full fledge into the wasteful spending by the cabinet, we would be able to find other examples of the misuses of taxpayer dollars. ten years ago a financial crisis hit the american people, the likes of which were seen from the great depression. housing crisis plunged, 8.8 million jobs were lost. a liquidity crisis hit the financial sector on the unemployment rate.
the meltdown left hundreds of thousands of homeowners under water in their mortgages, owing more than their houses were worth. in 2008, u.s. foreclosure filings hit more than 81% and over 860,000 families lost their homes in foreclosures that year alone. in response to this crisis, congress enacted the stabilization act, which among other things, created the tarp troubled asset relief program. tarp is widely considered a bank bailout. authorizing the secretary of the treasury, the purchase, or to ensure $700 billion in troubled assets owned by the financial firm. tarp also sought to provide assistance to homeowners, facing foreclosures by stabilizing the housing market and engaging in the affordable housing program, the federal
administration towards their refinancing program. and the hardest hit fund, they made funding available through the state housing ajen they have experienced the greatest de-- agency that have experienced the greatest decline. they help homeowners stay in their houses and knock down blighted properties, raising property values of the surrounding homes. it's grown into a $9.6 billion program funded by the federal government, but administered by the state and assisting in more than $300,000 homeowner -- 3 hushes ,000 homeowner -- 300,000 homeowners in the district of columbia. i support this program with the states and the federal government, working together to solve common problems. but today's hearing will highlight instances where that cooperativefederalism is still awry.
in december of 2016, general inspector for tarp found this in the nevada housing program, allotted a use in waste in the hardest hit fund dollars instead of helping homeowners. . this included a car loan of 500. a month for the ceo to drive a mercedes-benz totaling $11,000. nearly the same amount spent on employee bonuses, outings and other perks in over 580 5801 hoy parties, 43,000 bonuses almost all of which were paid to the ceo leader terminated. at the same time the state agency had all but stopped homeowners from getting assistance through the hardest t hedghit fund admitting only 117 homeowners in 2015 drops of 96%. the special inspector general department also found state agency stretched more than
100,000 for barbecues, picnics, celebrations and other outings that included instead of putting $14,124 towards assisting homeowners, the north carolina housing finance agency charged that amount for employees beverages and overall sound of the agency charged with him 100,000 in on the extent is. at the same time that same agency team adt .8% of homeowners who applied for housing assistance. state agency stretched employee parking fees an in the hardest t from as low as the case in michigan that spent over 330,000. eight years after the passage of the inspector general continues to conduct audits of the hardest hit expenditures to ensure that it's been spent properly. they foun bound the states misst 3 million in funds and we must
remember $3 million which could have been used to provide assistance or rehabilitate and more disappointing than the agencies using unnecessary expenditures is the treasury departments reluctance to recover the misspent taxpayer dollars. after receiving the audit treasury decided to call that 29% of the improperly spent funds so it is important sigtarp keep a watchful eye to ensure that taxpayer dollars are spent judiciously and for the purpose congress intended. i'm glad we are having this we's hearing and looking at the improper use of the funds and i believe the safety net ought to be applied to the cabinet into this committee should have hearings on those issues. i yield back.
>> pleased to introduce the witnesses. the deputy secretary personal business development affordable housing policy in the office of the assistant secretary for financial institutionsecretary e department of treasury is all of that fit on one business card? the honorable goldsmith romero at th the troubled if you department at the department of treasury and chief executive officer of the nevada affordable housing assistance corporation. kathy james business development manager of the housing finance authority and mr. scott farmer executive director of the finance agency. welcome to you all pursuant all witnesses will be sworn in before they testified so please stand and raise your right hand. do you solemnly swear and affirm the testimony you'r you are aboo give us the truth, the whole truth and nothing but the truth so help you god? the record will reflect all
witnesses answered in the affirmative. please be seated. to allow time please limit testimony to five minutes. your entire written statement will be made a part of the record and it's a reminder there's a clock in front of you that shows the remaining time and delightful turn yellow kind of like a yellow light at a traffic stop. you have 30 seconds left and read when your time is up. also remember to turn the microphone off before speaking. mr. campbell look forward to the testimony. >> vendors of the subcommittees thank you for the opportunity to testify about the efforts to mitigate the effects of the financial crisis to the home owners. treasury established hhf as a part of the relief program for t.a.r.p..
state housing finance agencies in 18 states and district of thf columbia were selected to participate as these areas extended unemployment rates above the national average in the declines were greater than 20%. hhf was designed to give them maximum flexibilitmaximumflexibd administer their own program tailored to local conditions and restrictive communities. part of the flexibility to states have been able to adapt their programs in order to address the changing even the communities over time. as of december 312017 distinct assists approximately 350,000 homeowners and funded demolition of more than 24,000 properties in distressed communities over the flexibility afforded by the hardest hit fund needed made ovt a critical aspect of the program. it is a strong commitment to ensure the program achieves its goals and federal taxpayer dollars are used for their
intended purpose. treasury requires each to set specific goals for the program to demonstrate steady progress toward meeting these goals and also maintains ongoing dialogue and works with each to identify and address barriers to keep from achieving would keep them from achieving. the treasury has also can he be thed more than 100 on-site reviews for participating hsas as well as targeted reviews. these reviews evaluate a number of critical functions, which is why the homeowner in these guidance. the administrative expenditures are appropriate. information reported to treasury is accurate and the hsa internal controls are functioning as we intend to minimize the risk of non- compliance. treasury takes corrective actions when issues arise. this includes, for example, requiring the hsas to reevaluate homeowners that were improperly denied to reimburse hsa for external controls in
order to prevent further noncompliance. in addition to non-compliance review, presenting fraud, waste, and abuse in all tarp programs. we certainly consider the recommendations in that regard. treasury responds to writings and our responses are made available to the public. you work hard to address the concerns raised by these recommendations in a manner that allows programs to function as intended and into the context of the wind downs. for example, treasury, early reviews, $2.2 million have seen tarps all in their 2017 report. this involves analyzing thousands of individual transactions incurred by all 19 hsas dating back to the program's inception in 2010. following this review, treasury determined $661,441 did not comply with federal government's cross principles. they were required to require hsa for the reasons set forth in our april 4, 2015 letter to tarp, a copy of which has been
provided to the committee and available on our website. the treasury determines the remaining costs were allowable under cost principles. as is the case with all tarp programs, hss is winding down. although congress authorized additional funding it many 2015, the program remains a -- funding in 2015, the program remains. 92% of the $9.6 billion obligated under hfs. they may issue new funding in 2020. most states have begun closing down programs. they will exhaust their available funds this year. these includes california and florida, two largest states in the program. treasury's outstanding commitments under tarp represents just 1% of the 470 billion authorized by congress. tarp winds down, treasury remains committed to robust oversights, monitoring of all its tarp programs. thank you again for the opportunity to testify today
and welcome your questions. >> thank the gentleman for his testimony. chair recognizes ms romero for her testimony. >> chairman palmer and chairman meadows, ranking member raskin, connolly, members of the committee. i really thank you for the support you have given to tarp. think of the law enforcement agencies as well as the watchdog auditor. 416 defendants have been charged with crimes including 100 bankers. 349 have already been convicted, 247 sent to prison. we've recovered $10 billion from our investigation. that's money going back to the government, the victims, the homeowners. that's a 35 times return on our investment. auditors have identified hundreds of millions of dollars in cost savings. i'm grateful you're examining the hardest hit fund because i've been there for the full eight years for the program. the very beginning of the
program, phillip caldwell, the senior treasurer who created the program. and what they were trying to do at treasury was develop locally tailored strategies. state agencies will choose the type of programs, the amount of funding, the number of homeowners that they want to help. and the white house announced that the program would be under strict transparency and accountability rules. they promised they would measure performance. now phyllis caldwell told us are we reaching the number of right people? are the states meeting their target? if not we'll learn and adjust. and by 2012, we found the treasury had moved away from that. the senior treasury official in charge of implementing the program told tarp this is not our program, this is their program. and after two years at the height of the recession, only 3% of the money had gone out to only 7% of the homeowners who the program was estimated to help. they never took ownership of this program or broad
accountability. we made bread and butter practices, recommendations for best practices that were often dismissed. some state agencies performed well, and for low performing state agencies, what we did, we did data analytics, we talked to homeowners, whistle blowers, home counselors, and others. we identified obstacles this could be removed. for example in florida, seniors had trouble with online applications. that's not surprising. they had trouble getting documents, which is tax assessments. in georgia, homeowners had trouble because they had to go to the irs to get a tax transcript within 30 days, which you can't do, and in which other state agencies don't require. after our report, some of these obstacles were removed and the performance improved. we found waste and misused dollars, which you already talked about. parties, picnics, catered barbecues, gifts, vacancy food, dinners, $500 a month for an executive to drive a mercedes?
i found one receipt in illinois, $549 at a pizza restaurant and said to celebrate hha funds given from u.s. treasuries and to celebrate the name of employees upcoming wedding. in comparison to arizona and california, which has the most dollars, $0 on food and party. we apply treasury's contract criteria. in 2010 treasury's top lawyers said under appropriations lost, an expense must be necessary for congress to be authorized in tarp. if the homeowner could get the assistance without it, it wasn't necessary. but the federal cost principles, they say they are being talked about today and they start with what's necessary. that's reasonable, applicable to the program. and that top lawyer treasury warned if you open this up further, it's going to authorize an unlimited number of expenditures, rendering the law meaningless and that's what
we found with the days at the zoo and gym memberships, lawyer fees, visa gift cards, custom shirts, building a customer center where most of the customers are not hit. moving to a luxury building, $20,000 severance package. every misused dollar will reduce the cost. we found there were no federal competition requirements that could save money and prevent fraud. we found the demolition rose 90% in michigan. 65% in ohio, 70% in indiana, army corps of engineers founded mismanaged. what are the top threats today in the program? waste, anti-competitive conduct. in the blight program, corruption, fraud, anti-trust, exposure. these are the types of areas we are investigating and auditing. we have a vested interest in prevention. greater accountabilities and controls are needed. there are billions of dollars at stake. more than $100,000 people apply for this program this year.
demolitions are just starting this year or they haven't even started in some cities, so it is not too late, thank you. chair now recognizes ms campbell who will hear her testimony for five minutes. >> thank you, mr. chairman. chairman palmer, members of the committee, thank you for the opportunity to participate in today's hearings. and appear before you regarding implementations and oversight of the hardest hit funds. for the record my name is bernice campbell. since june of 2016, i have been the chief executive officer for the nevada affordable assisted corporation. i was selected by the state of nevada to restructure after the organization experienced a series of operational issues in a decrease in production. no state was hit harder than nevada during the great recession and subsequent housing crisis. in nevada the hardist hit fund -- hardest hit fund has been instrumental in helping people get back on their feet. these are actual quotes from
the homeowners. this program saved my life. it saved my children's life. i feel like the weight of the world has been lifted off my shoulders. we were under so much pressure. we didn't going to lose our homes until we spoke to the hardest hit. providing benefits to nevada homeowners has not been without challenges. they acknowledge there have been issues with this performance, specifically the most critical report was a big report that actually indicated that there was far waste of an abuse in nevada in the amount of $8.2 million. however subsequent treasury audits for the same period found it significantly reduced the amount of unallowable expenses. $136,000 not $8.2 million. they immediately reimbursed $136,000 to the treasury. nevertheless it was without a doubt, changes had to be made if he was going to effectively
serve nevada homeowners. and major changes were, in fact, made through their organizational structure. the system and programs. in fact our newest program is a down payment assistance program entitled hope brings you home, which was launched on may 1, 2018. $36 million was allocated to this program to assist $1,800 homeowners. to date, the down payment assistance program has over 200 reservations with over $3.8 million committed in its short time. the nevada affordable housing assistance corporation has helped over 6,000 nevada households to date. programs have been instituted to solve the housing crisis with the assistance of treasury, nevada's business and industry, and the nevada
housing division. they initially -- there were issues the operations initially, but improved their organizational structure and its operations resulting in better oversight, transparency, and control. and increase capacity to help more nevada families. new management is committed to efficiently and effectively utilize the remaining allocations of government funds to help citizens for one of the hardest hit areas. >> five minutes. >> good morning, chairman palmer, members of the subcommittee, thank you for the invitation to discuss the hardest hit programs. my name is kathy james. i'm the business development manager for alabama's housing authority. i also serve as the manager of the hardest hit funds program in alabama, which we call the hardest hit alabama program. alabama's introduction to the
hardest hit fund began with the notification in 2010. hardest hit funds had already undergone two rounds of funding when they were invited to participate in round three. we quickly began creating our program and program guidelines. we begin by reviewing term sheets, all by the department of treasury, which had been adopted by other states in rounds one and two. during the development of our process, close attention was paid to the respective allocations of the program funds and administrative expenses. in total, alabama's allocation is $162.5 million and 16.75% is allocated to administrative expenses. during the seven years of hardest hit assistance, the department of treasury has approved 12 term sheet changes for the state of alabama. our current portfolio of programs includes a mortgage payment assistance program, a loan modification program, a short sale program, and a
blight elimination pilot program. more than 6,500 homeowners have been approved and received more than 63. million in program -- 63.8 million in program. 85% of the households who received assistance on our mortgage payment assistance program had an annual income of $50,000 or less. 45% of the homeowners who received assistance were 90 plus days delinquent on their first mortgage at the time of application. hardest hit funds have been dispersed in all 67 counties in the state of alabama. hsa helps with great seriousness to ensure regulatory and program compliance. alabama's hardest hit programs is reviewed on a monthly basis for our internal audit teams, and an annual basis by an independent audit firm. since the program's inception,
alabama has completed five compliance reviews with the department of treasury. the 2017 tarp report asserted $705 of expenses charged by the hardest hit fund was unreasonable and therefore unallowable. all noted expenses were related to hardest hit activities such as in-house lunches for working conferences. in one instance, lunch with participating in the hardest hit programs and promotional items to two homeowners who volunteer for radio and television ads. alabama contested the allegations and defended the charges. even so per the march 2018 compliance review, they agreed to reimburse $397. that's the balance of expenses that were found to be reasonable. since the notification of alabama's allocation of hardest hit funds, we have worked to ensure the program is problemmatically sound and funds were not spent
unnecessarily. the commitment to the proper use of hardest hit funds is unchanged. we'll continue to provide hardest hit assistance to homeowners across the state of alabama and compliance with the agreed upon terms and the term sheets and in compliance with federal guidelines, thank you. >> chair now recognizes mr. farmer for five minutes. >> chairman meadows, palmer, and honorable members of the committee. my name is scott farman. since january of 2017, it has been my honor to serve as executive director. i'm proud to be with you today representing our board of directors and more than 160 dedicated staff. thank you for the opportunity to share information about one of our most effective programs, the nc foreclosure program fund and its accomplishments on citizens in danger of losing their homes in the face of an economic downturn. a foreclosure prevention fund helps responsible homeowners struggling with mortgage
payments payments while they search for work. those facing foreclosure due to a no fault job loss, temporary financial hardships such as illness, death of a spouse, or a natural disaster. the fund also provides housing counseling and assistance for veterans transitioning to life. those who have given so much termination should never face the prospect of losing their home. this initiative has already saved more than 400 veteran families from losing their homes. the fund was launched in 2010 in the wake of great recession, when our state was identified by treasury as hardest hit due to high unemployment and the high number of foreclosure filings. since then the fund has helped more than 26,000 homeowners keep their homes during difficult times. approximately $706 million was allocated to our agency under the hardest hit fund to develop this program. we had to significantly expand our agency capacity. this included hiring more staff, leasing additional office space, building a
complex application portal and website, and training hundreds of partners statewide. we were notified by the treasury we were to receive the hardest hit funds in april of 2010. the initial program was approved by treasury in august of 2010, and we built, marketed, implemented the program by october in only six months. the program of this scale and complexity in that time frame requires long hours for staff. many of whom had existing work closures for our agency. the work is specialized, involved, stressful, when assisting homeowners upset about losing their homes. among the news of hard working families assisted by the fund as a small business owner in allegheny county, on a thriving business since 1998. that changed when the recession hit. by 2011, he and his wife were about to -- to lose their home. aisle pleased to report their business merged from the recession and it was stronger, recently celebrating their 20th anniversary. the fund also helped the lee county veteran who struggled
with unemployment from the u.s. army. the assistance kept their families in their homes while they used the g.i. bill to require skills needed for civilian jobs. and he is now employed by a local government. a worker who was laid off from her job was able to keep her own with assistance from the funds while she sought new unemployment. she still lives in her home and now works for a health care non- profit focuses on providing medical care for rural communities. the fund has also had a noteworthy impact on state and local economies, preserving an estimated $4.5 billion in property values, sustaining wealth, not only for the homeownership, but for their neighbors as well. and on average, lenders and investors can expect to lose half of their investment in the foreclosed mortgage, presented to the work with an estimated $1.5 billion in our state. this work also offsets the cost associated with broader social impact before foreclosures, such as stress, neighborhood destabilization, integrated
health outcome. as noted, we have helped more than 460,000 north carolinians since the program was lost. using the hardest hit fund. we are currently winding down the program and expect to have committed all of our program funds for the second quarter of 2019. and we are proud of what has been accomplished from north carolina and their citizens through the nc foreclosure prevention fund. one we will continue to ensure they have the opportunity to benefit from this program. thank you for the opportunity to share our story today. and we'll be happy to answer any questions. >> thank you witnesses for their testimony. the chair now recognizes the gentleman from penn state pleasuring duncan, for fiveminutes for his questioning. >> well thank you very much mr. chairman and thank you for calling this important hearing. you listed a very impressive record for your office. but you also said nevada, for
instance, that had committed $8.2 million or lost $8.2 million in waste, fraud, or abuse, and turned right beside you and said oh, it was only $136,000. but what is the discrepancy there? what do you think of her statement about how it really was? and it was very little? >> so we labeled it waste and debut. we want to make it clear because of the auditors. but it doesn't make sense. i mean to be honest, you know, what they paid back is what the treasury requested, which also didn't make sense. so for example, the ceo that was driving the mercedes benz was forced to resign with a $20,000 severance package, which has been paid. but that's not necessary for a homeowner to get assistance in the hardest hit fund. and so what i found was that
treasury officials were applying the wrong standards. they were not applying the necessary standards, which is the -- not only what they can see as the first requirements of the federal cost, nor is it reasonable. that's just one example. there are many examples like moving into a luxury building to improve employee morale than deciding it's more cost than you need because you doubled the rent, breaking the lease. $20,000 in legal fees to break the lease, move, pay rent. none of that was paid back and all when they were not helping homeowners. >> all right, thank you very much. as of december 2017, 347,000 people have been helped by this hsa program. somebody tell me how this works
exactly. how many homes is that? most homes, in the name of the husband and wife bill, maybe more than one person. how many homes are we talking about? does anybody know? of the 347,000? >> we count house pools, so those numbers represent the house pools. >> and those are 347,000 homes? >> households. >> and how long can somebody stay on this program? ms romero mentioned eight years. have there been people who have been on this program since day one and they're still on the program?
can anybody tell me? >> i think each state is a little different. our homeowners have up to 12 months not to exceed $30,000. >> and is that pretty typical? you say each state is different, ms campbell? >> mr. committee member. our homeowners, it depends on the program. we have an unemployment program, where homeowners can stay on the program up to 18 months. and we have a limit for all of our programs combined no more than $100,000 per household. >> all right. is that typical of ms romero? >> again, it varies two years, three years, one year, it just depends on the state. >> all right.
and now, there's $2 billion unspent. is that correct in one of these reports? >> actually it's around $800 million. the $2 billion is the new authorization from the 2015 vote. it could be spent through. $800,000 or about 2% of the hardest hit funds remains. >> is there a goal or plan since unemployment is so low and the economy is so strong. is there a plan to end this program or faze it out? >> yes, sir. the applications are available for those who have dollars. that $2 billion was allocated across the 19 states. so of the remaining funds, applications may be accepted through december 31 of 2020 and dollars could be put out through 2021 if there are any remaining dollars. certain states have wind those down, so there's no dollars
available. >> how many of the 19 states are left on the program? >> california and florida are already winding down. many others have gone down now. >> thank you very much. >> thank you mr. chairman. the chair now recognizes the gentleman from maryland for five minutes. >> mr. chairman with your permission, i'll yield to mr. connolly and switch places with him. >> i thank the chair and my good friend from maryland. and i appreciate this consideration. i'm concerned about the apparent mismanagement of the hardest hit programs from some of our partners. according to the inspector general's reports, they said it was $600,000 for cars.
free parking for staff plus tax. the state spent $50,000 to house counselors. $14,000 for employee meals, and $8,000 on gym memberships. in 2017, tarp found nearly $3 million in wasteful spending. where in the world do they get the idea that this was permissible spending? >> well, i appreciate your question. i can't speak for why the states made decisions. but they are required to follow cost principles and all their administrative expenses and that's the standard as they are required to follow. >> well, i mean, okay, but some of them decided based on those standards that it was permissible to spend up to $8,000 in gym memberships. using federal funds intended for housing relief.
[ change in captioner ] happe? is there any oversight wit of te use of these fun as? >> we've conducted more than 100 in person reviews with states to review their administrative expenses if we work with them upfront to make sure there are standards followed into the cost principles are compliant with an e- >> let me ask it differently. the fact is, someone is putting money in gym memberships. with that be with your standards? >> there are a range of expenses that are eligible and in eligible under federal -- >> is it eligible or ineligible?
>> if you'd like to go through each line item, -- >> this is a simple question, is it gym membership payment a permissible use of these funds from your point of view. >> all i can tell you is the federal cost principles are followed -- >> if permissible, apparently he doesn't want to answer a reasonable question. >> thank you so much, that is called cleared of english. useful when we are trying to get to the bottom of problems. can you elaborate since he wants to gives us -- >> the treasury send me a letter in april saying that they think gym memberships were allowed in the federal cost principles. number 1 of the federal cost principles it has to be necessary to a congress
authorizes. >> the only way i can reach an agreement with the homeowner is at the gym, it wouldn't be permissible. >> i think that poses a danger. >> in his answer, right here right now, i have more concerns than i had going into this because we are not clear and no wonder states are approving expenditures that clearly show a commonsense witness would not be allowable because of this type of guidance. the treasury department -- since he will not be cooperative in answering, i will ask you. the treasury department only thought to recuperate 29% of the money that was misspent or wasted, is that acceptable from your point of view and why only 29%?
>> no, not acceptable. we work hard to look at this, we didn't substitute our own judgment. we applied federal cost principles, there is a long history of applying the federal cost principles. they apply to every grant. i also want to say, when these programs wind down, there is $2 billion remaining to be spent in the numbers he is talking about is what goes out of treasury. when he says california is closing down, they have 335 million dollars to be spent. >> very helpful, thank you for the clarity of answers. thank you mr. conley. i will take a few minutes to follow up with questions and then gives him time. what actions if any did the agency take to address concerns about
the report? >> thank you, immediately following the release of the report our agency made the decision to repay a portion of those costs related to -- primarily because there was a number of charges in there that we could have spent an inordinate amount of time debating back and forth whether it was allowed or not a lot. we had to repay immediately. in addition to that, we hired a third-party firm, brought them into the office and looked at the expensive categories and how we categorized expenses to give us advice and help us address any questions related to those expenses highlighted. in addition to that, we also revised our travel and expense policy based on the guidance and in addition to that we provided all the same records through treasury, they did a similar review. why we did not agree with
everything included in the initial report in the categorization, we respect the role and responsibility to review it. we tried to get back to the place where we knew the expenses we had with better guidance moving forward so that we would not make expenses or charge things that may not be allowed under the federal principal. treasury did their additional review and we have since repaid all the dollars that were requested to repay. >> when are they going to return those funds to the treasury? when did they make the decision to return those funds? >> for the initial amount we actually made the decision prior to the release of the report for some of the expenses. we reviewed it and recognized some of those requests staff -- the other fees we repaid in march following the exit interview with treasury, we paid an additional $5100 at that point in time. >> have you received guidance
or training to the agency, received from the treasury on the use of administration funds? have you had correspondence with the treasury? >> we received guidance over time from treasury, at different points. they were in our office five times over a seven-year period with on-site reviews of the administrative expenses that were not an issue at any of those reviews. they have provided additional guidance regarding the federal principles and of those have been what we reviewed and instituted across the board. >> is this primary communication -- on site or any other way they communicate with you? >> it is with staff, with the staff they are administrating through the program. phone calls, conference calls, as they come up they would bring that to the attention on the regular calls where information is communicated to
the group. >> thank you very much. miss james, summary of questions and topics, would you like to take 30 seconds to go back to the same questions and give a summary of what to ask? >> yes sir, they disclose there were $705 in misuse of funds and we did not agree with that. we did after the treasury report reimburse $397. the funds were used concerning activity, lunches, promotional items for homeowners. we did not consider the funds to be of misuse or unnecessary. >> what were some of the hardest hit and lamentation challenges? >> some of the difficulties were if it was relatively new, we had a program. receiving the
dollar amount that required us to basically start from scratch . as i mentioned in my remarks we had to hire staff, most contractors, we knew this was a time-limited program. we try to go out and hire in our peak with 50 contractors that were working on the program. we continue to maintain the staff. it was a statewide program and we have a large stake with 100 different counties and we had to work with partners across the state. we held events as we were rolling out the program, educating partners on what the program would be and figure out a delivery vehicle to get it out an required -- it required a database system for the portal as we refer to it for intake of applications. not only partners but homeowners had access, whether they were computer savvy, they have the ability. if they needed to go and agency there was one available. it was the size and scale of
the program initially, knowing that there was a great need and it was not an area that our agency had expertise in. we are used to providing the affordable housing as afford -- as opposed to -- we were glad to step in that role and it's been a learning experience for us. >> the chair recognizes mr. raskin. >> thank you very kindly, miss romero we have some information indicating that your office found information that led to criminal charges against 415 people and 349 criminal convictions with 247 people sentence -- sentenced to prison. that is more than just taking people out to lunch. what activities were taking place and -- >> overall, 100 of those are
bankers, a good number of them are the co-conspirators that we are talking about tank fraud. 80 people who have gone to prison for scamming homeowners in tarp housing program. there are a number of things related to -- >> the kind of things you identified being the hardest hit program, affects the other programs as well? >> in terms of the tarp housing program we have found people who have tried to stay in scam homeowners. the others are program related. >> so, i'm going to come back to you. there are some suggestions that the treasury is not washing their hands of what goes on at the state level is somewhat indifferent or lackadaisical. is that right or you basically just trust the state authorities to implement this in an
efficient way with integrity? >> thank you for your question, we work with the state and conducted more than 100 in- person reviews. we can speak to what the methodologies they used however, hours are detailed, each expenditure is looked at to make sure they comply -- >> have you follow the recommendations that were made by the inspector general as part of the report? >> there are two reports outstanding, that we are reviewing. we have reply to each line item recommendation that they have provided in writing. >> when you say reply, -- >> we have written a response letter with each line item. >> what we are interested in is terminating the underlying factors that are wasting public resources that should be going to people who are in need.
>> we are appreciative of that and focus on making sure that we follow cost principles along with every other program. >> i guess you detected some frustration in his response to you but i detect a certain type of passive it he about the enterprise that we follow the principles and standby -- one expense that would make sense is to make sure we bring these people in from the 50 states to have a meeting and say here the principles and here is what will get you sent to jail and we are serious about enforcing this because it is the public's money and it's the people who need it. i am curious about what kind of high octane intensity you are bringing and enforcing integrity within this? >> we had several annual meetings to share best practices and review compliance and procedures. anytime there is an instance called into question, we work with the state to augment those
and strengthen the internal controls. with retrospect to the question, several cost principles allow for healthcare platforms, employees to have health and wellness programs and memberships fall under that. >> okay, do you feel confident the treasury has responded positively to your recommendations and implementing them to crack down and get the money to the people who need it? >> let me say i appreciate this but no. this is an absolute misread of the federal cost principles that start with what is necessary as to what they intended and reasonable. and applicable to the program. when it comes to accountability, we want to stop what is going on. let's start with retaining. there is no better way to secure misuse of funds then payment.
and let's put some controls in their. just because the cost principles have a line in there about health and welfare does not mean a gym membership is necessary and what they intended. that is being lost. >> i would like to say the expenditures that are reported are eye-popping and i think any government agency would be amazed to think they can spend money on lavish business parties , taking people on trips, even purchasing lunch for the office on a daily or weekly basis. it doesn't make sense. well, the program arose because there were terrible prizes that through people -- prices that three people out of work. the focus is on that. the big banks got the huge
subsidy but we have a lot of people around the country who are hurting and in crisis. i guess the last point i want to ask -- are you convinced you have the controls in place now to make sure that the money that is within the pipeline will be spent in the right way and do you have the controls within treasury to make sure you are on top of it? >> appreciate your question. we are dedicated to working with this committee and making sure any state and program follows the proper cost principles that waste, fraud or abuse. the intended use of the dollars from congress will be followed. the driver of this platform is to help homeowners in need and we are committed to doing that.
>> i recognize myself for a few questions. you testified that you have expended 8.8 billion of the 9.6 billion, is that correct? >> that is correct. >> so you have $800 million left in the? >> that is a large number but yes. >> that is a large number, it also indicates that the program is virtually shut down. >> it is winding down, we have less than 1% of all dollars of the program left. >> is that number consistent with what they have found? >> that is what it is left for the u.s. treasury but the money has not been spent. when we investigate fraud and when we audit waste, those are
only spent monies. there is $2 billion that is left unspent. >> so there is still $2 billion but there is 800 million left in treasury, i want to get that straight. >> for my purpose, whatever is sitting in treasury is safe and secure. whatever is out there and will be out there in the future which is $2 billion, that is what i have to watch out for. >> what responsibility think the treasury department has for ensuring that this money was spent to achieve the purpose to help families who were homeowners, keep their home? >> there are several measures taken to make sure they are spent -- >> i am asking you -- not a filibuster time. i want to know what responsibility does the department of treasury have when you oversee a program like this to make sure that in this
case, administrative costs don't get out of hand. you have an oversight responsibility. >> certainly, from an administrative cost perspective we work with them to look at the internal controls but more important, we work with them to make sure that dollars are being deployed, if they are having a challenge, we work with each state to make sure that they are -- that the platform is accessible to those who need it. >> where was treasury when you have the people driving mercedes or renting office space in the taj mahal? i really appreciate the work the inspector general does but generally he is coming to call the report is not always a good report. that is unfortunate. but it is indicative that there is a problem with oversight. in treasury has a responsibility and i don't like the idea of us having hearings like this. coming back, to try to fix a
problem that should never have occurred to start with. i just want to know does the treasury takes seriously its oversight responsibility to make sure the people at the state level who are handling federal dollars, are not abusing those dollars? >> we are identifying the items ourselves. then we refer it to the department for their review. we are focused on that. >> tell me what action has been taken, has anyone been fired? has anyone been referred for investigation for criminal issues? >> there are many cases where we require the state to replace the management teams to make sure we work with the fha to make sure proper accountability
was occurring. >> he was forced to resign and pay $20,000 in severance. for crying out loud, is there anything they could've done to get him fired? >> as we reviewed each situation, we offered recommendations. >> let me ask the question to the folks who administer the program from the state level. did treasury divide -- provide guidance on the use of administrative funds? did you attend any kind of training online, in person, facetime, did you get any training? >> in nevada, the way i was brought on i was in constant contact with treasury prior to becoming -- i did read correspondence where treasury and state as well as the housing division had expressed concern.
>> you did not get training, you did not attend training? >> actually, i came in the door with training because i was walking hand-in-hand with treasury because i came in after the problem was started. >> how about you miss james? >> i wouldn't say we received training, we received guidance, the agreement we signed in terms of facetime, it was discussed at summits that training -- i cannot say that. >> what about you? >> i would agree with miss james, -- >> is that a problem, charged with handling hundreds of millions of dollars, is that adequate training? >> no. >> let me ask you this. miss james, you guys had $35 million for demolition and you
repurposed 34 million of that, you spent 1 million and only demolished three houses. since 2014. i hope you didn't spend $1 million because i think for that i could've gone in with a sledgehammer, wheelbarrow and i probably could've done it for less than $1 million. that drives me crazy. prior to this job i run a think tank and i worked in the private sector. a couple engineering companies, i had my staff to research for birmingham and the average cost to completely demolish the house ranging from 5000 to 15,000. at 15,000, that is 67 houses that should've been demolished.
if you want to look at the median, that is 100 houses. you demolish three houses, that is $45,000. what happened to the other $955,000? >> they allocated $1 million for the elimination program. we have only dispersed $38,000 for those properties that were demolished. >> so you have $960,000 in balance. >> that is correct. >> i will not get into the local responsibility. for those houses that went out, if these are homes that were previously owned and mortgages defaulted on, and tax liens on them which is typically the case. birmingham has 16,000, 25,000 or so in jefferson county, that have tax liens on them. is there any responsibility that the local municipalities have or to take ownership of
these homes and dispose of them? >> we have worked closely with the city of birmingham as well is the land bank in terms of trying to get them up and running on the pilot program for the elimination project we were offering. we reached out to cities that we knew were in great need of assistance for the city of mobile in birmingham. the city did submit an application although the application was never completed. we have not heard from the last conversation with the city of birmingham which was on january 29. we had a conversation with their new executive committee. they do have a new mayor and he did reach out to us and we had conversations in january but we have not had a response. >> one of the problems or potential problems that i see in some of these programs,
particularly demolition is the state agency ensures that there is an open bid process for that type of work. so you don't have a single source contract, no brother-in- law contracts, i will start with you and we will go in order. are those -- do you have those insurances in place? would you be actively involved in monitoring the disparate minute -- disbursement of money that there was a fair and open bidding process? >> actually, they released a report where they identified a weakness without policy and procedures. when i came on, it was like restarting the organization all over again. and although we got multiple bids, we did not follow a specific process and that was one of the takeaways that we
took back after we recognized that. taking a look at all the policies and procedures and see how to tighten them up. >> you say three houses demolished in three years, that is not an issue yet. that when you do start spending the money, i highly encourage that. mr. farmer, you have an oversight program in place to make sure contracts are fairly bid. >> we are not operating a blight program, we do not run it in the state. >> miss romero, in your investigation of how they have been handled, have you also had an opportunity to look at not just those programs but other areas where they have been led? do you have any insight into whether or not these are getting adequate oversight? >> in my opening statement i
identified one of the top threat and we are actively conduct during investigations and i will say this, our investigation is criminal investigation run by specializations and they are confidential. i am not at liberty to discuss those but i will say is it is a real issue in this program. >> i want to go back to you, i am being generous to myself in time but i think this is serious. i think we all take this seriously. the thing that disturbs me more than anything else, that there are people out there who lost their home. who were eligible for the program but only 24% of alabama was able to get help from this. that is the third lowest in the country. and it looks like new homeowners
were given preference over existing homeowners. from my perspective, the whole point of the program was to help people who own their homes to be able to stay. >> we don't make it this diction between alabama versus existing homeowners. the program is open to applicants who have suffered a hardship prior to their application of the program. we do have a significantly high withdrawal rate of applications. >> that is because the process is so impossibly complex and cumbersome. some of the things that she has testified about in georgia and other places -- what is the national average? 87% of first new homeowners got approved? >> the down payment assistance program? that is 88% compared to the national average. >> we are in the wind down
stages but my perspective, it was a failure. and two thirds of the people were needed help, couldn't get help, for whatever reason, that is a failure. i want to go back to you, you have this treasury go about monitoring these programs -- i want to get back to the oversight. >> i want to make it clear that everyone identified the case of waste fraud or abuse. we proclaim every dollar that was -- >> you only claimed -- >> i can't speak to the standards that others have reviewed the treasury in our program have reviewed each one and in each case -- we can't just decide how they might sound improper. every time those have been violated the dollars have been reclaimed.
>> none of these things -- i want say none but it took them to bring this before you to identify this, that my guess is you did not provide this, they provided it to you. >> i can't speak to each case, i suspect some were provided but we undertake the program that is risk adjusted in terms of how we pursue our reviews. we do a sample study, i will tell you that last than 1/100 of 1% of all administrative dollars have been deemed improper for the federal cost standard. >> how would you respond to that? >> there has been more than 800 million spent, but again, it is not seeing the forest through the trees. i he can -- i keep hearing federal cost dollars but it
starts with necessary. you have to get back what congress intended for tarp. there might be some statement about -- being allowed but it doesn't -- you have to look at the program. is it necessary? in nevada, they are not letting people into the program, moving to a luxury building, it is not the same. so that seems to be lost. the context of something seems to be lost. getting back to a congress intended. i want to say this, when we apply the program, this is not like a shop going on and island. there is years of reports, this is just bread and butter work for the shop. this is not doing something that somehow is remarkably different than anyone else. this is just really basic get back to what congress intended for spending. >> i am about to gavel myself i
want to say this. one of the reasons this bothers me is this. we sent out $140 billion last year. it will be more than that this year. and when you -- this is possibly not in that realm but it all adds up and every dollar is improperly expended, every dollar wasted, every dollar that is misused is a dollar that we have had to borrow and adds to the -- i guess my concluding remark on this is you have to do better and we will insist that you do better and that the state agencies receive federal money, do better. and i recognize the gentleman from wisconsin. >> you have $2 billion left in
the tarp. overall in your program, is that right? >> those are the unspent funds. >> correct. what was this program originally established in? >> 2010. >> what do you plan on having happen with that money? >> to be clear, the amount that was appropriated for the program, in 2015 with dollars made available, they go out to the states to be spent at the state level to decide how they should help homeowners most. >> i heard this on the news
this morning -- the housing market is booming. in general, housing costs are up everywhere. do you think it would be appropriate to take these funds back and with the chairman said, give them back to the treasury, is it necessary that we help anyone else in the program? >> we at treasury are administering a program that congress deemed necessary. if the state is unable to use the dollars at the end of 2021 they will be returned to treasury. >> what would happen if we grabbed the money now? >> my understanding is there would have to be a change -- >> we would change the law and say we won't send more money to the states. what would happen? >> states are utilizing dollars
they believe are needed if they cannot use them they will return them. >> getting back to what the chairman said, we are broke out of our minds. i know if you send money to state, they will always find a way to spend it. but, the question i have is given that the housing market in this country right now is booming like never before -- i am told. do you feel it is necessary to send any more of these dollars to the state? what would happen if we didn't? what if we give them back to treasury or whatever? >> i think that question might be best for the states, we are solely allowed to administer the program use -- >> you can't make observations on the program you are administering? your mind is blank? >> to be clear, they have found plenty of uses for the dollars. >> out of curiosity, there is a
general lack of urgency in this whole building on spending federal dollars. does anyone on the panel know what percent of the federal budget we are borrowing this year? just out of curiosity? >> my guess, how much of the budget are we borrowing? >> i do not care to guess. >> 22%. that is kind of high. we will give you some questions. >> which state housing finance authorities perform better than others and what is imperative to their success? >> i would say that the states have utilized the dollars was quickly have performed the best like california, florida,
however the performance is probably best gauged over time. and history will decide that after the program is complete. we helped more than 350,000 homeowners in demolition and 24,000 applied to properties. >> i have a question to either one of you. how would you describe the goals of the hardest hit funds in your state? >> i think the goal for north carolina was to try to help as many folks as we could during the economic crisis and recognize there was a real challenge with the high foreclosure rates that were knocking -- not anything like we had seen before. trying to help as many families as we could, help them out in
our case, the primary one was the mortgage payment. where we would make the payment while they were out of work or had reduced work and while they were being retrained for their jobs. it was getting them back on good footing, bringing the payment current and getting them back to where they remain in their home. >> i will ask you, what money is out there -- what would happen if we took back all the money that hasn't been spent right now. we are poor, broke, destitute. >> if you took it back we would have to shut down the program sooner than anticipated. right now we anticipate closing out the 2nd quarter of next year and we would have to close it out at whatever point they would recover the dollars. what it would amount to is fewer households that would benefit from the foreclosure
prevention. we are a growing state, obviously the economy has turned around. >> the housing crisis in north carolina -- would they ever have thought of this program? >> i do not believe they would have. >> i say the same thing, in alabama, if i give you the same question what would you say? >> we definitely enjoy the use of the funds. we have helped several homeowners maintain homeownership. if for some reason they were withdrawn from our state i believe there would be people who would go into foreclosure. there has been a turnaround in the state but removing the funds would cause some families to go into foreclosure. >> how are housing prices in alabama? >> they are doing well in alabama. >> if they were doing well they were in 2010 would congress
have to begin a program? >> i would have to agree with north carolina. >> more than enough time to think the chairman for giving me an extra 20 seconds. >> my pleasure. i now recognize mr. peskin for follow-up. >> i wanted to come back to something i started off with that is bothering me. y in maryland, why are they not part of the program. the hardest hit referring to the states or the people who are the victims of the downturn? >> the decisions on what states were eligible to participate were made under a set of criteria developed by the proper administration. if you would like we would be happy to come in and sit down
with you and run through the criteria and talk about the other programs. >> are you actively reconsidering the criteria. it seems like there is a lot of money that is being wasted in other states. maybe not necessary for parts of maryland were devastated and demolished by the crisis. is that something that is under active consideration with you? >> we do not have authority to change the criteria at this point. the changes are to which dates are eligible -- >> why not? >> the criteria was set for the program and has been closed -- >> as a matter of administrative discretion, it was not built into -- itself. >> i can't answer that specifically. i would be happy to work with my team. >> you know a case called shelby county versus holder? in that case they said they
basically cut the heart out of the voting rights back to the states being treated differently. here is a program that has been set up by the department of treasury for some states get the benefit of it and other states are excluded from it. there are billions of dollars sitting around that have not been programmed. i would you like -- i would like you to reconsider why these other states including my own were roped off from it. >> my understanding is that legislation were wires that the funds had to be committed by october 2010. were the eligibility -- we can go through that with your office and staff if you would like? >> i would love it if treasury presented a legal memorandum saying if you have the authority to include the large parts of america that were included in the program. i would appreciate that.
let me ask you one other question and i want to go to nevada. whose job is it to coordinate and oversee the hardest hit fund within the treasury? >> our office of financial stability which administers the tarp programs including the hardest hit funds, the oversight goes -- they report to me and the deputy assistant secretary and i report to the assistant secretary for financial additions. >> the offices? financial institutions. is there a director? >> assistant secretary. >> who is that person? >> christopher campbell. >> is he the person who is in charge of it on a day-to-day basis? >> the program is administered by the office of financial
stability and the chief financial officer day-to-day working with overseeing the team. >> what i am trying to understand, is this someone's job where they are focused on this as a program or is it part of somebody's portfolio of 10 or 15 different things that they do? >> we have a team focused on this program as well as other programs specifically and there is a team of overseeing the overall program, roughly 30 folks that have overseen data >> okay. the buck stops where -- when something goes wrong. who within treasury is the person that says we need to make changes in nevada or we need to revolutionize what's
going on in alabama because the money is not getting to the people. whose job is that? >> that job would fall to a team and program director for that. that would be elevated to make you aware -- we would recommend a change where a program was put into place in april this year. to make sure those dollars are spent properly. >> let me come to nevada. i understand your part of the new regime, not part of the people were there was waste and fraud. what do you attribute the problem that replaced the program before you got there? >> thank you for the opportunity, there were multiple issues that i identified right off. the first thing was that there was no systems in place. that would create a strong foundation to administer such a program. it was massive. the second thing was --
resume, however it came from the banking industry and that is where some of the misunderstanding of how to interpret certain guidelines came in. they were coming from private sector her. -- private sector. >> you are talking about the gym memberships and free will spending? >> for example, i take lunches. for one of ours, there was a staff member who is pregnant and we bought a baby gift. while that might be appropriate in private practice, it is not appropriate -- >> in government everyone kicks in their $10. but you are saying they were writing checks? >> i think there was a complete misunderstanding and also, as demonstrated here today -- there is certainly a difference
of interpretation between tarp and treasury. it would be most helpful to the state if we had some uniformity there. even coming on it was difficult, we hired a cpa firm as well. and we get this large circular and it is left to interpret. >> i am going to give you the last word on this, i would like to hear what you think we should do from this point on. >> there needs to be greater accountability and control. i went up and met with the secretary and said you have to recover this money. if we don't recover it, that is up to you and that was the
general counsel. i think they need to sit down and reread the federal cost principles and they need to look at the first page. it goes beyond -- we can talk about cost all you want but it comes down to appropriation. you cannot send money until congress authorizes it. that is what it comes down to. that is why the provision can't be left out. they need to go back and read the memorandum by their own general counsel and take a look at all this. i have not seen in the workpapers the determination about what is necessary. the idea that in california, hundreds of thousands of people can get help without this kind of expense, without lunch, every week. it is not necessary. if you go back and look, the secretary said much to the chagrin of a number of congressmen, you can't use this money for legal aid, -- we know
a lot of people get in to this program with legal aid but you can't charge it. if you can't charge that kind of reasonably related -- because it's not necessary under appropriations, how can you take those to the zoo? i understand that treasury is saying there is a provision in these cost principles that say you have to read page 1. you have to read page 1. which is necessary. federal cost principles cannot override appropriations law. that is what it comes down to. what i think everyone should do , all the state agencies and everyone involved, let's get back to what did congress intend in the tarp law and what is this program for? it doesn't matter if something is related or reasonably related, that is not the standard. do you have to spend the money? what i also suggest they do is talk to each other. and say california is not spending on this, arizona,
other states not spending anything and they talk to each other and they say are using this for bonuses? that is where accountability comes in, all it is about is getting back to what congress authorized. and if they do that, if they talk to each other and work something out, it will be back on track because there has to be controls. it shouldn't be left up to each state. >> my concluding remarks on that is first of all, you have to take seriously what congress intend. as true with every federal agency. if treasury doesn't take it seriously, then the state agencies may or may not take it seriously. it is likely they won't know what this criteria is. that is my point about the lack of training. i think when the treasury or any federal agency overseas money that is sent to the state, there has to be a clear
understanding of the parameters to where it it is spent. some of the money as was pointed out, spent on things that anyone with any common sense would've known that if it wasn't -- it is in the gray area. i think they have a responsibility to monitor that. that is an oversight responsibility you have. and what i would like you to do is when you get back to treasury i would like you to submit changes to the guidelines . i think on our end and members of congress, we have to me -- be more diligent. that our instructions are clear. that when we are hemorrhaging funds like we are, we can afford to waste another dollar. with that, i would say there seems to be a lack of
seriousness and commitment to help the hardest hit homeowners. to keep their homes and prevent the numbers -- i don't know what we can do to go back and fix what has been done but i guarantee will pay attention to what happens, going forward and i think the treasury needs to inform everybody of that. and the inspector general, they have done a good job on that and i think they would be happy to let you know when those things are going outside the lines. and with that, i think for the witnesses to appear before us today in the record will remain open. the questions for the record, there is no further business, the subcommittee stands adjourned.
and testimony wednesday on the hillside of the capital, secretary pompeo was asked by -- at out a tweet referring to a criminal deep state. >> vicki mr. chair, thank you for your civilian service and i appreciate you being here today and agreed to testify. i would like to ask you about the come -- the conflict in yemen. i would like to ask you a few questions about official statements that the president made this morning on his twitter account. you said there is a criminal deep state, as you know, the president said he will also investigate the state department , do you think there is a criminal deep state at the state department? >> i haven't seen the comments from the president, i don't think there is a deep state at the state department.
>> you have formally served as cia director, do you believe your colleagues are part of that deep state? >> this term has been thrown around, i will say this the employees that work for me, nearly uniformly were aimed at achieving the president subject. >> that is your experience that the fbi and department of justice -- >> yes. there are always exceptions to every rule, i never had an organization who didn't have that actors, no government organization is exempt from having malfeasance. >> in general you are confident that the members of those agencies are honoring their oath united states constitution. >> in general, yes. >> it was secretary pompeo testifying wednesday about the 2019 budget report. he appears before the senate foreign relations committee live at 10 am eastern on c-span three.
thursday morning, we are in madison wisconsin the next up on the c-span 50 capitals tour. the wisconsin lieutenant governor will be our guest starting at 8:30 am eastern. todd meacham is a pulitzer prize winning biographer, his new book is called the battle for better angels. in the opening pages of the book, you write this is a portrait of the power of which politics appear more prevalent and a reminder that -- is not new and a reassurance that they are survivable. are we in a new hour of public despaired of this? >> it sure feels that way. if you are voting for president donald trump in 2016, you are clearly of this conviction that the country was head