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S. HRG. 110–868

CLARK COUNTY, NV: GROUND ZERO OF THE
HOUSING AND FINANCIAL CRISES

FIELD HEARING
BEFORE THE

CONGRESSIONAL OVERSIGHT PANEL
ONE HUNDRED TENTH CONGRESS
SECOND SESSION

HEARING HELD IN LAS VEGAS, NEVADA, DECEMBER 16, 2008

Printed for the use of the
Congressional Oversight Panel

(

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Available on the Internet:
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CLARK COUNTY, NV: GROUND ZERO OF THE HOUSING AND FINANCIAL CRISES

S. HRG. 110–868

CLARK COUNTY, NV: GROUND ZERO OF THE
HOUSING AND FINANCIAL CRISES

FIELD HEARING
BEFORE THE

CONGRESSIONAL OVERSIGHT PANEL
ONE HUNDRED TENTH CONGRESS
SECOND SESSION

HEARING HELD IN LAS VEGAS, NEVADA, DECEMBER 16, 2008

Printed for the use of the
Congressional Oversight Panel

(

Available on the Internet:
http://www.gpoaccess.gov/congress/house/administration/index.html
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON

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51–705

:

2009

For sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800
Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

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CONGRESSIONAL OVERSIGHT PANEL
PANEL MEMBERS
ELIZABETH WARREN, Chair
REP. JEB HENSARLING
RICHARD H. NEIMAN

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DAMON SILVERS

(II)

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CONTENTS
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Opening Statement of Elizabeth Warren, Chair, Congressional Oversight
Panel .....................................................................................................................
Opening Statement of Damon Silvers, Member, Congressional Oversight
Panel .....................................................................................................................
Opening Statement of Richard Neiman, Member, Congressional Oversight
Panel .....................................................................................................................
Statement of Congresswoman Shelley Berkley .....................................................
Statement of Congresswoman-Elect Dina Titus ...................................................
Statement of George Burns, Commissioner, Nevada Financial Institutions
Division .................................................................................................................
Statement of Bill Uffelman, President & CEO, Nevada Bankers Association ...
Statement of Dr. Keith Schwer, Director, Center for Business and Economic
Research, UNLV ...................................................................................................
Statement of Gail Burks, President & CEO, Nevada Fair Housing Center .......
Statement of Danny Thompson, Executive Secretary-Treasurer, Nevada State
AFL-CIO ...............................................................................................................
Statement of Julie Murray, CEO, Three Square Food Bank ...............................
Statement of Senator Harry Reid, U.S. Senate Majority Leader ........................
Statement of Alfred Estrada, Resident of Clark County, NV ..............................

(III)

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CLARK COUNTY, NV:
GROUND ZERO OF THE HOUSING AND
FINANCIAL CRISES
TUESDAY, DECEMBER 16, 2008

U.S. CONGRESS,
CONGRESSIONAL OVERSIGHT PANEL,
Las Vegas, NV
The Panel met, pursuant to notice, at 10 a.m. at the Thomas and
Mack Moot Court, Boyd School of Law, University of Nevada-Las
Vegas, 4505 S. Maryland Parkway, Las Vegas, Nevada, Elizabeth
Warren presiding.
Attendance: Elizabeth Warren [presiding], Damon Silvers, Richard Neiman.

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OPENING STATEMENT OF ELIZABETH WARREN, CHAIR,
CONGRESSIONAL OVERSIGHT PANEL

The CHAIR. The hearing of the Congressional Oversight Panel
will now come to order. This is the first field hearing of the Congressional Oversight Panel of the Emergency Economic Stabilization Act of 2008. I want to begin by thanking our hosts, The Boyd
School of Law of the University of Nevada Las Vegas where I count
many of my close friends. I want particularly to thank President
David Ashley and Dean John White. I think both of them are with
us. Would you mind standing so we can say thank you.
Universities and law schools in particular have a unique role to
play in civic life. And I think this is a very important example of
that. And so I am grateful, the entire panel is grateful, for the willingness of those at UNLV to come in on very short notice and work
very hard so that we can put this hearing together. I also want to
add that we received generous assistance from the offices of Senator Harry Reid and Congresswoman Shelley Berkley. We’re delighted that Senator Reid and Congresswoman Berkley, as well as
Congresswoman-elect Diana Titus will be joining us. Sorry. I’m
sorry. I’m sorry. Congresswomen-elect Dina Titus will be joining us
during the course of today’s hearing.
Actually, I’m particularly embarrassed, because I want to be able
to say publicly how tickled I am to have the opportunity to meet
Congresswoman Titus because she is responsible for doing something that I didn’t think anyone could do. And that was to manage
to get through when she was still a state legislator, a ban on universal defaults in consumer contracts. And so my particular kudos
in that case. It’s a remarkable achievement, given how much the
(1)

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2
odds were stacked against it. So I’m particularly looking forward
to this opportunity.
Chairwoman WARREN. In September 2008, the Secretary of the
Treasury, Henry Paulson, issued a strong warning to Congress that
without massive government intervention, the U.S. financial system faced the possibility of imminent collapse. In response, on October 3, 2008, Congress passed the Emergency Economic Stabilization Act of 2008 authorizing the Treasury Department to commit
up to 250 billion dollars in taxpayer money, to be followed by another one billion dollars and another 350 billion, if warranted.
The statute also created this oversight panel at a considerably
smaller cost. The Act’s purposes are, to quote, ‘‘restore liquidity and
stability to the financial system of the United States in a manner
that, A, protects home values, college funds, retirement accounts,
and life savings; B, preserves home ownership and promotes jobs
and economic growth; C, promotes overall returns to taxpayers of
the United States; and D, provides public accountability’’.
Congress created the Office of Financial Stability within Treasury to implement the Troubled Assets Relief Program, cleverly
known as TARP. At the same time, Congress also created the Congressional Oversight Panel with the far better acronym, COP, to review the current state of financial markets and the regulatory system. COP is empowered to hold hearings, to review official data,
and to write reports on actions taken by treasury and financial institutions and their effect on the economy.
Through regular reports, COP must oversee Treasury’s actions,
assess the impact of spending to stabilize the economy, evaluate
market transparency, ensure effective foreclosure mitigation efforts, and guarantee the Treasury’s actions are in the best interest
of the American people.
In addition, Congress has instructed COP to produce a special report on regulatory reform that will analyze, quote, ‘‘The current
state of the regulatory system and its effectiveness at overseeing
the participants in the financial system and protecting consumers’’.
We are here today to investigate, to analyze, and to review the
expenditure of taxpayer funds. But most importantly, we are here
to ask the questions that we believe all Americans have a right to
ask. Who got the money? What have they done with it? How has
it helped the country? And how has it helped every day Americans?
As part of that ongoing effort, we reach out to you. We can read
the statistics and we can analyze the data, but we want more. We
come to Nevada to learn from you about the current economic crisis
and the impact, if any, of the nearly 350 billion dollars that has
been committed to the financial institutions and AIG insurance
company so far.
One quick word about this panel. We have been in existence as
a group for less than three weeks. And instead of spending time
to set up our offices, hire an extensive staff, and develop a timeline
and a strategic plan, we jumped directly into the task at hand. We
have met with representatives of the Treasury Department, the
Federal Reserve Bank, and the GAO. We have read documents and
requested information. And we now have two things: We have our
first report and we have a website. The two are together.

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The first report is posted on our website. It’s COP,
cop.senate.gov. That’s cop.senate.gov. And you can go there and
download the report, cut and paste it. Do what you want to do, if
you would like to read it.
But most importantly, what we also hope to do with that website
is not just have us talk to you. We hope that you will use it as an
opportunity to talk to us. And that is, we’re setting up within the
website, it’s still in its beginning phases, but an opportunity for you
to tell us what’s happening to you in this economy, how it is that
you’re experiencing the current economic crisis, and to talk with us
about the questions we are asking of the Treasury Department.
Further to that, we have invited witnesses today and their testimony will be posted on the website so that people all around the
country can read it. But we recognize this is an opportunity for a
public hearing.
And so we will have out in the lobby, starting, I believe now, a
video camera. We have someone out there who will give you the
same five minutes the witnesses get here to tell your story. To tell
whatever story you want to tell about this economy, about the Congressional Oversight Panel, and about the actions of the Treasury
so far. We hope to be able to use some of those. We will look at
them when we’re not here. We recognize the constraints of time.
And we also hope to be able to use them to feature some of them
on our website so that others have the opportunity to hear from
people in Nevada about what is going on in Nevada. So we hope
you will take advantage of that, as many of you as possibly can.
We arranged this first meeting in great haste, imposing on our
skeletal staff and, more often, on the kindness of our friends to put
together this event in less than a week. We are especially grateful
to everyone who contributed to this effort. But I mention the tight
deadlines and our quick response to emphasize a different point.
We take this task very seriously. Our country is in peril. Taxpayer
dollars are flowing into banks, but there is little evidence what effect these hundreds of billions of dollars are having on the very obvious troubles facing us. Mortgage foreclosures, constricted small
business lending, and rising unemployment.
We are here to learn from you and to take what we learn back
to Washington. We appreciate your coming here in person. And for
those of you who join us online, for telling us your stories. And I
hope you will join us again on our website.
[The prepared statement of Ms. Warren follows:]

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8
The CHAIR. With that, I will be quiet and listen to you.
And next, we will have our opening statement from Damon Silvers, one of our panelists. Damon.

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OPENING STATEMENT OF DAMON SILVERS, MEMBER,
CONGRESSIONAL OVERSIGHT PANEL

Mr. SILVERS. Good morning. I am very pleased to be here in Nevada for this first hearing of the Congressional Oversight Panel. I
want to express my appreciation to Senator Harry Reid and Speaker Nancy Pelosi for the opportunity to serve on the panel and to
the congressional leadership and their staff, and the good people
here at UNLV, and to Congresswoman Berkley and Congresswoman-elect Titus for all their help under the extreme time pressures that we asked people to act under as Elizabeth indicated.
I also want to express my appreciation to our chair, Professor
Elizabeth Warren, for her leadership in getting our panel off to
such a fast start. Professor Warren has worked tirelessly over the
past three weeks, giving voice to the concerns of the American people.
It is also an honor to serve on the panel with my two distinguished fellow panelists; Congressman Jeb Hensarling, who was
unable to be here with us today, and New York State Banking Superintendent, Richard Neiman.
In the three week since the panel’s first meeting, we have had
the chance to meet with many dedicated public servants at every
level. In the Treasury Department, the Government Accountability
Office, the GAO, and other government agencies who are working
as hard as they can to try and stabilize our economy. Whatever the
panel’s concerns are and may become regarding policy, strategy or
execution, they should not be read in any way as to diminish the
great respect and gratitude that we owe for those folks, for the
public service that they are rendering in their efforts to serve our
country in this economic crisis.
Since early October, the Treasury Department has provided
banks, private companies, with 165 billion dollars in public money,
taxpayer money, in exchange for preferred stock. Plus, an additional 60 billion dollars to two companies; Citigroup and AIG. And
they have made commitments to allocate more than 100 billion dollars more to banks and to buy asset backed securities. In total,
these very large numbers amount to more than $1000 for every single American.
Each of us has to be concerned about the specifics of these actions taken under the Emergency Economic Stabilization Act of
2008. Actions which every person I know who is not actually involved in the policy making process refers to as the financial bailout.
When Congress created this panel, Congress asked that it report
every 30 days on our oversight work. Last week, we issued our first
report. The report was, in its essence, a set of ten simple questions,
together with some explanations as to why we felt it was necessary
to ask each question. These basic questions cannot be answered
through a dialogue among Washington insiders. They must be the
subject of a national conversation. A conversation that starts off
with what is actually happening in our communities. Communities

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like yours. Can business people borrow money to run their firms?
Are foreclosures getting better or worse? Are employers hiring or
laying off workers? Are local financial institutions being fairly
treated by our federal government?
The opportunity to get answers to these questions is why I’m so
pleased to be here in Nevada today. Because we need to know how
the Wall Street bailout looks from here. Has it helped? Is there less
fear here in Nevada than there was in September and October? Is
the bailout being fairly managed? Is the Treasury Department’s
plan thoughtful in relation to what has gone on in the economy
here? Do Nevadans, whose tax dollars have been used to fund the
bailout, feel that you have enough information about how your
money is being used? Do you feel that there has been accountability for the financial sector?
Now, some involved in managing the bailout have said that the
measure of success is not in what has happened but in what has
not happened, that we have averted, we have prevented a complete
halt to all financial activity. When Hank Paulson asked Congress
to act in September, and then when he chose together with British
Prime Minister Gordon Brown to put money directly into the banks
in October, he certainly had good reason to believe that we faced
the risk of systemic breakdown. But it is difficult to assess this
kind of argument. Because while it is true that our economy is in
grave trouble, now, today, it could always be worse. And it can be
hard to know whether by our actions are actually making it better.
So our panel needs to look deeply in the coming weeks into the
extent to which we have stabilized our financial markets and
whether we could have done a better job. But when we do so, we
must remember that the financial markets do not exist to serve
themselves. Markets exist to move resources to productive activities so that all of us are better off. If the financial markets are not
achieving that end, if the innovative entrepreneur, the builder, the
business person, large and small, cannot obtain financing for viable
businesses, then we have not achieved our purposes in seeking to
stabilize the financial markets.
If a downward spiral in housing prices driven by foreclosures,
falling incomes, and rising joblessness keeps our major financial institutions on the brink of collapse, we have not repaired the real
economy and we have not really even stabilized our financial markets.
As we make these inquiries we need to remember that our economic problems are not ultimately about finance. This recession
and its associated financial upheavals are driven by structural
problems in our economy. And in particular, a long futile effort to
maintain high consumer spending while in reality wages stagnate
and our productive capacity shrinks. Some of us in the East don’t
understand about Nevada, that for decades there have been good
jobs here. The hotels here in Las Vegas employ tens of thousands
of workers who earn a living wage, have health insurance and a
pension, doing jobs that in other parts of the country often pay only
poverty wages.
Labor and management in Las Vegas built a service sector middle class in the ’80s and ’90s, which is now under pressure from
a national economic model that is not working. The truth is, if

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America is in economic trouble, if the American middle class is
under pressure, the middle class in Las Vegas will feel the pain.
In a very real way our economic fate as Americans is woven together.
But our national strategy in recent years seems to have been to
look to the financial sector to borrowing, to leverage, to generate
wealth. That strategy has failed. And the vain pursuit of it has
made our economic situation far worse than it might have been.
Now, we run the risk as a nation of making the mistake of thinking that if we only cut our incomes we can get through this crisis,
that the best employers are those that pay the least. The best
bankers are those that lend the least. The truth is that these deflationary strategies will only make things worse, much worse.
So the questions we as a nation should ask about the 225 billion
dollars that has been handed out are: Are we really stabilizing the
financial system and improving our economy? And second, are we
laying the foundation for a financial system that can really work
to move capital toward productive uses and appropriately manage
risk?
In the pursuit of answers to these questions, I hope our panel
will visit every corner of our country. In the weeks and months to
come, we need to hear what the public, business people and consumers, workers and home owners have to say about how the
public’s money is being used to stabilize our economy.
Thank you.
[The prepared statement of Mr. Silvers follows:]

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The CHAIR. Thank you, Mr. Silvers.
Mr. Neiman.

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OPENING STATEMENT OF RICHARD NEIMAN, MEMBER,
CONGRESSIONAL OVERSIGHT PANEL

Mr. NEIMAN. Good morning. And thank you all for appearing
here today. Especially those who are here to testify, those who are
here to learn. And particularly, those who are here because they
care. I also want to especially thank the media here. And there are
a number of television and print. Because that way, all citizens and
members of the public across the state will have an opportunity to
participate in today’s event.
I also think it’s especially appropriate that we are starting our
first meeting here in Nevada, the epicenter of the foreclosure crisis.
I don’t have to tell anyone in this room that Nevada ranks first in
the nation for foreclosure filings, up more than 100 percent since
last year. The turmoil in the financial markets has literally hit
home here.
Now, we all come from diverse backgrounds as members of this
panel. We’ve been asked to serve as citizens by Congress on this
unique experience. I come from the state of New York. We are not
nearly as severely impacted as a state as you are. However, pockets
of New York are being disproportionately impacted. Whole areas of
communities like Brooklyn and Queens, which account for over 30
percent of all foreclosures, are being devastated by a series of foreclosures impacting concentrated areas in those communities. Over
20 percent of foreclosures are on Long Island are being significantly impacted where there is an extreme shortage of affordable
housing.
So I can relate to the challenges you are facing here in Nevada.
It may seem overwhelming when entire communities risk being destabilized. Unfreezing credit markets is vital. But lasting stability
also must address the needs of families losing their most valuable
asset, their home.
So a lot of these efforts—foreclosures, are a local issue. They impact states, they impact communities, and they impact families.
And much must be done at the state level. In New York, Governor
Paterson and I chair an inter-agency task force for over a year and
a half that we refer to as HALT, Halt Abusive Lending Transactions. We are addressing foreclosures and the impact of the housing crisis across a continuum of progressive approaches to stem the
crisis. From direct outreach to borrowers, connecting borrowers and
lenders to sit down and modify mortgages, to new legislation at the
state level, to significant grants to home counseling agencies and
legal aid groups, and increased enforcement against unscrupulous
mortgage originators and other participants in the mortgage crisis.
However, only so much can be done at the state level. And that’s
why there is such an important need for action at the federal level.
And that was the impetuous for the Emergency Economic Stabilization Act which gave rise to this important panel. The panel includes a diverse group, as you can see, among us, as members, with
diverse backgrounds from a union, an academic, and consumer interests. As well as myself from an industry at a regulatory agency.
But even more importantly, we are out to hear from you as stake-

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18
holders among an even more diverse a group of citizens. From industry, from consumer advocates, from state and local officials, and
from academia.
So we’re here to hear from you. This is your day. And I’m going
to turn it back over to Elizabeth so we can get started. And I look
forward to an extremely productive morning. And thank you for
giving me the opportunity to give those remarks.
The CHAIR. Thank you, Mr. Neiman. We would like to start with
statements from Congresswoman Berkley and Congresswomanelect Titus. If you can join us. Come to the table.
Congresswoman Berkley, thank you very much for being with us.
The chair recognizes you.

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STATEMENT OF CONGRESSWOMAN SHELLEY BERKLEY

Congresswoman BERKLEY. Thank you very much. I want to particularly thank you, Chairwoman Warren. And thank all of the
panel for traveling to Las Vegas to see firsthand how the nation’s
economic crisis is affecting our community.
Mr. Silvers, I’m going to help you understand the State of Nevada.
Mr. SILVERS. I tried.
Congresswoman BERKLEY. You tried. Here in Las Vegas, we have
become accustomed to leading the nation in many different categories. And that’s usually a very good thing. Population growth,
economic strength, number of satisfied visitors that come to our
community. Las Vegas has been a boom town. Just to give you
some idea of what it has been like growing up in Las Vegas over
the last several years, many, many decades now.
Unfortunately, the problems caused across the nation by the current economic downturn have been magnified in Nevada. We have
had the highest foreclosure rate in the country. For most of the last
two years, our unemployment rate was at 7.6 percent. In October,
I suspect it’s substantially more than that. And Danny Thompson
head of the AFL–CIO will speak to the fact that thousands and
thousands of his members are out of work and idle.
Our unemployment rate, unfortunately, continues to climb. And
the number of people flying into Las Vegas to enjoy our wholesome
family entertainment has decreased for the last 12 straight
months. The airlines have cut 20 percent of their flights to the Las
Vegas valley, which has had devastating consequences for us. Our
community is suffering. My constituents are suffering. And there’s
not much good news on the horizon.
When Secretary Paulson came to Congress requesting unprecedented power and funding to rescue the financial industry and restore the flow of credit, I was extremely skeptical that this strategy
would work or that enough conditions were attached to ensure accountability and transparency. I initially voted against the bailout.
And I’ll tell you why.
There were three reasons. One was, I didn’t think there was
enough control over executive compensation. There was some language in there, wasn’t strong enough. And if you read in the Las
Vegas paper yesterday, you would have seen that there’s a report
saying that executive compensation continues as usual because of
a loophole that was included at the last minute in the bailout bill.

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The second one was, with all due respect, please know how grateful I am that you are here, I thought the congressional oversight
committee was a window dressing, to say the very least. I mean,
this is an after the fact thing. The money is gone and there was
no oversight. Secretary Paulson gave the money where he wanted
to give it. There was nobody, certainly nobody in Congress that had
the authority. We gave the authority away, and the money is gone.
The authority never existed and—there’s no accountability.
The third was the judicial review section, which I thought was,
in all due respect, a joke. The only way that Mr. Paulson can be
held accountable for his actions through judicial review is not if he
violated the intent of Congress, which I believe he has, not if he’s
violated the statute, but if he violated the constitution. So as an
attorney, I was thinking, how does one violate the constitution? It
seems to me, unless Mr. Paulson is accused of committing treason
or owned slaves or keeps women from voting in this country, there
is precious little we can do when it comes to judicial review of his
decisions.
I reluctantly supported the final legislation only after being assured that the need was great and the oversight would be vigorous.
This is what was said to Congress. And I am quoting almost verbatim. The purpose of this was to buy up toxic paper, unclog the
pipes of the financial industry, and get money and credit into the
pipeline, get the credit and the money flowing again.
In the two months since I cast that vote, Secretary Paulson has
used almost 350 billion dollars to prop up Wall Street banks and
investment companies, but little has been done to help the people
of Las Vegas and other communities across the country who have
already lost their homes or who will fall victim to foreclosure soon.
As an added insult, the government accounting office reported recently that the Treasury Department has no way of knowing
whether the billions already allocated are being used merely to pad
the financial industries’ bottom line rather than increase lending
and limit foreclosures—and limiting foreclosures was Congress’ intent.
The bottom line is there is no discernible impact from TARP
money. TARP was supposed to set the floor. It has not set the floor,
and that has not created the necessary stability to give the banks
the confidence to lend money.
Now, I keep hearing from people that this is a crisis in confidence. Well, perhaps that is true.
However, it is very difficult to tell someone that has lost their job
and their home in the same week that this is a crisis in confidence.
It is a little more substantial than that.
And believe me, I understand what it’s like to want that American dream of home ownership. When my family moved to Las
Vegas, everything we had was in a U–Haul hooked up to the bumper. Now, when we finally bought our first home in Vegas, it gave
us a feeling of stability and power. We had roots in this community. We were—we were somebody. We were homeowners. We belonged here. We made Las Vegas our home. I understand how my
constituents feel about that. It gives you a piece of the rock. And
I cannot even begin to imagine the devastation it would have

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caused my family if we would have lost our very small but our very
first home to foreclosure.
It’s more than that. It’s more than people that have lost their
homes. And let me give you three very quick vignettes. I met with
my car dealers yesterday. They have got millions of dollars of inventory sitting on their lots. They have willing buyers coming into
their lots, and they can’t get them financing because the pipes are
still clogged. So people that are creditworthy still can’t get the credit that they need in order to do the second biggest purchase of their
lives for most people, and that’s a car. That’s killing the car dealers. Killing them.
My step-daughter—I’m very proud to say—has just become a doctor and started practicing here in Las Vegas in September. She has
signed a multiyear contract. She has an income coming in, and a
rather substantial one. She could not get a loan for a house. Because why? Because there’s no liquidity. The banks are not lending
money, even to creditworthy people.
And finally, another quick example, one of the most successful
business people in the Las Vegas area, if not the United States of
America, has the second largest timeshare company on the planet,
Golden Credit, is having all of his loans called in for absolutely no
reason. Nothing has changed other than that lack of confidence and
the banks wanting to guarantee their money. And it’s creating
havoc, I can assure you.
I appreciate the efforts of this Congressional Oversight Panel to
highlight exactly what the economic crisis has meant to families of
southern Nevada, whether the TARP is actually helping. I also am
delighted that you’re going to take a tour of Las Vegas. You’ll be
in my congressional district. You’re going to see the devastation of
home after home after home in foreclosure. What it’s doing to
neighborhoods, and what it is doing to property values. The witnesses you will hear from today bring a variety of important perspectives to this hearing. But each are going to deliver the same
message. Our community is hurting. We could use some help.
Now, let me say this. And I have a couple of other things I want
to say. I remain optimistic. Our nation has survived far worse than
this and we’ve come out stronger. And while it is not under your
jurisdiction, I believe that infrastructure stimulus package that
we’re going to pass in January is going to make a tremendous difference. Because we have a crumbling infrastructure in this country. And if we are going to remain a super power with a future,
we’re going to need to shore up that.
Number two, energy legislation. We need to get away from foreign oil and start tapping into renewable energy sources. It’s an
economic imperative, an environmental imperative, and I believe a
national security imperative too. And it’s good for the future of this
nation.
Also, the way we do health care in this country is backwards. We
spend billions of dollars in end of life care rather than pouring
those billions into early detection and prevention of disease, research, and development. This crisis may be the catalyst for making those necessary changes for the 21st century. But before we do
any of that, we have to solve our financial crisis.

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Let me give you four things that I have found would help a lot.
My homeowners still have no one to renegotiate their loans with.
And at the end of this month, a lot of—millions of loans across the
country are going to be reset higher up, people are going to be losing their homes. There is nobody to talk to. There is no telephone
number. There is nobody on the other end of the line that can say,
alright. You can afford to stay in the house for $1100 a month,
your current mortgage payment. You’re reset to go up to $1600 a
month. Let’s renegotiate this loan.
Who are these people going to talk to? There is nobody yet. And
we need to provide that for them. I’m sure the blanks would rather
have somebody paying a mortgage, even at a lower amount than
nobody in the house. It’s certainly good for the municipalities and
the states as well.
I believe there is no consistency between the Treasury and congressional intent and the FDIC in what they are doing. The regulators are overcompensating. And that’s why creditworthy people
like my stepdaughter can’t get a loan. They’re putting—really putting the thumb down on the banks. We’re giving them the TARP
money. And there are so many rules and regulations to overcompensate for what they did or didn’t do that created this crisis, that
they’re not freeing up the liquidity that we need.
Number three, short selling. I mean, it’s killing us. And suspend
mark-to-market. And there hasn’t been a businessman that I’ve
spoken to that hasn’t begged for those things and the banks as
well. Because if it’s at the current—if it’s valued at 500,000 but it’s
only worth 300,000, then the banks have to write off the 500,000.
They’re using the TARP money for that instead of putting it in the
pipeline so that my consumers can get that credit.
I thank you very much for your kind attention. I know I went
a little long. I’ve got much to say, and I need to take care of my
constituents because they depend on me.
The CHAIR. Thank you. Thank you very much, Congresswoman.
I applaud your enthusiasm and thank you for hosting us here. We
really do appreciate the help you gave us so that we could be
here——
Congresswoman BERKLEY. Well, you’re here at my alma mater,
and I’m very happy to have you here.
The CHAIR. Thank you.
Congresswoman-elect Titus, it’s a pleasure to welcome you.
Please, give us your statement.

hsrobinson on DSK69SOYB1PROD with HEARING

STATEMENT OF CONGRESSWOMAN-ELECT DINA TITUS

Congresswoman-Elect TITUS. Well, thank you very much, Madam
Chair. That’s always a hard act to follow, I can tell you. Madam
Chair, members of the committee, for the record, I’m Dana Titus.
I’m the newly-elected member of Congress from Nevada’s third congressional district and a former minority leader of the state Senate
since ’92. And I very much appreciate, Professor Warren, your comments about some of my work in the legislature.
I’m pleased to join my colleagues in welcoming you to Las Vegas.
And I’m encouraged by your presence here to gather information on
our very serious housing and mortgage foreclosure problem. As you
know, as you’ve said, and as you will hear repeatedly, Las Vegas

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has the worst foreclosure rate in the country. And the third congressional district is the worst of the worst. The third district includes the suburbs and the surrounding communities where the
greatest growth has occurred in the recent decade. In the numerous developments that ring this valley that have just sprouted up
like mushrooms over the past ten years, speculation has run rampant. And we see the result of that in the high foreclosure rate.
Companies and individuals scooped up lots of houses with mortgages that were too good to be true, anticipating that they could
sell the houses off at a profit before they had to pay the piper. Unfortunately, it didn’t work that way. There were other individuals
who, as Congresswoman Berkley mentioned, who were just trying
to realize the American dream at a time when the economic prospects looked really good. Never did they dream that within a few
months or a year or so they would be without a job. Nor did many
people understand the complex financial instruments, and terms,
and ARMS, et cetera that were part of the lease—or the mortgage
that they signed. Who can read and understand that—those terms
in the fine print when many of those haven’t even been recognized
or defined in the financial world and certainly have not even been
regulated?
As a result, it’s been estimated that maybe as many as 1 in 40
houses in this district is in some form of foreclosure. Now, you take
that problem and you couple it with the highest unemployment
rate that Nevada has had in 25 years. In addition to that, we have
a national economy that has hurt our gaming industry, because
there is no disposable income for people to use for taking a holiday.
In addition to that, the revenues at the state and local level are
down because property tax is down, sales tax is down, real estate
transfer tax is down. And the result is those governments have had
to cut services that would help the people who are now in trouble.
So you overlay that with this foreclosure disaster and southern Nevada is on the brink of an economic crisis.
We used to pride ourselves on being recession proof, but that is
no longer the case. People used to feel like if they had two nickels
to rub together, they would go to Las Vegas, gamble it, and perhaps change their fortune. Not so much anymore. Now, we are in
trouble and we need your help.
I understand. I wasn’t there. But I have tried to study that the
Emergency Economic Stabilization Act that was passed by Congress with the best of intentions to encourage the banks to free up
credit, to invest money back into the economy, and to allow the
Treasury to buy those troubled assets. As yet, however, we have
seen very little help on our main street level here in District Three.
And now the message has changed. As I understand it, Secretary
Paulson now says he is not going to buy up mortgage related securities. One day it’s one thing, the next day it’s the next. I believe
that until the Treasury Department uses it’s authority to more aggressively and directly address the housing problem, hard working
families in CD3 will continue to face the problem of foreclosure. We
need for banks to use the money that they have to refinance mortgages, to restructure loans in meaningful ways that don’t foster reforeclosures within a short time, because we have seen that happening. To get involved before delinquencies in payments occur, so

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23
you get on the front end of things and not the back end, and to pursue rent to buy options as certain possibilities. And we need to
focus first on those owner occupied homes. Those are the people
who are there who need our help.
And as you have said, Madam Chair, and as the recent GAO report pointed out, we need more transparency. The taxpayer needs
to know who is getting the money, how much are they getting,
where is it going, what are the state and local governments really
doing with their neighborhood stabilization funds, and why is it
taking so long?
In short, we cannot allow financial institutions to ignore the intent of the law to aid in the reduction of foreclosures, because I believe that addressing the housing situation and creating jobs are
the keys to turning our economy around. That is certainly true in
Nevada.
While individual lenders, investors, builders, and borrowers must
accept the responsibility for their actions, we also have to remember that this crisis not only affects that family that loses its home
but it also affects the neighborhood. From lower property values to
forgone revenue, the entire community suffers. We have seen that
throughout District Three. A house is vacant, the lawn dies very
quickly here without water, then the graffiti comes, the vandals
come, the windows are broken, the swimming pool turns into a
feeding ground for West Nile Virus and mosquitoes. You see the
whole neighborhood goes downhill instantly. And we just cannot
allow that to happen.
So thank you very much for being here and for giving me an opportunity to tell you how critical this problem is and how much we
need your help to diversify Nevada’s economy, keep people in their
houses, get people back to work, and turn this country around.
Thank you so much.
The CHAIR. Thank you, Congresswoman. Thank you both for joining us.
And now I ask that the first panel could be seated. Thank you.
Today’s hearing will consist of two panels of witnesses. The first
panel will address the causes of the current foreclosure crisis in
Clark County and their relationship to the broader financial crisis
gripping the country. The second panel will focus on the impact of
the crisis on the local economy and how it has affected working
families in Clark County.
We’re joined on the first panel by George Burns, a Commissioner
of the Financial Institutions Division of the Nevada Department of
Business and Industry. William Uffelman, President and CEO of
the Nevada Bankers Association, and Dr. Keith Schwer, Director of
the Center for Business and Economic Research here at UNLV.
Thank you all for being here today. I ask you to please limit your
oral remarks to five minutes. Your full written statements will appear in the official record of the hearing.
Mr. Burns, could you start, please.
Mr. BURNS. Thank you. Good morning, Chair Warren and members of the panel. My name is George Burns. I am the Commissioner of the Nevada—am I on?
Mr. NEIMAN. I think the speaker over to your right. You have
one right in front of you. Okay.

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Mr. BURNS. Is that better? How is that? Sorry. I’ll start again.
The CHAIR. Thank you.

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STATEMENT OF GEORGE BURNS, COMMISSIONER, NEVADA
FINANCIAL INSTITUTIONS DIVISION

Mr. BURNS. Good morning, Chair Warren and members of the
panel. My name is George Burns. And I am the Commissioner of
the Nevada Financial Institutions Division. I am honored to have
the opportunity to testify on the banking and economic environment in the State of Nevada and the Treasury’s Troubled Asset Relief Program.
This panel provides an important mechanism for oversight and
accountability of this program in the future of our regulatory structure. I am very pleased that my colleague, Richard Neiman, has a
critical role in this process. As state regulators, we play an important role in ensuring local economic development while protecting
consumers. As we evaluate the effectiveness of the various government programs and contemplate our future regulatory structure, it
is important for Congress and the Administration to hear and learn
from the experience of state officials.
Today, I will share my perspective on the effect of the mortgage
and financial crises on state chartered banks and bank customers
in Nevada, the strategy behind the Nevada banks and the Treasury
Department’s use of TARP funds through its Capital Purchase Program, and my recommendations on the use of future TARP funds
to help the banking industry in the State of Nevada.
I would also like to share my thoughts on the broader issues surrounding the TARP and regulatory restructuring. Nevada, as the
rest of the nation does, finds itself in one of the most challenging
financial situations since perhaps the 1930s. Two studies, one done
by the National Conference of State Legislators, and another completed by The Rockefeller Institute, state that Nevada has suffered
significantly more than the rest of the nation in the current economic crisis. In short, our economy has gone from the fastest growing in the nation to amongst the worst.
Nevada, like the rest of the nation, is experiencing both a foreclosure problem and a credit availability crisis. In Nevada, the financial crisis is strongly related to the unavailability of capital.
The lack of investment funds for projects has literally killed economic growth, while just a few years ago this state led the nation
in the creation of small businesses.
Not only are many financial institutions not extending new credit, but they’re also reducing or eliminating existing lines of credit
for many customers, which only exasperates the problem. Making
capital available for institutions to loan to credit worthy customers
is an essential step in the right direction of turning this financial
crisis around.
Our nation’s banks are operating in a challenging economic environment, the severity of which is probably greatest in Nevada. A
downturn in economic conditions often results in a weakening of
the banking sector and an increase in bank failures. Nevada has
seen the voluntary liquidation of two banks, the closure of two
other banks, and the merger of two nationwide financial institutions into others.

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The declining real estate market of almost 30 percent in values,
rising foreclosures to a level of the highest in the nation, slower
economic growth, and an unstable energy crisis have both exposed
and contributed to weaknesses in the portfolios of numerous Nevada banks. The industry now has to manage these risk exposures
over an ever weakening economy.
Our job as regulators is to ensure that risks are identified in a
timely manner and proactively managed to minimize destabilization of individual institutions, as well as the financial institution’s
industry as a whole. Nevada, particularly southern Nevada, has
two major economic engines; gaming and real estate development.
The overall economy has dampened gaming, and the mortgage crisis has stagnated real estate development with huge inventories of
foreclosed properties. State chartered banks in Nevada are being
affected by these circumstances indirectly but significantly. Most
Nevada community banks do not originate much, if any, residential
real estate mortgage loans. If they do, they are not held in portfolio
in any significant amounts. However, the mortgage crisis has
begun to spill over into the commercial real estate market, which
Nevada community banks specialize in with small to medium size
businesses.
As residential real estate values have declined, so have commercial real estate values, specifically, in the acquisition and development categories. If there are no residential rooftops going up, supporting commercial development of grocery stores, retail strip
malls, et cetera do not go up either. This has led to increasing nonperformance in substantial segments of Nevada community bank
loan portfolios. The need for——
The CHAIR. Mr. Burns, if I can just ask you to wrap up, so that
we can be sure we hear all three people. I’m sorry how fast five
minutes goes.
Mr. BURNS. That’s quite all right.
The CHAIR. And we will, of course, have your entire statement
in the record.
Mr. BURNS. Thank you.
With the announcement of the Capital Purchase Plan, 27 of the
banks—state bank charters indicated their interest in applying.
Nine of these have submitted applications. Two applications have
been forwarded to federal regulators in Washington D.C. headquarters. And two applications have been forwarded and approved
by the Treasury. To date, only three Nevada institutions have received any of the TARP funds. And that is from funds that were
supplied to their multi-state, multi-bank holding companies. All the
rest of those that have been submitted so far are primarily from
privately or closely held institutions, which the Treasury Department has only just begun to entertain the approval process.
It seems that the larger institutions have avoided poor examination ratings that would have vexed them from consideration because of timing. However, the smaller community banks have continued to deteriorate putting them at a competitive and regulatory
disadvantage to publicly traded institutions because they maybe no
longer meet the federal regulatory definitions of a healthy institution.
The CHAIR. Thank you very much.

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Mr. Burns.
Mr. BURNS. Thank you.
The CHAIR. I appreciate it.
Mr. BURNS. Thank you.
[The prepared statement of Mr. Burns follows:]

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The CHAIR. Thank you. Mr. Uffelman.

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STATEMENT OF BILL UFFELMAN, PRESIDENT & CEO, NEVADA
BANKERS ASSOCIATION

Mr. UFFELMAN. Good morning. My name is Bill Uffelman. I’m
president and CEO of the Nevada Bankers Association. Madam
Chair, members of the panel, I appreciate the opportunity to testify
on behalf of Nevada’s bankers on the Troubled Asset Relief Program. I have been asked to focus on the health of the local banking
system of the current financial climate, including bank lending to
small businesses and whether TARP has had a measurable effect
on the community banking industry in Nevada.
Nationally, the TARP program has served to calm the financial
markets and does have promise to promote renewed economic
growth. However, it’s also a source of great frustration and uncertainty to many banks. George has commented on how few Nevada
banks actually have seen the money.
Much of the frustration and uncertainty is because of the significant and numerous changes to the program and misperceptions
that have resulted on the part of press and the public. Overall, as
you know, regulated banks were not the cause of the problem and
have generally performed well. Not only did the regulated banks
not cause the problem, they can be the primary solution to the
problem, as both regulation and markets move towards the bank
world. Investment banks, in effect, are no more. They’re all becoming bank holding companies with substantially reduce leverage opportunities and with much stricter regulation.
In general, banks across Nevada did not make toxic sub-prime
loans. They are strongly capitalized and ready to lend. But they
cannot do so if misguided policies increase their regulatory costs
and provide disincentives to lend. Banks already face significantly
higher costs from deposit insurance premiums. They are almost
double now what they were in the past. And banks are already receiving contradictory government signals about lending, being told
to use capital to make new loans. And in some cases, being told by
bank examiners not to because the risk is too great.
As you all probably recall, banks loan from deposits. You don’t
lend out your capital. The capital is there to support the lending,
but it in fact is not to be—or shouldn’t be the source of the loans.
There’s a broad consensus that the crisis grew out of a housing
bubble fed by mortgage loans that never should have been made,
which were securitized and sold to investors who did not properly
analyze or understand the risk. Excess leverage on Wall Street and
other financial centers greatly exacerbated the crisis. The impact
on the economy of the dysfunctional housing market is very evident
in Las Vegas and in northern Nevada. The dramatic reduction to
new home construction has hit the construction development lending, bringing it to a virtual halt. Banks in both areas have also
been hit by the decline in the commercial real estate development,
which typically lags behind residential construction.
These impacts are further exacerbated in Las Vegas by the decline in retailing, tourism, and gaming. In northern Nevada declines in manufacturing are also contributing to the decline of their
economy. Despite it all, banks in Nevada stand ready to lend to

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qualified borrowers. However, it’s more difficult for potential borrowers to qualify because of tightened credit requirements. At the
same time, because of the economic slowdown, potential borrowers
are not stepping forward to ask for loans. They have hunkered
down to wait and see what the future holds.
A banker at a large bank commented to me that in the old days
they might have funded seven deals out of ten that were presented.
Now, they’re only funding three or four. Some of the other deals
were referred to smaller community banks where they might obtain
funding or many wither on the vine. To many bankers, the implementation of TARP has been frustrating. Today, nationally, only
about 50 banks have received capital infusions in Nevada. Less
than a handful, as George has pointed out, two community banks
have qualified for the Capital Purchase Program and received
funds.
This is due to Treasury’s phased implementation program. The
program was open to the publically traded banks in mid-October,
to small privately held banks in mid-November. Guidelines from
mutual banks, Sub S banks, and others that have no way to issue
preferred stock have not been issued. My current chairwoman, she
actually received the application forms on Thursday. She has to decide whether to convert her bank from a Sub S to a C, so they can
even proceed with the process.
As Treasury moves forward, it should assure that TARP will
allow all healthy banks, regardless of their corporate structure or
charter type to participate in the CPP. Treasury should also ensure
that sufficient money remains to fully fund the CPP for community
banks accepted into the program. It would be most unfair and result in competitive inequality for the community bank program not
to be fully funded.
The CHAIR. Mr. Uffelman——
Mr. UFFELMAN. Because the TARP funds have not really reached
most of Nevada’s community banks, I cannot say that it has a
measurable effect on community banking.
The CHAIR [continuing]. One minute.
Mr. UFFELMAN. To the extent that most community banks have
not yet had the opportunity to participate, they are at a disadvantage in competing with banks that have received TARP funds. Nevada banks continue to lend, and the TARP can help to further
stimulate expanded banking services by healthy banks. As the
economy starts to grow again, the growth will be stunted if adequate credit is not available.
As experience has shown in previous economic slowdowns, it is
the banks that end up providing most of the needed credit to support a recovery. Banks are anxious to meet the credit needs of businesses and consumers, and we know that such capital is vital to
the economic recovery in communities large and small across Nevada and the country. Thank you.
The CHAIR. Thank you——
Mr. UFFELMAN. I have also provided the panel with an article
that was in the Review Journal yesterday. It’s an associated press
article: ‘‘Small Banks Waiting for Rescue Funds.’’ It seemed very
on point. I could have read you the article rather than constructing
something myself.

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The CHAIR. Thank you very much, Mr. Uffelman.
[The prepared statement of Mr. Uffelman follows:]

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49
The CHAIR. Dr. Schwer.

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STATEMENT OF DR. KEITH SCHWER, DIRECTOR, CENTER FOR
BUSINESS AND ECONOMIC RESEARCH, UNLV

Dr. SCHWER. Thank you. Madam Chair, members of the panel,
thank you for the opportunity to testify this morning. I will be focusing on the economic conditions surrounding the State of Nevada, but will be making most references with respect to Las
Vegas. But conditions in Las Vegas are pretty much matched by
what is going on in our sister city to the north in Reno. Las Vegas
represents 71 percent of the population of the State of Nevada, a
population of slightly less than two million people here locally.
There was a myth that was mentioned earlier about the southern
Nevada economy, that it was decoupled from the national economy.
That myth has destroyed very clearly. But the myth was based
upon 25 years of growth and expansion with the population growth
rate in excess of 5 percent per year. And that compares with the
national rate of 1 percent per year. Last year, we lost a population
of near 10,000 people. And that turns into roughly 4,000 additional
vacant homes added to the excess supply that we currently have.
Looking at the composition of the economy, it is an economy that
very much looks like the Michigan economy, in the sense that it is
concentrated in one industry. The location quotient, the measure
that economists use to evaluate economic concentration, shows that
hotels and accommodations were 17 times the national average.
And with autos in Michigan, it is somewhere around 12 or 13 percent.
Over this rapid period of expansion of the last 25 years, housing
prices in southern Nevada until 2003 remained at or near the national level with very little price variation. So our economy was
growing and providing housing, but it was not in a bubble situation. In 2003, we saw the change. In 2003, we saw that housing
prices began to jump. And within a period of one year, housing
prices had rose more than 50 percent.
The cause of that is many components that were associated with
speculative behavior. I will note only one. That was on television,
you could follow the get rich real estate seminars. Take out your
mortgage equity, withdraw it, and invest in Las Vegas, and get
rich.
We have also had others that followed on, seeing an economic opportunity, that were inexperienced and that added to the economic
difficulty associated with price increases. Housing price increases
peaked in 2006, and have been going down ever since. I’ve included
the most recent information in graphic form, the Case-Shiller Price
Index for Las Vegas.
Housing prices are now returning to the levels that they were
prior to the peak, but nobody is buying other than investors. Overall, the economy slowed. I would note that we did not enter a recession here in southern Nevada until October. The economy peaked
in October of 2007. So we went for over a year with minimal impacts even though real estate and residential construction were
heavily hit. What happened there is, we had workers moving out
of residential construction to construction jobs on the strip. If it
had not been for the credit crisis of 2007 and the associated dif-

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ficulties thereafter, we may, we may have got through that economic downturn without the severity that we now see.
The Las Vegas economy is now one in which unemployment rates
are rising. As noted, our unemployment rate has remained above
the national rate by 1 percent and continuing to increase. We have
every reason to believe that the economy, its unemployment rate
will peak next year and could well be at the 10 percent level.
We also included a very important point of the risk during this
period. And that is, that 50 percent of homeowners in the State Nevada have negative mortgage equity. And that is a great risk going
forward if the economy does not pick up. The housing problems are
focused in three key areas: price, for which we have made some
progress locall; foreclosures, which continue to be a problem, an increasing problem; and jobs. And we’re seeing around those last two,
that our economy is suffering significantly.
So in conclusion, what we’ve seen is that credit has dried up, we
had a housing bubble, we’ve seen flight to safety. And we anticipate that there will be further problems here, serious problems.
And that we face significant risk going ahead, and that risk will
depend very much on how the national economy performs over the
next year.
Thank you for your time and your attention.
[The prepared statement of Dr. Schwer follows:]

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The CHAIR. Thank you, Dr. Schwer. If you all would remain for
just a minute, we have a few questions. And I’m going to start with
Mr. Neiman.
Mr. NEIMAN. Thank you. As you all referenced, the Treasury has
two programs that it implemented under the TARP. One is directed
toward systemically significant failing institutions. The other toward healthy institutions. And that’s where the bulk of money has
gone to, the Capital Purchase Program. With respect to the Capital
Purchase Program, I’m interested in your views on the effectiveness of a strategy that invests taxpayers’ money into only healthy
banks, the term viable without any additional assistance, and investment in banks without any restrictions on—or requirements
that that money be down streamed.
I think Mr. Burns referenced the fact that there is no requirement that money invested at the holding company level be down
streamed to individual banks, as well as no restrictions or requirements regarding the use of the funds. And this is really one of the
critical questions that we are dealing with. I would like the perspective of both—in fact, of any of the members of the panel that
would like to comment.
Mr. BURNS. If the Capital Purchase Program continues to be orchestrated the way that it has been so far in its short existence,
I believe that it’s going to lead to further concentration of banking
in Nevada, where over 80 percent of the market is already controlled by three national banks. This is because, as the smaller
banks have taken longer and longer to be able to apply for and possibly receive these Capital Purchase Program funds, their exam
ratings are deteriorating and they’re now being tagged as nonhealthy banks. Whereas, if this program had moved faster or sooner or further consideration could be given to them regardless of
what their most recent ratings are and so forth, their sustainability
there over the long run.
Mr. NEIMAN. So the use of the capital into larger banks, the likely use of those funds will be for acquisitions of other banks further
consolidating the markets?
Mr. BURNS. Exactly. One of the few banks in this state that has
received the funds from their holding company received over 140
million dollars. They just recently announced that they’re using 77
million of that in order to write off their bad security investments.
That is not contributing to lending, nor the stabilization of the system.
Mr. NEIMAN. Mr. Uffelman.
Mr. UFFELMAN. Last week, when I was invited to appear before
this panel, I went out to a number—well, I went to my board and
several of my other members, among them a small community
bank. I want to quote something that he wrote back to me. ‘‘The
FDIC just left here yesterday—and George, I forget what bank
you’re at—we’ve been impacted with the real estate and economic
issues much the same as everyone else. They’re just plain overreacting in favor of protecting the FDIC to the detriment of the consumers they’re chartered to protect. They talk out of both sides of
their mouths and are unquestionably on a mission to take some
banks down regardless of their real viability. I will undoubtedly
come under some form—some sort of regulatory action, just not

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sure which one for now. The TARP program really needs to have
its name changed. And I can think a number of good names since
they have yet to touch a toxic asset by way of loan purchase or
stock purchase.’’
I will skip a couple other comments here. ‘‘All the while, community banks like ours are left hanging in the wind, and due to our
deteriorated condition caused by the economic downturn, excluded
for eligibility for the CPP. It’s just ridiculous. And I hope that the
idea that community banks didn’t cause the problem and are affected by it are being—are not—excuse me—are not—are affected
by it are being dismissed as bad investments. That the FDIC has
taken all this effectively discourages banks from taking any risk
due to the fear of being downgraded and subjected to harsh treatment as they continue to protect the bank insurance fund. Since
everyone knows that the government will step in to bolster the
fund, I think they’re tossing out the baby with the bathwater. Now,
that you’ve heard it, I’m buried at this point working on an action
plan to refocus this bank in a fashion where we’re stingy lenders
or not lenders at all and will only grow our loan portfolios at a rate
commencement with our core deposit of growth. That won’t go a
long way towards encouraging the banking industry to begin lending again.’’
The CHAIR. Thank you. Mr. Silvers.
Mr. SILVERS. Well, first, I want to thank all three panel members. I thought that the testimony was extremely valuable and candid. As someone who just got off the plane from the East Coast this
morning, it was worth my while just to hear the three of you outlining conditions. I’m really grateful.
I want to ask several questions I believe follow up on Richard’s
inquiry, which I think, as he indicated, is essential to an aspect of
at least our—of our world.
Let me pose a series of questions to you and you can maybe pick
which one you want to answer. We have met with the Treasury Department, and we have been present and reviewed much of what
they have said about what they are doing. And they repeat, and
we have queried them about this, and we’ve queried the Federal
Reserve about this, that their sole decision criteria in the Capital
Purchase Program is whether a bank is healthy, absent of the capital infusion. That that’s all that they look at. All right.
I’m curious if any of you have a response or an evaluation of the
accuracy of that assertion.
Mr. NEIMAN. And the appropriateness, is that what the test
should be as to the use of those capital objections?
Mr. SILVERS. And with that addition, my second question to you
really comes off of some of the comments in Mr. Uffelman’s written
testimony, where you discuss the quandary, the problem faced by
banks contemplating requesting TARP money. The perception
how—how potential depositors will perceive it, how capital—how
stockholders will perceive it, a sort of set of game theory problems.
Will a bank be perceived as being weaker for asking for money or
stronger?
And this of course interacts with the criteria. The sole decision
criteria is, are you healthier or not? It’s kind of a question you may
not want to ask for fear of the answer. My question is kind of one

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step up, which is: Does that set of quandaries that you’ve laid out,
which seemed like a sort of no win set of propositions for banks
thinking about this, does that suggest that maybe we ought to reconceptualize the way this whole capitalization program works, and
perhaps for example give money to everyone? So that it’s not—you
don’t ask, you just get it. Unless, of course, you really can’t—you
really are nonviable. In which case, you should be closed or sold off.
Third question—and this is very brief—the Congresswoman and
the Congresswoman-elect talked a great deal about the problem of
mortgage restructurings. And each of you in your testimony eluded
to very high foreclosure rates. I’m curious as to what steps are
being taken here to address mortgage restructurings by the financial institutions community, and what steps would be helpful for
the Treasury to take under the TARP in that regard.
The CHAIR. So a combination of questions there. Perhaps, we’ll
start at the other end this time, if that’s all right. Dr. Schwer.
Dr. SCHWER. Well, I’d like to come back perhaps to the first one
and offer some explanation of perhaps what the Fed is doing. And
since the question and the devaluation of banks is always that of
solvency versus liquidity. And the deep abiding concern and the financial regulators is the question of solvency and the question of
bank runs. I would suggest that it is in the DNA of bank regulators
not to use the word solvency. They are very much concerned about
liquidity. So I think that perhaps reflects some of the comments
that they may have made. With respect to structuring mortgage
programs, I think it’s particularly important to note the magnitude
of the problem that we face. I realize that there are questions
about how to do that. But waiting a long period of time to figure
it out in some way may well result in the problem having grown
to great magnitude. There is a question of getting it done and getting it done now.
Mr. SILVERS. If you don’t mind my stopping you right there. Do
you think it’s important, in thinking about this, how much attention should we pay to the question of whether to some, quote,
‘‘undeserving’’ people may receive aid if we act?
Dr. SCHWER. Well, I realize the there is always the question in
equity of who gets what. That is the current debate about the distinction between the money that is being used for Wall Street and
the money that is being used for Main Street. There is the question
of bailing out the banking industry versus the automobile industry.
So that equity issue is always in front. Standing and having a long
debate on who wins and who loses is contrary to getting the nation’s economy back in order. So we need to be moving forward,
from my perspective.
The CHAIR. Thank you. Mr. Uffelman, would you like to respond
to the questions?
Mr. UFFELMAN. If I can keep them all straight.
The CHAIR. I hope you took good notes, sir.
Mr. UFFELMAN. I did want to comment. You know, Fannie and
Freddie, before their failure and their preferred and other—their
stock and the impact, it did have an impact on at least one Nevada
community bank that I’m aware of. So, you know, immediately, the
day before, you’re being encouraged, put your money in Fannie and
Freddie, you can’t lose, by the regulators. You do, and guess what,

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it’s basically no longer of value. So your capitalization is down.
Mark-to-market, in the midst of all the Treasury process over that
weekend, the same time we had people in the banking industry
working on the mark-to-market issue, again, a kind of a doublewhammy.
I’ll comment on the mortgage restructuring. As I said before, the
banks that I represent, in effect, they got excluded from the mortgage game. I mean, the larger banks, you know, that had a mortgage division, that because they were in the mortgage business,
they now are frequently servicers for a number of investors for the
mortgage-backed securities. So they have a bigger portfolio to manage. But, in fact, and if you go out here, as we commented before,
the community bank in Las Vegas, the community bank in northern Nevada, a minimal number of mortgage loans, and regularly
packaged up and sold upstream.
But the whole servicing industry—yesterday afternoon, I was on
an extended phone call with people all over the country in the servicing industry, talking about servicing related issues. For whatever
reason, I have become their spokesperson. The servicing companies
that—you know, you used to have that collection side that made all
the calls, those people are now becoming workout specialists. And
they have added bodies.
But again, how many thousand properties are we talking about?
The other experience that time and time again we’re reminded, as
many as half—excuse me—as many of half the loans that are in
default in this valley, the people will not return a phone call, they
won’t respond to the letter. They have in effect thrown their hands
up and walked away.
Foreclosure in Nevada is typically nonjudicial. Typically, you
have missed payments for three months and a letter is sent called
a notice of default and intent to sell. That’s a 90-day letter. Sometime in that 90 days, we sure hope you would call home and ask
about, can we make an arrangement? At the end of that 90 days,
I then have a 21 day notice of sale. You still have an opportunity
to work it out.
After the sale at the courthouse steps, whoever the purchaser is,
they basically have a three day delay before there is an eviction.
So in that process, if you missed payments for 90 days, you have
the notice of default for 90 days, 21, you start adding it up, we’re
talking about seven or eight months before there is that final moment that the locks get changed on the door and the new owner,
whoever they are, takes over. Maybe the institution got it back,
maybe they didn’t.
But the net outcome of all of that is, somewhere between 40 and
50 percent of the people who are involved in that, they haven’t
talked to their lender at any time. It is very discouraging. The
homeowners association are upset with the lenders. The lender
doesn’t own the home until the end. And it is very difficult to deal
with. So yes, we are working at it and there are more people available to do the workouts. But it is a very tough situation.
The CHAIR. Mr. Burns would you just have a short answer. We’re
going to be running a little bit late, but we would like to hear from
you on these questions.

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Mr. BURNS. To generally answer all of the three questions that
you asked, it is indeed the case that for the first time in history
we are seeing banks fail, not due to a lack of capital but due to
a lack of liquidity of that capital. And that’s why the Capital Purchase Program is so important as far as providing capital to institutions, so that they can loosen up the funds aimed at liquidity.
It seems to become a matter of too big to fail versus too small
to matter. The larger banks whose actual viability is probably even
more in doubt than small community banks are being infused. The
smaller community banks are not.
Mr. NEIMAN. Can I just ask—do we have time or——
The CHAIR. We—actually—it would be rude to our next panel.
Mr. NEIMAN. Okay.
The CHAIR. So I am going to play the discipline of the chair here.
I want to thank our first panel very much for coming. As I said,
your remarks will be posted in full. We appreciate the time that
you have taken. And the first panel is excused. Thank you.
I would now like to invite our second panel of witnesses to come
down.
I’m pleased to welcome our second panel of witnesses. We’re
joined by Gail Burks, who is president and CEO of Nevada Fair
Housing, Inc.; Julie Murray, who is CEO of Three Square, a local
community food bank; Danny Thompson, who is Executive Secretary and Treasurer of the Nevada AFL–CIO; and by Alfred
Estrada, who is a Clark County resident who will share his personal story of the effects of the foreclosure crisis.
Thank you all for being here today. As I asked of our first panel,
please limit your oral remarks to five minutes. Your full written
statements will be part of the official record.
Ms. Burks, could we begin with you?

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STATEMENT OF GAIL BURKS, PRESIDENT & CEO, NEVADA
FAIR HOUSING CENTER

Ms. BURKS. Thank you, Madam Chair, members of the committee, for the opportunity to make comments today. I have been
asked to focus on the role of lenders in the foreclosure crisis and
the prevalence of foreclosure victims and the impact on those victims.
Audience SPEAKER. We can’t hear.
Ms. BURKS. Is that better?
I’ve been asked to focus on the role of lenders in the foreclosure
crisis and the impact on victims. Nevada Fair Housing Center is
a nonprofit. We have served the valley since 1995. And much of our
work involves housing and consumer issues. Over the last two
years, we’ve seen a huge increase in our case load for foreclosure
prevention. Currently on average, we are servicing about 600 calls
and internet inquiries per day for foreclosure assistance.
In terms of the lender role, in the Nevada community, advocates
warn the local government officials as well as public officials about
the increase in predatory lending in 2001. As we begin to see what
we refer to as predatory lending, we saw an increase in fees, a decrease in retail originations, an increase in loan purchases, and a
decrease in the use of such things as down payment assistance,

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FHA loans, and fee for service type work that literally represented
services provided.
As this increased, we saw a transition from predatory lending to
sub-prime lending. With that, we mean consumers who could have
received better loans receiving what we consider to be toxic loans
or sub-prime loans. So how in effect did that work? In looking at
actual data and case files in some of the communities that have
been hit the hardest by the foreclosure, over 97 percent of the consumers that received adjusted rate, sub-prime loans, interest only
loans or Alt-A loans had credit scores of 640 or greater and could
have received a traditional conventional loan or even qualified for
an FHA loan.
As the increase in the sub-prime market expanded and the decrease of consumers receiving legitimate loans, we also saw an increase in foreclosure. Now, many of the national reports and studies that have been broadcast in the news have done what we call
blaming the victim or literally putting the economic crisis on the
backs of low income consumers stating that they caused the mortgage market to fail. This is not true. Many of the consumers that
we see on a day-to-day basis are consumers who could have received better loans. The clients that we see are broken down into
those who have a delinquency; meaning 30 days or less, those who
have received a notice of default; meaning, 90 days or more, and
those who have actually received a sale date.
Given the opportunity, many of these loans could be modified because the consumers could afford the homes. Now, earlier it was
stated that 50 percent of those in foreclosure don’t talk to their
lender. What was not stated is that many of the consumers have
attempted to contact their servicer to receive help, but because of
all of the different programs that are available, the loans are not
getting modified without some sort of intervention and assistance
on behalf of the consumers.
The CHAIR. Ms. Burks, one minute.
Ms. BURKS. The other thing that we are seeing in terms of the
foreclosure crisis is not enough sufficient initiatives to actually address consumer issues. All real estate is local. With the inability to
modify loans or to obtain direct assistance or funding to modify
those loans or to purchase those loans, these loans are actually
going into foreclosure. That’s also leading to another type of scam.
Consumers are being inundated with requests to pay for foreclosure prevention services. In some instances, consumers have
paid upwards of $4,000 to scammers to modify loans, only to find
that the foreclosure has not been stopped.
The top funds have not increased lending. Indeed, many lenders
have changed their mortgages conventional products. So today, you
have to have on average a 680 to a 720 credit score and 75 percent
of that loan will be financed, where as the other 25 percent must
come from money from your pocket. In order to make TARP effective, we have to give consumers some relief, we have to make modifications mandatory versus voluntarily, and we have to ensure consumers that there is legitimate assistance to help with the foreclosure crisis.
The CHAIR. Thank you, Ms. Burks.
[The prepared statement of Ms. Burks follows:]

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71
The CHAIR. Mr. Thompson.

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STATEMENT OF DANNY THOMPSON, EXECUTIVE SECRETARYTREASURER, NEVADA STATE AFL-CIO

Mr. THOMPSON. Thank you. Thank you, Madam Chairwoman and
members of the committee. It’s a pleasure to be here today. You
know, I think the previous speakers have pretty well laid out what
happened here, and that we had this massive housing bubble and
a move by everyone to make money quick.
Let me tell you, during that period of time, I was going to buy
a rental property, to show you how bad this was. I had found one
that was right, that I could afford and make enough money in the
rent. When I went to make the offer on the home, the person selling the home told me, ‘‘Well, no, that’s not enough, you have to
offer more because this week the prices went up.’’ The prices went
up so quickly and there was such a move by people to get in on
this get rich scheme, if you will, that the lenders made loans that
normally they wouldn’t make.
I have friends who—who got ARM loans that they didn’t fully
understand. Interest-only ARM loans on a $700,000 home that had
been told by the lender that, ‘‘Well, don’t worry if rates go up beyond,’’ because there is no way they could afford that home, ‘‘if the
rates go up, you will simply refinance.’’ And then we come to where
we are today and you couldn’t refinance if you had to.
Today, they’re over 30,000 foreclosures in Clark County. One of
the problems, quite honestly, is that 50 percent of the people that
hold mortgages owe more on the mortgage than the home is worth.
Now, that’s a direct result of the bubble popping. But it’s also—a
lot of those people are her clients, where they now have those
ARMs and those interest-only ARMs come due. And as they get readjusted, they find themselves in a situation where that is impossible. And so many of them simply walk—walk away. We have a
$450,000 house that the house right across the street is worth
$200,000. That’s what’s happening. They—some of them literally
walk away. And some of them go and turn the keys in.
Whether the stimulus has helped individuals, I don’t know of any
help that has filtered down to homeowners. I do know, though, that
the lack of regulation or the lack of enforcement of existing regulations on some of these mortgage companies is something that certainly needs some scrutiny. Because, you know, like I say, I know
people that have loans that ended up with an adjustable rate mortgage that they didn’t fully understand that that’s what it was.
Whose fault is that? I don’t know. But I can tell you that the result
of that has put Nevada, as a state, in a place where we have never
been before.
Right now, on the Las Vegas Strip, we have the largest privately
funded construction job in the world. There are approximately
10,000 workers on that job. And Nevada’s economy is dependent,
so dependent on a single source, in that almost 50 percent of all
the money in the state budget comes from a single source. And so
I can tell you what the fix is not. The fix is not to take away wages.
The fix is not to take away pensions. The fix is not to take away
health care of workers. Because that’s a rush to the bottom.

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And I have heard so many work people say, ‘‘Well, we need to’’—
in fact, this legislative session, I’m in the fight of my life to protect
public employees’ pensions. That’s not the fix. The fix, I think is
creating jobs and good paying jobs and jobs that pay prevailing
wages in the community that they are created will get us out of
this mess. Thank you.
The CHAIR. Thank you, Mr. Thompson.
We are going to take a break for just a minute in the middle of
this panel. I apologize to Mr. Estrada and Ms. Murray. But Senator
Reid has come to join us, and we would like to just make a space
for him and invite him in so that he can also read a statement.
That would be good. The rest of you can just stay there. Stay there,
Ms. Murray. I think Mr. Thompson is going to give up his seat.
Please, Ms. Burks, stay. That’s fine. I think we have the Senator?
Oh, it’s—sorry. We do not have the Senator. We will have the
Senator soon. I was misinformed.
Ms. Murray, would you like to start your testimony? Yes. Sorry,
Mr. Thompson. I’m glad for you to have a little exercise in the middle of this. I appreciate it.
Ms. Murray.

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STATEMENT OF JULIE MURRAY, CEO, THREE SQUARE FOOD
BANK

Ms. MURRAY. Good morning, Chairwoman Warren and members
of the Congressional Oversight Panel. My name is Julie Murray,
and I serve as the CEO of the Three Square Food Bank in Las
Vegas, Nevada. And I’m honored to have been invited to provide
testimony today. My testimony follows that of housing and finance
experts who have done an outstanding job discussing the economic
conditions of our community and our state. My role in today’s proceedings is to focus on what these numbers mean in terms of
human lives and how the residents of our city and state are being
affected and are suffering due to the downward trends in our economy.
As you know, I run the Three Square Food Bank which started
over a year ago at the inspiration of Eric Hilton, youngest son of
Conrad Hilton, and numerous other think-outside-the-box leaders
in this community who declared that it is was not acceptable for
people in our community to go hungry. As the newest member of
Feeding America, we’re proud to distribute food in southern Nevada to over 211 nonprofit agency partners, including faith-based
groups and churches. We also provide weekend food banks, food
bank bags to 120 schools with our Backpack for Kids program.
Maslow’s hierarchy of needs states that when looking at how a
human being’s needs are met on a pyramid, the basic needs of food
and shelter are at the base of the pyramid, serving as the foundation. Once a person has these basic needs of food and shelter met,
they are better equipped to excel in school, to maintain a job, and
lead a productive life. When part of that foundation, the core, food
and shelter, is absent or has crumbled, it makes it very difficult for
a person to survive or exist.
If I would have testified a year ago or even six months ago, I
would have said that thousands of families in my home state are
living paycheck to paycheck and are just one crisis away from dis-

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aster. However, I’m sad that as I testify before you today, those
thousands of families have had that one crisis occur. Due to the recession, they’re now living their biggest fear, living without a paycheck. Our city, county and state budgets are receiving double digits cuts at a time when people are in most need of services. At the
Three Square Food Bank, we see the people affected by these statistics and these numbers every day.
Let me give you three brief examples in the five minutes of my
testimony. Number one, children. Children facing hunger. In this
Clark County School District here in southern Nevada nearly half
of our children, 132,000 qualify for a free or a reduced lunch meal,
which means that a family of four makes less than $20,000 a year.
Picture that. Five out of ten children crossing the crosswalk on
their way to school who are struggling with hunger. When half of
our children are suffering, we are living in a crisis mode.
The CHAIR. One minute.
Ms. MURRAY. Thank you. Secondly, families in need. For every
child in need, there are members of families struggling to make
ends meet. Recently, while filling my gas at a gas station in
Summerlin, Nevada, a car driven by a middle aged man with two
sweet little girls in the back seat pulled in next to me. The man
approached me with an ashamed look on his face and said that he
had never been out of work but recently was laid off, lost his home,
and could not afford gas or food for his family. My heart broke as
the two little girls watched their dejected father beg for money. I
gave him some cash and told him how to find a local food bank
agency partner where he could receive free groceries.
As Nevada’s unemployment rate grows, such stories will only become more common all across the country. So in conclusion, I want
to share with you what I testified before the Congressional Appropriations Committee last week, along with Governors from Wisconsin, Vermont, and New Jersey, and an expert on higher education. Congressman David Obey wanted the Congressional Appropriations Committee to hear testimony about how lives are being
impacted. And I was delighted to be able to represent our state and
share that with him. My input for that committee and my input
for this committee is the same. When we are looking at ways to effect change and when you are looking at the effectiveness of TARP,
let me say that we have not seen any decreases in the demand for
food or services from my food bank and from our 211 nonprofit
agencies, partners, schools, and churches. In fact, as we wind down
our year, each week brings huge increases in demand for food and
longer lines of people who need food at our agency and nonprofit
agency partners.
My recommendation is that we all work together. And in the
final conclusion is, I want to share with you that, as Damon Silvers
said in his opening remarks, we’re all woven in this together. And
Richard Neiman said, only so much can be done at the state level.
And all of you are right. We have to work together. My food bank
service providers, cities, counties, states, and the federal government must communicate and be effective.
It is sad—a sad day when a child writes to Santa that all he or
she wants for Christmas is food. This recession is frightening, it’s

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impacting us all, people are suffering. And I thank you for coming
to our state to hear about how things are going. Thank you.
The CHAIR. Thank you, Ms. Murray.
[The prepared statement of Ms. Murray follows:]

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81
The CHAIR. Now, Mr. Estrada, if you could wait for just a
minute, we’re going to hear, I believe, from Senator Reid, who’s
going to join us.
Senator Reid, on behalf of Mr. Neiman, and Mr. Silvers, and myself, the Congressional Oversight Panel, we want to welcome you
here today and offer a special word of thanks because, without your
insistence, this panel would not exist and certainly not would be
in Nevada today. So we welcome your thoughts.

hsrobinson on DSK69SOYB1PROD with HEARING

STATEMENT OF SENATOR HARRY REID, U.S. SENATE
MAJORITY LEADER

Senator REID. Madam Chair, I appreciate very much all of you
being here in Las Vegas. But more importantly, thank you very
much for taking this assignment. This is an extracurricular activity
that you all didn’t have time to do, but you’re all uniquely situated
to help the American people work their way through the issues
that they have, which are significant.
The CHAIR. Senator, could you move the mic just a little bit closer, now that you’ve finished those kind words.
Senator REID. It’s good over the years—it’s good over the years,
I haven’t developed a complex because people always tell me I don’t
talk loud enough.
The CHAIR. Thank you, sir.
Senator REID. Maybe I do have a complex. I don’t know. For
those who are listening, I had the unique opportunity to appoint
the chair, Elizabeth Warren. And I appreciate your taking this. I
worked with Speaker Pelosi, you know, Mr. Silvers, to get you on
this board. And it really is a very, very important job that each of
you have. I can’t think of a more appropriate place in the country
than Las Vegas to hold this hearing. No place can demonstrate
more the struggles that communities across the country are facing
as we work our way through one of the most difficult economic recessions in our entire nation’s history. I’m confident this hearing
will provide the oversight board important information and insight
into the economic crisis to help guide its work in Washington.
Before the election, we passed the Economic Stabilization Act,
which created the Troubled Asset Relief Program or as we all refer
to it TARP. In acting, Congress believed that working with the administration and the Federal Reserve, that there could be an ad
hoc approach to rescuing important financial institutions that at
the time wasn’t working at all. And we felt confident a legislative
solution was needed.
We all believed, and Congress certainly was part of that belief,
that the financial system had to be stabilized before a broader economic recovery could follow. The Bush Administration initially believed that they would do this by using TARP to purchase from
banks troubled assets which consisted mainly of mortgage backed
securities or mortgages.
Now, I’d never heard of an illiquid asset, but that’s what Paulson
kept referring to—these illiquid assets, these bad loans. These illiquid assets had been rapidly declining in value due to the housing
crisis and were causing many institutions to suffer enormous
losses. Soon after the law was passed, Secretary Paulson concluded
that this approach was too complicated and would take too much

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82
time and frankly too much money. So treasury shifted gears, began
buying preferred stock in the nation’s largest banks as a way to inject capital into these firms and hopefully into the country’s financial problems. This capital could be used to help absorb expected
losses on real estate related to securities or mortgages, and also
could be used to provide funds for lending which we know is critical
to economic growth.
So far, we know that at least 350 billion dollars have been allocated under TARP. Yet, as the economy continues to deteriorate,
foreclosures increase and credit continues to contract. Many Nevadans wonder whether TARP is being used appropriately. All America shares this. I do. I see two problems with how TARP has been
implemented so far. First, most of the big banks that received capital funding through TARP, some 225 billion dollars, were healthy
and should be using the new capital for lending. And they’re not.
Instead, these firms appear to be contracting their lending activity
just when business and consumers across the country need access
to credit the most.
This lending contraction exacerbates our country’s economic troubles. And if there is anything that I want to make as a point today,
it is that these banks have to loosen their grasp on stopping people
from borrowing anything. Businesses that have been ongoing for
years and years with good credit ratings can’t borrow enough to
keep their businesses going. People can’t buy cars.
I met with a bank president here in Las Vegas yesterday, president of one of the one hundred largest banks in America. He said
it’s unbelievable what is happening as far as his bank. People can’t
get—their credit ratings can be very high, but they can’t get approval to borrow money for a car loan. Now, as you know, I have
spoken to car dealers and of the few cars they have, if they have
somebody who wants to buy a car, they can’t get it financed. So 225
billion dollars given to the big banks has not helped the problem
at all. And it shouldn’t be that way.
I took the liberty yesterday to call three large financial institutions. What’s going on? And they all had the same answer, ‘‘We’re
working on it.’’ Well, I would suggest they get a new work crew because it’s just not helping at all. Underwriting standards became
too shoddy before the housing bubble. We all know that. But I believe the pendulum now has swung too far in the other direction.
I hear from too many constituents, parents, small business owners
or business leaders that need capital but can’t get it because it’s
either unavailable or far too expensive. The banks that received
TARP have a unique responsibility due to the fact that American
taxpayers now have an ownership stake in these banks. All of us
here who pay taxes are shareholders of those banks. We can’t force
them. But for the good of the country, the banks should be putting
their TARP funds to use and lending where possible.
I don’t know if this is true. You could find out, that some of these
big banks are loaning money to countries in the Middle East. I’m
not—countries, I’m sorry—to business propositions in the Middle
East, but nothing here in America. And I hope you would follow up
on that.
Second, despite Congress’ clear intent that TARP be used to stem
foreclosures, so far no TARP funds have been used for that pur-

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pose. Meanwhile, the number of foreclosures increases by day, by
day. Especially here in Nevada. Some of the witnesses here, like
Gail Burks, can explain first hand, if she hasn’t already, the scope
of Nevada’s foreclosure problem and the tremendous strain it
brings to working families and entire neighborhoods. If we don’t
confront the problem here more aggressively, experts predict we
would see another up to 2 million foreclosures in the next two
years.
Oscar Goodman and I went to the number one place in the city
of Las Vegas for foreclosures. The average home in the area was
eight years old. It was a very nice neighborhood. People have the
idea these foreclosures are taking place in slums. They’re not. The
number one foreclosure district in Las Vegas—neighborhood, I
should say—in Las Vegas is a very nice neighborhood. But part of
it was exacerbated by the virtue of the fact that here in Nevada,
we had a lot of homes that were bought for speculative purposes
and not to live in. And that made things worse.
My colleagues and I in Congress know that strong oversight of
the Treasury Secretary is critical, given the large funds at stake.
The oversight board is just one of several tools included in the legislation to hold the Treasury Secretary accountable to the taxpayers for fulfilling the objectives of TARP. While I had some role
in the makeup of this board, everyone should be reminded, this
board is independent from Congress. This board will be a reliable
resource to Congress and the public, and this administration and
the Obama Administration as we learn from you how the Treasury
program is performing and whether its helping to put our country’s
financial system and economy back on track.
And I would say to you, Mr. Neiman, I’m going to go out in just
a minute and speak to my number one pal on the telephone. Schumer and I talk—Senator Schumer of New York and I talk several
times a day, and he said only nice things about you a few minutes
ago.
Mr. NEIMAN. Thank you very much.
Senator REID. Thank you very much.
The CHAIR. Thank you, Senator, we appreciate you coming.
Senator REID. Could I be excused?
The CHAIR. You may be excused, Senator.
Senator REID. Glad to—glad to escape this difficult cross examination.
The CHAIR. Thank you, sir.
Mr. Thompson would you like to rejoin us? Mr. Estrada.
Mr. ESTRADA. Yes, ma’am?
The CHAIR. It was a wait. We appreciate your patience—
Mr. ESTRADA. No problem.
The CHAIR [continuing]. And now it’s time for your statement.
Please, sir.

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STATEMENT OF ALFRED ESTRADA, RESIDENT OF CLARK
COUNTY, NV

Mr. ESTRADA. Good morning. My name is Alfred Estrada, and I
was referred to you by my realtor who is Leslie Moore. Let me tell
you a little story about what happened to me. Okay?
The CHAIR. Yes sir.

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Mr. ESTRADA. What happened was that my house, I fell behind
on my payments. Okay? The house doubled in price, like this gentleman was saying, the houses doubled in price. So the amount of
money that I owed on my house was not what it is worth anymore.
So I had found another buyer to purchase the house from me.
Right? And this is when I met up with my realtors. And I had
asked them, I says, you know, I want to sell the house to a family
friend of mine so that I can stay in the house.
I have two little daughters, and I live in a house where I would
never need to live in any other home in my life. Okay. This is my
dream house, because I can open my garage door and see my
daughters playing right directly across the street because that’s
where their school is at. Okay. And what had happened was, was
that my mortgage company, they did everything that they were
supposed to do. My wife, she worked on it for two, three weeks. Always on the phone. We had sent a bid in for the house for a fair
rate of $75,000 for the house.
All the houses had lost all their equity in the homes. Okay. And
this was with Wells Fargo Bank. And what they had told us was
that they wanted $89,000—$98,000 for the house. Okay. So I
called—I called back my buyer and I told him, I said, ‘‘Listen, this
is what they want and then we can get the house back.’’ Because
the one part—the one part that I never wanted to do was to leave
the house. Okay. Well, we did everything that they asked for. We
gave them a new bid, the money that they wanted. They told us
that if you give us this amount, the house is yours. So after we had
did everything we were supposed to do, for two weeks, we couldn’t
get in touch with anybody. And then about another week or two
down the road, and we find out that our house was sold at auction.
I had a realtor come to my house and tell me that I had to move
out of my house because—because they had no record pretty much
of none of the things that was being done as far as the new bid
for the home with our first mortgage company. So at the end, they
tell me that I have 14 days to get my children out of the house and
take them out of the house that—it’s their home really. And so the
gentleman tells me that he’s going to pay me $500—up to—well,
first $1,500, he was going to pay me for something called cash for
keys.
Which meant—because my wife, she was—she was working for
a lady that was into foreclosed homes and she was cleaning the
homes. And so she—we had—I had been with her, and I had seen
some of the homes that people that are so distraught they’re losing
their homes or they’re just upset, and they’re tearing these houses
apart, which is bringing the value down even more.
And I told the gentleman, I said, ‘‘Look, that’s not our intention.’’
I says, ‘‘My intention is this, is that on the day that you told tell
me that you are going to put the house back up for sale, I want
to be the first person that you call so that I can have what should
have been done in the beginning get finished so that I can move
back into my home.’’ The thing that really amazed me was that the
$98,000 that the bank said that they wanted for the house, well,
they sold the house for $85,000 in a auction. So they actually lost
money.

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So now, Wells Fargo has the house. And now we’ve had to leave
the home. We—I live in an apartment right around the corner from
my house because I have five and six year old daughters.
My six year old came home the other day with a full sheet of
paper with all of her friends’ names on it.
And she told—she told me that these were the people that were
going to miss her because we were going to have to be moving. And
I told my daughter, I says, ‘‘I don’t care if I have to live in a van.
You’re still going to be able to go to this school.’’
I’m trusting in God that we’re going to be able to be back into
this home again. But this is what had happened to us. We had the
money to buy the house.
It wasn’t supposed to go into foreclosure. And four or five days
later, they sold it at auction for a reduced price.
The CHAIR. Mr. Estrada, do you have any idea why this happened?
Mr. ESTRADA. I have no idea. We did everything we were supposed to do. My realtors put in the bid for the home. They were
dealing with the mortgage company, this and that. They sent back
saying that they didn’t want the first bid, that they wanted this
amount of money, and they would sell the house to us. So that’s
what we did. We give them everything that they wanted. And in
the end, they threw me—threw us—me and my family out of our
house.
Mr. NEIMAN. This is often an unfortunately common story, where
banks are not moving these short sales along. And I assume when
you had that offer to purchase that home at that price, they were
going to allow you to remain in that house either through a rental
or a loan, personal loan to you?
Mr. ESTRADA. Right. We were going to rent the house from the
buyer.
Mr. NEIMAN. Right. This is something, an area that has to be addressed in order to get banks to move that along. Because, as you
see, you’re not benefiting and the bank is not benefiting.
Mr. ESTRADA. No.
Mr. NEIMAN. So it’s a lose/lose. And that really is—and I very
much appreciate you bringing this one to our attention, because it
highlights a number of the problems in facing and dealing with an
institution and the impact that it has on families. So I thank you
very much for sharing that with us today.
Mr. ESTRADA. Yes, sir.
The CHAIR. Thank you, Mr. Estrada.
Mr. ESTRADA. You’re welcome. Thank you.
Chair WARREN. Mr. Silvers.
Mr. SILVERS. I have two questions. First, I want to pose a question about foreclosures. And I think Mr. Estrada’s testimony suggests that foreclosure is kind of the first idea rather than the last.
And we in Washington have heard on a number of occasions from
the Treasury Department, in the context of the Treasury Department implementing TARP, the bailout, that what they are doing—
that they are doing an enormous amount to prevent foreclosures on
a voluntary basis.
They have a program that they talk about called Hope Now. And
they say that is the appropriate way to deal with foreclosures, is

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by voluntarily encouraging the banks that are receiving the hundreds and billions of dollars to work things out in just the—maybe
not quite just the way they worked them out with the Mr. Estrada,
but that kind of idea.
I’m interested in the panelists’ observations about the effectiveness of this voluntary approach and what might be done alternatively if that’s not good enough with what remains of the TARP
money?
Second question is for Mr. Thompson. There was a mention of
the——
The CHAIR. You have multiple chances to ask questions.
Mr. SILVERS. Oh, I do? Okay.
The CHAIR. So if you want to just ask one? I promise——
Mr. SILVERS. Then I’ll come back. Thank you.
The CHAIR. Good.
Ms. BURKS. Thank you. The Hope Now program is a program
that uses a national toll free number for consumers that need assistance to call in. The difficulty is, it is impossible to truly diagnose a particular loan situation without looking at the case file,
taking information from the client, and looking at the neighborhood
at large. If you just tell the consumer to call the lender and request
a modification, it doesn’t work. You have to assist the consumer in
calling the lender and show that lender how it’s in the best interest
of their investors and the consumer, how they can maximize net
tangible benefit by keeping the client in that home. It’s a lot of
work. And on the average, if you do it correctly, you will spend
about 200 hours per case.
It’s a direct service. There is no way around it. It’s like trying
to diagnose your medical problem without running a test or without doing any blood work. It cannot be done. So all of what we have
done and all of the voluntary initiatives, call a toll free number, get
it refinanced through FHA secured, they don’t address the fundamental problem. Look at, can the consumer afford the mortgage?
Is it in your best interest to take a short sale? And make sure the
paperwork goes through and is recorded so that there is no foreclosure. And then the last thing is different lenders, different
servicers have different departments and they don’t talk to each
other. It happens all the time that you’re negotiating a deal and
the foreclosure goes through. So then you have to start at the top,
work down, and rescind that foreclosure.
Mr. SILVERS. Thank you. Ms. Burks, we, as you probably know,
in New York we are working with a number of other state banking
departments and attorneys general in meeting with servicers on a
regular basis. The data that we have collected continues to worsen
and shows that eight out of ten seriously delinquent borrowers are
in no stage of foreclosure mitigation.
What are you seeing in terms of the largest obstacles? What are
the greatest obstacles that you believe are deterring the servicers
from modifying these? Is it the volume? Is it the staffing? Is it the
fiduciary duty they assert that’s owed to—to investors? What is it,
in your opinion, that we need to hurdle—that hurdle that we have
to address?
Ms. BURKS. It’s a little bit of all three. The major thing is the
people on the servicing end that answer the phone and talk to the

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consumer. And sometimes the same people that talk to the advocates have no authority to make a decision. If that servicer does
not have full delegated authority, they cannot give you an answer
on that modification. They have to go back to the investor, get permission, and then come back. And so you have to be able to sort
of negotiate at a higher level, to go to the top to say, ‘‘This is what
we need to do.’’ Present an offer and literally do counter offers back
and forth. That’s the main problem, that the people on the line
don’t have the ability to——
Mr. NEIMAN. Do you think that one of the other criticisms is that
this ad hoc basis of negotiation will never address the millions of
foreclosures? Is there a systemic stream line modification program
out there that you support as an alternative to move these modifications forward?
Ms. BURKS. Well, it’s not out there yet. But we would make it
mandatory. There has to be some mandatory modification in order
to stabilize the market. It’s not going to happen otherwise.
Mr. SILVERS. Okay. As I understand it, and I hope maybe other
panelists will respond to this. As I understand it, there’s been a
dialogue about—about foreclosure moratorium here in this state.
It’s my understanding that the Governor has asked major services
to voluntarily take on a moratorium. Am I correct in that?
Ms. BURKS. That request has been made. It is unclear as to
which servicers have agreed to do that and will do that. And so we
advise consumers, please don’t take a chance on voluntarily moratorium.
Mr. SILVERS. But now to come back for a moment to the issue
of what the treasury has said. As we have been providing financial
institutions with hundreds of billions of dollars, we have been simultaneously saying that for homeowners, for homeowners such as
Mr. Estrada, the solution is a negotiation, perhaps 200 hours, in
which the ultimate power as to what to do rests with the bank.
They can chose to act arbitrarily or they can chose not to, but it
doesn’t appear to be the government’s business. Right. As far as I
know.
Mr. Estrada, have you received any money from the Treasury
Department to assist you?
Mr. ESTRADA. No. Not yet.
Mr. SILVERS. Now, there seems to be—it feels like there was
some kind of difference in approach here fundamentally. The
Treasury Department says to us, ‘‘Well we are concerned that people who are undeserving might receive money.’’ Now, perhaps we
can request an application form for bank assistance and see if the
question, ‘‘Are you deserving?’’, is on the form some place.
Mr. NEIMAN. I think something that would be useful would be
some regulation that would be mandatory for these lenders to be
more proactive with these people, and often times people who
don’t—who can’t tell you what their loan is, they can’t—they don’t
know that they’re in an ARM, they don’t know that it’s going to be
readjusted. But the potential, certainly in Clark County where half
of the people owe more than the house is worth, the potential there
is disastrous. So if I were in the mortgage business, I would be
more proactive in reaching out to those people knowing that at any
given moment they could walk away for a better deal somewhere

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else. I don’t it’s unreasonable for the government or the Treasury
Department to require them by regulation to be more proactive, in
that they are getting the bailout money and seek out these people
who—and it’s easily identified, they know what their loans are and
they know what the value is in the community, seek them out and
see if you can’t make arrangements with them to keep them in the
house.
Mr. SILVERS. There has been a deal between Citigroup and the
Treasury Department and the FDIC, that in exchange for—
Citigroup received, I think, it’s 25 billion dollars in the first set of
monies for healthy banks. Then later on, when there was some
issues at Citigroup, they received another 20 billion. In the context
of that second infusion of cash, there was an agreement that
Citigroup would implement the FDIC program for mortgage modifications. The FDIC program is not principal write down program.
It’s a program that defers payments in certain respects, reschedules things, to make the loan more attractive.
Is it your view, Mr. Thompson or Ms. Burks that that perhaps
ought to be across the board for people who receive this money? For
banks who receive money from the Treasury Department?
Mr. THOMPSON. I believe that. I believe that.
Ms. BURKS. Yes.
Mr. SILVERS. That’s the sort of thing you’re talking about?
Ms. Murray and Mr. Estrada, you have an opportunity to respond.
Ms. MURRAY. Yes. Thank you. As we talked about, 50 percent of
the people who receive a foreclosure letter are not responding. I
just want to remind all of us that often times those same 50 percent of people are people who have lost their jobs, who don’t have
food, and are just trying to survive. So as we look at the ripple effect that comes from what you’re here to investigate and how it
flows through the system of you lose your home, you lose your job,
vice versa, often times, and you have no food, it’s so important for
us to get the core fixed so that people can stay in their homes, have
jobs, have a healthy economy and be able to have food. These are
just the basic needs in life. So I wanted to again to just talk about
the human element in all of this. So thank you, Mr. Silvers.
Mr. NEIMAN. In New York, the numbers are even in worse. Over
90 percent of people who lose their homes through the foreclosure
process, and we have a judicial process in New York, 90 percent
of those individuals lose their homes through a default. Meaning,
they never show up. And that’s why, they give up hope, they don’t
understand the process, they don’t know how to obtain an attorney.
Or they just think that it’s—there’s no hope.
So I think your point is so well taken, and why the focus has to
be on—on not for profits who provide housing, counselors on legal
aid to provide assistance on these complex issues involving negotiations, because individuals cannot be expected to understand the
complexities. You even heard the Senator talk about the complexities of these illiquid securities and these contracts. These mortgage contracts are even more complex. So I agree with you. And
I really appreciate you putting a public face to these complex
issues.

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The CHAIR. I would like to ask in a different direction, as long
as we’re talking about mortgage modifications here. As I know
you’re well aware of at this point, it’s possible for a family to declare bankruptcy and deal, in effect, with virtually every debt except the home mortgage. So credit card debts can be written off.
Car loans can be written down. Indeed, mortgages can be written
down on real estate if they’re on vacation homes, if they’re on rental property, if they’re on business property. But for someone who
lives in a home and is trying to save that home, there is currently
no bankruptcy protection. One of the alternatives that Congress is
currently considering would be to amend that portion of the bankruptcy laws so that bankruptcy is never a happy alternative, but
it puts rights in the hands of the family. So that it would not be
possible to ignore the phone calls, it would not be possible not to
have someone on the phone to negotiate. So that these mortgages
could be re-written, at least down to 100 percent of loan to value
ratio and put people into 30 year fixed mortgages that would permit them to save their homes.
I wonder if you could speak to the impact of that on not only how
it would or would not be useful for families who are in trouble as
a direct option for some families to go through bankruptcy, but perhaps more importantly how it might change the structure of the
negotiations if the consumer had the option available to the family
to declare bankruptcy if nothing could be worked out consensually.
Could anyone speak to that? Perhaps, Ms. Burks would be appropriate?
Ms. BURKS. Thank you. When the bankruptcy rules were
changed, it became more difficult for consumers to file bankruptcy.
And attempts have been made to get mandatory cram down and to
look at using bankruptcy to save the foreclosure. That would be
very helpful if we could get that passed. Currently, when they file
bankruptcy, if they don’t litigate the underlying sub-prime mortgage issue, they cannot then go back again and address it. So once
the main bankruptcy plan is put in place, guess what, the lender’s
running out, filing a motion to lift a stay to take the home anyway.
So, yes, we need the bankruptcy rules amended in order to help
consumers address these issues.
Mr. SILVERS. I want to shift for a moment from mortgages to jobs
or the way to jobs. I want to get at the heart of what I think are
the reasons why Congress passed the Emergency Economic Stabilization Act, TARP, bailout, why this was passed and what this
was trying to be—what Congress was trying to achieve and what
I believe the people at the Treasury Department are in good faith
trying to achieve.
References have been made to large commercial construction
projects in southern Nevada and particularly, on the strip and to
projects being canceled. There is an argument that it takes a while
for money to flow down through the financial system to home mortgages, to cars, and so forth. Large commercial construction financing which drives jobs, good jobs—to your point, Mr. Thompson—
large commercial construction financing moves very fast, if people
want to lend it.
I was hoping to ask the prior panel this, but we have a structured time frame here. But, Mr. Thompson, I wondered if you

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might be able to enlighten us as to whether or not large commercial construction financing is flowing in southern Nevada or not?
And if not, why not?
Mr. THOMPSON. I can tell you that right now, we have the largest
privately funded job in the world. When that job is over, and there
are about 10,000 people on that one job, I don’t know where those
people are going to go to work. As a direct result of this financial
crisis, builders and developers aren’t able to get financing. We have
Echelon, which is a massive project, coming out of the ground, and
it’s closed because it’s not able to finance the project.
Mr. SILVERS. Can you describe Echelon? Where——
Mr. THOMPSON. It’s a resort development on the Las Vegas Strip.
It’s partially built and stopped in the middle of construction. It was
in the early phases of construction. So there were only about 1,000
workers on that job. But they literally stopped the job because—
because of the inability to get the financing. So if you multiply that
out, times every job that I can think of, that’s either been canceled
or been put on hold or postponed, we are heading for some very
tough times in Nevada, specifically, because we are so reliant on
one source of income in the state, that when they have hard times,
we all have hard times. So if you add the fact that now, you know,
builders can’t build and developers can’t develop, to just the general downturn in the economy, we are in real trouble here.
And potentially, this time next year, and I think you heard Dr.
Schwer talk about unemployment numbers, this time next year are
going to be severe unless something changes. And unless something can be done to loosen up those lines of credit to businesses,
we are going to have double digit unemployment and an economy
that’s going to be very difficult.
Mr. SILVERS. Can I just get more specific with you for a moment?
Mr. THOMPSON. Okay.
Mr. SILVERS. It became clear that the Treasury Department was
going to infuse banks with substantial equity capital in mid October. Now, of course, the mechanisms by which the money gets
there are a little slower than that. But it became clear in mid October. By mid November, some of largest banks had received that
money. Those are the sorts of banks that I would assume would be
potential funders for a project of the size of the Echelon project.
Have you seen any indication or are you aware of any indication
among developers that construction unions deal with, that there
has been any increase in the availability of credit starting in mid
October, or starting in mid November?
Mr. THOMPSON. Not to my knowledge. And I would tell you that,
you know, the City Center is actually saved by partially being
funded from money from Dubai. But I don’t see that happening.
And as this thing continues to tighten around and people spend
less money and, you know, you can’t get financing on a car, so the
cars aren’t selling. It just at some point spins out of control.
Mr. NEIMAN. We’re hearing that across the country. In New
York, which has traditionally been a very strong commercial development location, we are hearing that there is no money to any loan
type, to real estate, that over 400 billion dollars of commercial real
estate loans are coming due and are going to need to be refinanced
over the next number of years, and there are no banks there to talk

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about refinancing. So I appreciate you highlighting it from what it
means for Nevada but recognizing that this is going to be an issue
that we are going to look at and address across the country. Because these are some of the largest banks that are accepting these
funds as capital. And as of now, we want to understand why, what
are their lending standards with regard to a large commercial construction development project?
The CHAIR. Mr. Neiman, I think Ms. Murray would also like to
comment.
Ms. MURRAY. Yes, thank you. Thank you, Chairwoman Warren.
Going back to Mr. Silvers’ comment, you recently mentioned unemployment and you shifted the transition to that.
Let me share with you, in Nevada, we are currently at 7.6 percent unemployment rate. And you heard Dr. Schwer say we are on
track for what could be 10 percent unemployment rate. And as you
know, nationwide, traditionally, we’ve been a percentage point or
more below the national average for decades.
So currently, if we have five out of every ten children in school
who need and qualify for a free lunch or if they don’t get food in
a day, and we go from 7.6 percent unemployment rate to 10 percent unemployment rate, the numbers are going to skyrocket of
kids who won’t eat and won’t have access to food. And so we’re
bracing for something of crisis proportion next year when the unemployment rate could go as high as double digits.
So again, I come back to the importance of what you all are
doing and what you’re doing in listening to share with Congress
the severity of the situation. And I thank you for that.
Mr. THOMPSON. There is a point that I would like to make that
I—unrelated to the banking crisis—that I think when you talk
about stimulating the economy, and certainly in this state, one of
the things that the federal government could do is to relax the need
for matching funds for some—for instance, highway construction is
a match. If the government could put a moratorium on matching
funds for public works projects for two years so that the state
doesn’t have to come up with that money, and yet they get the
funds to build those projects, I think it would go a long way in creating jobs. Just this last year, we gave money back because we
didn’t have the matching funds to match for the particular program.
And I think that’s something the government can do immediately
to help the economy.
The CHAIR. Mr. Thompson, can I just ask, because this is one of
the proposals on the table, not specifically for TARP, but in general. The idea of putting money directly back into the states overall
with the theory behind it, that the states are well prepared to put
this money to use, to put people into jobs, to rebuild infrastructure,
and so on. Can you comment on this? Do you think this is a wise
move, a foolish move? I’d be interested in your thoughts on this.
Mr. THOMPSON. I can tell you, I served in the Nevada legislature
for ten years. Actually, I served with Shelley Berkley and Dina
Titus. But I can tell you, absolutely, critically needed, the state is
ready—for instance, I’m a commissioner in a high speed train commission, to build a train from here—a train from here to Anaheim,
California. So much work has already been done on that job. If we

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just had some money, they could start construction soon. And in regards to matching funds, we have mapped out needs to widen I–
15, to increase the freeways. That work’s already been done, but
we don’t have the money. And so by relaxing those matches and
letting the states keep the money, you would create jobs overnight.
The CHAIR. That’s pretty helpful.
Mr. Silvers.
Mr. SILVERS. Mr. Thompson, your comments, I think, go to my
opening statement which is the real underlying problem here,
which we need to be conscious of as we craft TARP, as TARP
moves forward, is that we’re not moving resources to productive
uses. Right? Enormous housing levels, speculative—speculative
boom here but all around the country. Meanwhile, critical needs,
the congressman talked about energy and infrastructure, critical
needs are unmet. Now part of it—part of addressing that is the
issue of moving public money. But part of the issue is why are our
private funds, why are our capital markets not funding productive
processes and instead funding destructive speculation? That is all
over this. And the question of what should the Treasury Department be and the Congress be doing in relationship to TARP, to see
to it that TARP moves in the right direction rather than in the
wrong direction. By rather than repeating this cycle of destructive
and ultimately misleading financial booms, I think is right at the
center of things.
I would like to turn again, though, I think, you know, we, as a
panel later this week are going to be meeting with the FDIC and
we hope to be even meeting with Treasury again. We will have an
opportunity to convey what we hear today to the people who are
the decision makers, people who will decide what to do with the
TARP funds that remain, who will decide what sort of oversight
should be over institutions that have received money, that will decide what the rules will be for some of these programs that have
been announced that involve buying credit card paper or buying
other sorts of paper. There is more money involved here than I
think any of us can properly grasp. But this is an opportunity—
and as our chair said there are cameras outside for all of you who
are here to be heard—but this is an opportunity particularly for
the four of you to be heard, for us to be able to carry the direct
message back. And I particularly would like Ms. Murray and Mr.
Estrada, you know, this is your chance. Imagine, Hank Paulson is
sitting right here at this desk, what would you say?
Ms. MURRAY. If Hank Paulson were sitting at the desk, I would
say that never in the history of our country has the challenges
been so great. But then never has there been a greater opportunity
for us to show how strong we are as a country. We’re the United
States of America. We have to, and we will be able to get this
under control. But it starts with the strength of the financial communities and unemployment. Because, as a food bank, I can do all
that we can do to keep up with food. But if people don’t have jobs,
and if there is not strength in the financial markets, we’re only
being reactive. And that it’s so important to be proactive and to
work with members of Congress, to work with the states and the
cities and the counties to ensure that everyone is doing the best it
is that they can be doing.

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Mr. ESTRADA. Well, I would like to just say that to me, without
putting God first around us, this world, the way that it is right
now—unfortunately, I just got laid off from a job that dealt with
transportation for tourism. And they couldn’t justify moving 32
people in the morning, having 13 drivers, and having a bus that
carries that many people in one shot. So I was laid off. And the
one thing I thank God about is that I have a commercial license
so that I sort of have some leeway. But the one thing that I will
not do especially in this town, and I’ve lived in Las Vegas for 30
years, is take a job that has to do anything with tourism anymore.
Because tourism here in Las Vegas is so bad. I have a friend that
was working at the airport—and three years ago, I worked an economy lot shuttle from the airport parking to the zero level, and we
filled up three different parking lots. This year, they didn’t even fill
up the first parking lot.
And all I’m saying is that we need help. And some of these people that we’re trying to talk to, like our mortgage companies and
stuff like that, they’re not talking to us. They’re waiting until the
end, just like what happened with me as far as losing my house,
when to me, that never should have ever happened. It should have
never happened. They had what they wanted, we agreed to give
them the amount, and still a few days later, they tell us, you know,
it’s not your home anymore.
Ms. MURRAY. Chairwoman Warren, we have an opening in our
food bank for a driver. I would like to talk to Mr. Estrada after the
hearing.
The CHAIR. Good things can come from hearings.
Mr. ESTRADA. Yes, they do.
The CHAIR. Good.
Remarks——
Mr. NEIMAN. I have a question. We have heard a lot about the
servicers and the lenders being overwhelmed. And I know that not
for profits, particularly the housing counselors, are overwhelmed as
well. And that’s why in New York, we’ve had a specific effort of getting grants. In fact, we’ve given in the banking department, over
2 million dollars in monies that we’ve collected from fines, in fact,
against predatory lenders to go to housing counselors and legal aid.
The state’s given 25 million to housing counselors and legal aid, because they’re mandating now, prior to a foreclosure, that individuals have a right to counselors. And if it goes into a foreclosure
proceeding, they have a right to legal counsel.
Ms. Burks, what is the level of volume and support that your institutions have in terms of providing resources? Can you handle
the work? Is there a funding resource or is there an expertise or
staffing need for the organizations in this state?
Ms. BURKS. Yes. The nonprofits have been working around the
clock and with the local government to do outreach. We could work
24/7 and we couldn’t handle the load. There have been some counseling funds that have come down through national. There is no
state money to do the work. Staffing is inadequate, and it’s going
to get worse in 2009.
So while you may have expertise, there may be people you could
hire, there are no funds to hire more staff. That is not going to
happen. So we have to do the best we can with what we have. And

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we have to change the way we modify loans in this country and in
this state.
The CHAIR. Thank you. With that——
Audience SPEAKER. Madam Chairwoman, a point of inquiry, if I
might?
Ms. WARREN. I’m sorry? Yes.
Audience SPEAKER. Well, it’s such a special panel and this is
such a special gathering. So nonofficial, so nonspecific. I would beg
your indulgence to open to the public to be able to comment to
folks. It is a special moment. And you have that discretion. And I
think this moment calls for that. And if you give us a certain
amount of time. Even three minutes. And I mean this with respect.
Now, there are some things that need to be addressed which are
not being addressed here.
The CHAIR. I understand your question. I’m going to deal with
the panel first here.
I want to thank the panel for coming. I appreciate the time that
you have put in on this. I know this is difficult to come and tell
these stories.
I know you work hard to prepare, and I know you work hard
every day on what you’re accomplishing. So I appreciate it on behalf of the panel.
And the second panel is now excused. Thank you very much.
We still have in our schedule, I believe, we have about eight minutes left.
We are scheduled to leave at 12:30, and we will leave at 12:30.
We must leave at 12:30. I’m sorry we don’t have more time. I want
to remind everyone, we brought, for exactly this reason, a
videographer who is out in the hallway so that each of you who
wants to talk can talk to the videographer. That gives us a record
to take back with us, rather than simply our repeating.
But we are glad to spend our remaining time, perhaps the fairest
way to allocate that time, is if we each just took one minute for
a person who wants to do that. And perhaps I should start with
you, sir.
Audience SPEAKER. First, I would state my position to somebody
else more important who might not understand who I am. I’ll take
that.
The CHAIR. Yes, sir.
Audience SPEAKER. So having conveyed that, here is what concerns me. It concerns me that we’re talking all around an issue and
we’re not being specific. I want to see the plan. I want to see just
like I’m sitting at the kitchen table what we’re going to do. I want
to feel the pain. And there is lots of pain, ladies and gentlemen.
And you are not going to resolve this unless you go to the heart
of it. It is about energy. If you do not move towards energy and
move now, everything else will be fraud.
When I hear people talking about financial enterprises, I am disgusted. It is those people who got us into this that give these bodies credibility.
It is foolish on top of foolish.
And it is not about——
The CHAIR. Sir, that’s one minute.
Thank you very much. I want others to have a chance to talk too.

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Audience SPEAKER. It is not about jobs. It is about a vision for
the country that brings us back to being American. And I am not
here to——
Chairwoman WARREN. Thank you, sir. That is more than a
minute. Thank you. Yes, sir.
Yes. In the back in the gray sweater. Will you please identify
yourself, please, sir.
Audience SPEAKER. Yes. My name is Raymond G. Herrera. I’m
going to make this as quick as I possibly can. I lost my position
in May of 2008. We have done everything we possibly could with
our own savings to help support the people that are renting the
homes that we have rented, including our own which we reside in,
which is in Las Vegas. We have since tapped our resources because
of the fact that the other individuals who rent those homes have
themselves have become victims to this economy. We couldn’t do
anything towards moving towards trying to address our own loan
situation because the banks instructed us that we had to be in default before they would even talk to us. Now, that they’re communicating with us, they treat us like we’re the culprit. In fact, that
we can’t pay the loan anymore. And then you hear these outside
sources that say, you know what, these people are trying to take
advantage of the system by trying to get some kind of loan modifications.
There were two things that were brought up here that could really assist those of us. One is to mandate forbearance until an issue
is resolved, even if it does mean the loss of a home. And the second
one is do the adjustment on the bankruptcy, so that we can at least
address our situation.
I mean, everybody is talking about the three big auto dealers
going bankrupt to try to resolve their own issues. Yet we ourselves,
in our own homes and residences, we don’t have that option. So
those are two things that could be addressed and we don’t have to
worry about where all the other money is going at this point in
time.
The CHAIR. Thank you, sir.
Yes, ma’am.
Audience SPEAKER. My name is Aussie Brooks.
And I have written a proposal on real estate and foreclosure and
defaults. I know I can upload it, but I do have an extra copy here
that I would like to give to you. And it seems like everything is
trickling down, not getting to us. I want it to start trickling up.
What do we have to do, wait for the new regime or administration
to come in or not? But my concern—my great concern is that nothing has been done now. And we do need some help right now. And
when I say we, I mean the people who make the banks. Our monies are in the banks. And anyway, can I give this to you, please?
Foreclosures, are these lenders receiving mortgage insurance? Is
that a motivation for them to let it go into foreclosure? Also, you
know the TARP money that is going out, you know, the banks are
getting—receiving this money, can this money go through the consumer? To allow them to buy down the loans, and it still goes to
the lender anyway. That’s something I wanted to state.
The CHAIR. Thank you, sir.
Yes, sir.

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Audience SPEAKER. Strictly, three things.
Economics. Economics. Economics. Now——
Chairwoman WARREN. Got them all.
Audience SPEAKER. Now, Obama wants to reissue economics in
the middle class of America with dams and bridges, and buildings,
and federal funds.
The bailout is waste, because if you bail them out now, you’re
going to have to bail them out in the future. But if we go back to
our founding fathers, the people that came over here from the old
country, and they built equity—the word equity has been lost in
the rental of survival and low income is $750 a month. How in this
God’s earth can a wage earner that is making $7.50 to $10.00 an
hour afford to live in the economic structure the way it is?
Simply, the unions and all the other factions pushed our economic structure lop sided. I’ve been told that the Ford motor company worker gets $50 to $70 an hour for goods and services for his
work. The basic America is getting back to the low income people
that can afford to live and build some equity. The only option is
the mobile home industry that can rebuild mobile homes for low income housing and buy equity into the future. That’s where it has
to go. Back to the grassroots of earning the right to become in life,
liberty and the pursuit of happiness. That’s what’s wrong, and
that’s what has to be corrected. And if you don’t, stop wasting your
time.
The CHAIR. Thank you, sir. Yes, ma’am. And then we’ll do one
more, and we’ll be done. The gentleman in the back.
The WITNESS. My name is Linda Abrams.
I’m a counselor with NID Housing. I want to speak on the issue
about the loan modification. It is not enough that is being done to
help the people that I am working with. The borrowers, they’re
being offered modifications that the payments are just as high. And
in some cases, more than what they were already paying. Which
is not helping them. Then they ask for $20,000, $30,000 up front.
Well, if they can’t make their mortgage payment, how are they
going to come up with $20,000 or $30,000? Then they’re forced into
bankruptcy. And when they’re forced into bankruptcy, and you go
back to the servicer or the lender to try and get a loan modification
so they can take it to the judge, which is what they tell you that
you need to do, they don’t talk to each other, because you go from
one department to another. And this department tells you you need
to talk to the bankruptcy department. The bankruptcy department
tells you you need to go speak to the attorney. The attorney sends
you right back, and then it comes that, well, you know what, we
can’t do anything for that loan because the loan is bundled. So we
don’t even have—we don’t even know who the lender is. So I’m
stuck with borrowers that we can’t do anything—we don’t have a
modification that we can take to the a judge and ask that judge
if he could do something to bring that payment back down. So what
do we do with those borrowers? There’s just not enough. And it’s
very, very sad. Our hands are just tied.
The CHAIR. Yes, ma’am. Thank you.
Audience SPEAKER. Ron. Resident here in Clark County. Coming
back to the courts, everything that has been said here, mandatory
loan modification, make them step up. If you are handed a million

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dollars, make sure they are handing you a million dollars that they
have in existing mortgages that they have done modifications down
to loan value.
The CHAIR. I want to close now by thanking all of you. I want
to thank you for coming out. I want to thank you for talking with
us. I want to thank for your patience for sitting here for two and
a half hours as we work through this. Please let me say again if
you have not already done so, we’re glad to hear and we’re glad to
make notes but please do talk to the videographer. I really want
to make a record of this. I also want to say if you get the opportunity click on the website. Remember it’s cop dot senate dot gov.
Click on, add your comments, as we begin to post comments feel
free to add additional comments. I don’t think this is going to be
over within the next few weeks. Finally I want to say that the
three of us, the panelists, one reason I need to stay on schedule is
that we were here today to engage in a formal hearing to have an
opportunity to hear from the public. But we are not through trying
to learn at least a little bit about Nevada in our short time here.
We are leaving to drive around a little and talk to some more people on a more informal basis. So we hope to see more of Clark
County while we’re here and learn more. Again thank you all for
coming. This hearing is adjourned.
Hearing adjourned at 12:32 p.m.
[The written statement of Oscar B. Goodman, Mayor, City of Las
Vegas, follows:]

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Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102