[House Hearing, 111 Congress] [From the U.S. Government Publishing Office] THE GOVERNMENT AS DOMINANT SHAREHOLDER: HOW SHOULD THE TAXPAYERS' OWNERSHIP RIGHTS BE EXERCISED? ======================================================================= HEARING before the SUBCOMMITTEE ON DOMESTIC POLICY of the COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM HOUSE OF REPRESENTATIVES ONE HUNDRED ELEVENTH CONGRESS FIRST SESSION __________ DECEMBER 16, 2009 __________ Serial No. 111-132 __________ Printed for the use of the Committee on Oversight and Government Reform Available via the World Wide Web: http://www.fdsys.gov http://www.oversight.house.gov U.S. GOVERNMENT PRINTING OFFICE 65-130 WASHINGTON : 2011 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office, http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, [email protected]. COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM EDOLPHUS TOWNS, New York, Chairman PAUL E. KANJORSKI, Pennsylvania DARRELL E. ISSA, California CAROLYN B. MALONEY, New York DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland JOHN L. MICA, Florida DENNIS J. KUCINICH, Ohio MARK E. SOUDER, Indiana JOHN F. TIERNEY, Massachusetts JOHN J. DUNCAN, Jr., Tennessee WM. LACY CLAY, Missouri MICHAEL R. TURNER, Ohio DIANE E. WATSON, California LYNN A. WESTMORELAND, Georgia STEPHEN F. LYNCH, Massachusetts PATRICK T. McHENRY, North Carolina JIM COOPER, Tennessee BRIAN P. BILBRAY, California GERALD E. CONNOLLY, Virginia JIM JORDAN, Ohio MIKE QUIGLEY, Illinois JEFF FLAKE, Arizona MARCY KAPTUR, Ohio JEFF FORTENBERRY, Nebraska ELEANOR HOLMES NORTON, District of JASON CHAFFETZ, Utah Columbia AARON SCHOCK, Illinois PATRICK J. KENNEDY, Rhode Island BLAINE LUETKEMEYER, Missouri DANNY K. DAVIS, Illinois ANH ``JOSEPH'' CAO, Louisiana CHRIS VAN HOLLEN, Maryland HENRY CUELLAR, Texas PAUL W. HODES, New Hampshire CHRISTOPHER S. MURPHY, Connecticut PETER WELCH, Vermont BILL FOSTER, Illinois JACKIE SPEIER, California STEVE DRIEHAUS, Ohio JUDY CHU, California Ron Stroman, Staff Director Michael McCarthy, Deputy Staff Director Carla Hultberg, Chief Clerk Larry Brady, Minority Staff Director Subcommittee on Domestic Policy DENNIS J. KUCINICH, Ohio, Chairman ELIJAH E. CUMMINGS, Maryland JIM JORDAN, Ohio JOHN F. TIERNEY, Massachusetts MARK E. SOUDER, Indiana DIANE E. WATSON, California DAN BURTON, Indiana JIM COOPER, Tennessee MICHAEL R. TURNER, Ohio PATRICK J. KENNEDY, Rhode Island JEFF FORTENBERRY, Nebraska PETER WELCH, Vermont AARON SCHOCK, Illinois BILL FOSTER, Illinois MARCY KAPTUR, Ohio Jaron R. Bourke, Staff Director C O N T E N T S ---------- Page Hearing held on December 16, 2009................................ 1 Statement of: Brown, Orice Williams, Director, Financial Markets and Community Investment, Government Accountability Office, accompanied by A. Nicole Clowers, Acting Director, Physical Infrastructure, Government Accountability Office; Professor B. Espen Eckbo, Tuck School of Business at Dartmouth; Professor J.W. Verret, George Mason University School of Law; Anne Simpson, senior portfolio manager for Global Equity, California Public Employees' Retirement System; Alan Tonelson, research fellow, U.S. Business and Industry Council Educational Foundation; and Ralph Nader, consumer advocate, accompanied by Robert Weissman, president, Public Citizen.................................................... 17 Brown, Orice Williams.................................... 17 Eckbo, Professor B. Espen................................ 42 Nader, Ralph............................................. 92 Simpson, Anne............................................ 72 Tonelson, Alan........................................... 81 Verret, Professor J.W.................................... 68 Letters, statements, etc., submitted for the record by: Brown, Orice Williams, Director, Financial Markets and Community Investment, Government Accountability Office, prepared statement of...................................... 19 Cummings, Hon. Elijah E., a Representative in Congress from the State of Maryland, prepared statement of............... 11 Eckbo, Professor B. Espen, Tuck School of Business at Dartmouth, prepared statement of........................... 44 Kucinich, Hon. Dennis J., a Representative in Congress from the State of Ohio, prepared statement of................... 5 Nader, Ralph, consumer advocate: A Review of Corporate Governance......................... 128 Prepared statement of.................................... 94 Simpson, Anne, senior portfolio manager for Global Equity, California Public Employees' Retirement System, prepared statement of............................................... 74 Tonelson, Alan, research fellow, U.S. Business and Industry Council Educational Foundation, prepared statement of...... 83 Verret, Professor J.W., George Mason University School of Law, prepared statement of................................. 70 THE GOVERNMENT AS DOMINANT SHAREHOLDER: HOW SHOULD THE TAXPAYERS' OWNERSHIP RIGHTS BE EXERCISED? ---------- WEDNESDAY, DECEMBER 16, 2009 House of Representatives, Subcommittee on Domestic Policy, Committee on Oversight and Government Reform, Washington, DC. The subcommittee met, pursuant to notice, at 10 a.m., in room 2154, Rayburn House Office Building, Hon. Dennis J. Kucinich (chairman of the subcommittee) presiding. Present: Representatives Kucinich, Cummings, Tierney, Watson, and Jordon. Staff present: Jaron R. Bourke, staff director; Michael Clark, professional staff member; Jean Gosa, clerk; Charisma Williams, staff assistant; Leneal Scott, information systems manager, full committee; Adam Hodge, deputy press secretary, full committee; Adam Fromm, minority chief clerk and Member liaison; Kurt Bardella, minority press secretary; Benjamin Cole, minority deputy press secretary; Christopher Hixon, minority senior counsel; Hudson Hollister and Marvin Kaplan, minority counsels; and Brien Beattie, minority professional staff member. Mr. Kucinich. Good morning. The Domestic Policy Subcommittee of the Oversight and Government Reform Committee will now come to order. Today's hearing will examine the way that common equity shareholder rights acquired by the Treasury Department under authorities provided in the Emergency Economic Stabilization Act of 2008 have been exercised to date, and to assess alternative frameworks for exercising and protecting the taxpayers' interests. Without objection, the Chair and ranking minority member will have 5 minutes to make opening statements, followed by opening statements not to exceed 3 minutes by any other Member who seeks recognition. And, without objection, Members and witnesses may have five legislative days to submit a written statement or extraneous materials for the record. Today and tomorrow we will be examining how the Treasury Department is managing common equity, or voting, shares acquired under the Emergency Economic Stabilization Act of 2008. As a result of activities conducted under the Troubled Assets Relief Program, the Government is now a principal shareowner in four large, complex, and troubled companies: two from the financial services industry--AIG and Citigroup--and two from the auto industry--GM and Chrysler. Like it or not, the U.S. Government is today the major common equity shareholder, the principal owner, in two of these companies, AIG and GM, and has an outsized role in two others. Establishing a clear chain of authority, responsibility, and accountability for our current exercise of fiduciary responsibility in the case of the four companies is an essential and unavoidable task if Congress, and in particular, the House of Representatives, is to uphold its constitutionally defined fiduciary responsibility to protect the public interest. The main objective of these hearings is to assess how and how well the Treasury Department has upheld its fiduciary responsibilities in managing the resulting U.S. Government shareholding, and also to assess how and how well it has mobilized the full array of Government capabilities in support of turning around these firms and their industries, and in support of the broader purposes of Emergency Economic Stabilization Act. A major theme today and tomorrow will be corporate governance. To an important degree, the failures of all four companies have resulted from failures in corporate governance-- failures in risk management, failures in compliance, failures to hold executives accountable, and failures to rein in excessive corporate pay. And so the first question we have to ask is: Have the actions of the Federal Government had the effect of upholding best practices in corporate governance? Or, rather, does the way in which Treasury is managing our more than $200 billion stake in these four companies actually constitute a major step backward in corporate governance? But this is only one part of what we need to examine. Remember that in choosing to provide the extraordinary authorities of EESA, Congress was not acting primarily as an investor. As defined in the Emergency Economic Stabilization Act of 2008, the Troubled Asset Relief Program [TARP], was intended to serve several purposes. Beyond providing liquidity to the financial system, EESA has as its second main purpose to ensure that the authorities and facilities created ``are used in a manner that'' promotes jobs and economic growth, helps homeowners stay in their homes, protects home values, retirement accounts, and life savings, ``maximizes overall returns to the U.S. taxpayer,'' and ``provides public accountability'' for the exercise of the authorities granted. Thus, the purposes and obligations of the U.S. Government are not at all limited to the maximization of shareholder value, and our fiduciary obligations are not at all exhausted merely by upholding established best practices in corporate governance, as necessary and urgent as this is. Now when it comes to broader issues, there is a really fundamental inequity. Consider first how the Treasury Department has handled the financial companies. When it came to intervening in the large financial institutions, and certainly AIG and Citigroup, the U.S. Government could have simply purchased the companies for a song. Or it could have forced the banks through bankruptcies, and forced creditors and other stakeholders to take major haircuts to share the pain. But, instead, the path that was chosen guaranteed payoffs for all creditors, and guaranteed outsized bonuses to even the employees who were most directly responsible for nearly blowing up the world economy. The upshot: This holiday season, bankers are taking home the largest bonuses ever paid. Creditors have been made whole, and shareholders that counted on government support and stayed with the companies are seeing values restored, while others that bailed out and came back in after TARP money was flowing have made a killing. But now wait; there is more. On the front page of this morning's Washington Post we see that the Treasury is so eager to placate the people at Citigroup and help them get out from under the thumb of the paymaster that it has agreed to allow Citigroup to keep billions of dollars in tax liabilities it would owe as soon as it pays back the TARP funds. These taxes are worth more than any alleged ``profit'' to taxpayers from the TARP repayment and interest. I want the administration to know that we are going to look into this. I want the administration to know that we are going to look into this deeply. And I want all those at Citigroup who have had their tentacles across this Government to understand that we are watching this and we are looking at their every move that they have made. And if you want any further reference, you can look at Matt Taibbi's article in Rolling Stone, which I have read thoroughly, and it raises plenty of questions about Citigroup and people in the administration. Now contrast the kid glove treatment given to the financial sector with the treatment of the auto companies and their stakeholders under TARP, the overall support and level of effort expended for the American auto industry, and the broader impact of the crisis and of Government intervention on U.S. manufacturing. In the case of the auto companies, shareholders were wiped out, and creditors, including pension funds, were forced to accept as little as 10 cents on the dollar for their previous investments. The impact of the auto rescue on employment was not to avoid major cuts in jobs or production. Instead, it was to accelerate pre-existing plans for downsizing U.S. production, work hours, pay scales, and dealerships by as much as 4 years. Plant closings, brand reductions, and, as we all know, dealer closures, and other restructurings were also advanced. More difficult to see, but equally important, is the impact on suppliers and their employees. What we do know is that even after the bailout, in October, GM's then CEO spoke openly of sourcing even more parts from Korea. Finally, there seems to be a pattern of favoritism shown to the financial services industry, and of ``malign neglect,'' when addressing issues of manufacturing, job creation, and decent blue-collar wages. To my knowledge, today's and tomorrow's hearings are Congress's first attempt to create some measure of accountability over Treasury's handling of U.S. shareholder interests financed through TARP. What the Domestic Policy Subcommittee has found preliminarily is that too much of what the Treasury Department has done seems to be designed to evade and obfuscate accountability. This is not acceptable. We need to find another way forward. We need to find or establish new agencies, with clear lines of authority, to do the jobs that TARP was intended to do. Left up to Treasury on its own, those jobs are not getting done, and probably never will be. [The prepared statement of Hon. Dennis J. Kucinich follows:] [GRAPHIC] [TIFF OMITTED] T5130.001 [GRAPHIC] [TIFF OMITTED] T5130.002 [GRAPHIC] [TIFF OMITTED] T5130.003 Mr. Kucinich. I yield to the gentleman from Ohio, Mr. Jordan. Mr. Jordan. Thank you, Mr. Chairman. Let me thank you for holding today's hearing. I commend you for focusing the subcommittee's time on the vital question confronting the U.S. economy and the American taxpayers: Given the unfortunate road of the bailouts we have gone down, how should the Government manage its interest in private sector companies so as to ensure that the taxpayers are repaid as quickly as possible? Unfortunately, TARP has become nothing more than a slush fund for the administration. The trend toward the nationalization of private sector firms did not stop with the banking sector. TARP has been used to secure Government ownership of automobile manufacturers, bail out insurance companies, and subsidize mortgage modifications, among other programs. Now President Obama says that he intends to use repaid TARP funds for the so-called job creation programs, the second stimulus bill that is slated to be on the calendar today. This trend of using taxpayer money authorized for one purposes for a completely different purpose is troubling and, frankly, it must stop. Many of us voted against TARP--I know the chairman and I both did--and our skepticism about the bailouts of private firms, I think, has been vindicated. We have seen numerous problems at the companies under the Government's control. For example, the committee has explored the flaws in the AIG trust agreement. This agreement, established by Mr. Geithner when he was president of the New York Fed, creates an unaccountable entity responsible for the management of the taxpayers' 80 percent interest in AIG. In addition, AIG has been hampered by the control of the Obama administration's so-called pay czar. Thirteen of AIG's top 25 employees have already left, and AIG's recently hired CEO and other top executives threaten to leave due to the pay czar's rulings. These developments reveal another pitfall of the bailouts. While we don't like paying these employees' competitive salaries--we may not like that--the reality is that without talented employees, AIG will simply not be able to repay the American taxpayers. The politicalization of General Motors and Chrysler has also demonstrated the problems created by the bailouts. In order to fully repay the taxpayers for the bailout of GM, the company will have to achieve a larger market capitalization than in any other time in its history. Making decisions that adhere to the wishes of the Obama administration's auto task force may benefit the unions or other special interest group, and satisfy the demands of powerful Members of Congress but will not lead to business success and taxpayer repayment. We have an obligation, Mr. Chairman, to ask how and when we can escape from this mess. The American people have a right to know how this administration intends to manage taxpayer interest and all the firms that have been bailed out. We must ensure that the American people are paid back quickly and that as much of their money as possible is salvaged from this unprecedented and unwise intervention into the U.S. economy. This is a hearing that takes us in the right direction in answering these important questions and, again, I want to thank you for your willingness to put this together and for our witnesses for being here this morning. Mr. Kucinich. I thank the gentleman. The Chair recognizes Mr. Cummings of Maryland. You may proceed. Mr. Cummings. Thank you very much, Mr. Chairman. Today's hearing highlights two issues for me: that the economy is far from out of the woods and we will not know the final cost of the financial crisis for some time. Economists may herald the end of the technical recession, but I would hate to have to make that argument to the 10 percent of our Nation that is out of work, the millions of small businesses that still cannot access credit, or the millions of homeowners who find themselves in or near foreclosure. Further, the American taxpayers were made involuntary investors in several firms last year to provide the financial market the stability necessary to ensure they kept functioning in the midst of unprecedented circumstances. Given the dire straits for so many Americans, in return for their investments in AIG, GM, and other firms, they are owed not only our efforts to maximize the value of the equity they have acquired, but also a frank evaluation of the manner in which those investments are managed. In the last month we have seen Bank of America, Citigroup, and Wells Fargo announce repayment of their TARP obligations. Further, the interim CEO at General Motors, Edward Whitaker, announced yesterday that the auto maker would repay its Government loans by June 2010. The news of repayments by these firms receiving extraordinary assistance is a sign that the financial sector has all but recovered. But it also raises three critical points that we must now address: First, despite the public pronouncements by Bank of America, Citigroup, and Wells Faro that they are off the Government tab, the taxpayers still retain equity positions in some of the firms, highlighted by their 34 percent stake in Citigroup. As a result, we remain shareholders and must continue to diligently play a role in the future of the firm. Second, some analysts have criticized the Treasury's decision to allow these firms to repay the Government, arguing that the firms have gotten out of executive pay restrictions while still presenting systemic risk. Therefore, it remains to be seen whether we have sacrificed economic stability for the benefit of a few Wall Street firms. Third, and most importantly, despite propping up Wall Street, credit is not flowing to small- and medium-sized businesses, the firms that Nobel Prize winning economist Joe Stiglitz called the source of job creation. This begs the question: With or without Government equity positions, how can we get these firms to start lending again? Mr. Chairman, once again I thank you for holding this hearing. Despite the technical end of the recession and shows of strength by Wall Street giants, the rest of America still desperately needs our help. I welcome the testimony of our distinguished witnesses and look forward to a frank and productive discussion, and, with that, Mr. Chairman, I yield back. [The prepared statement of Hon. Elijah E. Cummings follows:] [GRAPHIC] [TIFF OMITTED] T5130.004 [GRAPHIC] [TIFF OMITTED] T5130.005 [GRAPHIC] [TIFF OMITTED] T5130.006 [GRAPHIC] [TIFF OMITTED] T5130.007 Mr. Kucinich. The gentleman yields back. I want to thank the witnesses for being here. There is a vote that has been called. We are going to go vote, then we are going to come right back. It will probably be about 30 minutes. Sorry for the delay. We will move as expeditiously as possible. We will go right to your testimony as soon as we return. Thank you very much. We stand in recess for 30 minutes. [Recess.] Mr. Kucinich. The committee will come to order. I want to thank all the witnesses for their patience. There are no additional opening statements and the subcommittee will receive testimony from the witnesses who are before us. For those who are just joining us, this hearing is entitled, ``The Government as Dominant Shareholder: How Should the Taxpayers' Ownership Rights be Exercised?'' I want to start by introducing our first panel. Orice Williams Brown is Director of GAO's Financial Markets and Community Investment team. Her work is concentrated on securities and futures oversight, banking insurance and accounting policy. Currently, she leads GAO's work on the financial crisis, Treasury's troubled asset relief program and regulatory reform. We also have here, as backup, A. Nicole Clowers, who is currently an Acting Director at GAO and leads GAO's work on surface transportation. She has led GAO's evaluations of the Federal Government's assistance to the auto industry, among other topics. Ms. Clowers will not be testifying, but will be available to answer questions. Espen Eckbo. Professor Eckbo is the Tuck Centennial professor of finance and founding director of the Lindenauer Center for Corporate Governance at the Tuck School of Business at Dartmouth. He has written widely on a variety of corporate finance related topics, currently serves on the Advisory Board, Center for Leadership and Governance of America's Health Insurance Plans. Professor J.W. Verret is senior scholar at the Mercatus Center and assistant professor of Law at George Mason University School of Law. He is an expert on corporate governance and has published in a number of legal journals. Ms. Anne Simpson is senior portfolio manager for Global Equities at the California Public Employees' Retirement System, the largest public pension system in the United States, with approximately $200 billion under management. CalPERS provides retirement and health benefits to more than 1.6 million public employees, retirees, and their families, and more than 2500 employees. Previously, Ms. Simpson was the executive director of the International Corporate Governance Network, a body whose members are drawn from over 40 countries. Alan Tonelson is a research fellow with the U.S. Business and Industry Council Educational Foundation, a Washington research organization studying U.S. economic technology and national security policy. Mr. Tonelson's articles on American politics, foreign policy, globalization, and technology policy have appeared in nearly every influential publication. He is a frequent commentator on radio and television. The next person, Ralph Nader, needs no introduction, but I am going to introduce him anyway. Mr. Nader is an historic figure who, more than any other single person, has helped us to drive safer cars, eat healthier food, breathe better air, drink cleaner water, and work in safer environments. He has been doing this work for more than four decades. Mr. Nader's advocacy led to the passage of a National Traffic and Motor Vehicle Safety Act. He was instrumental in the creation of the Occupational Safety and Health Administration, the Environmental Protection Agency, the Consumer Product Safety Commission, the National Highway Transportation Safety Administration. By starting dozens of citizens groups, Ralph Nader has created an atmosphere of corporate and governmental accountability. He was named by The Atlantic as one of the 100 most influential figures in American history and by Time and Life Magazines as one of the most influential Americans of the 20th century. When I was mayor of Cleveland, Ralph Nader helped me save a city's municipal electric system, something that the people of Cleveland remember and are always grateful for. Finally, I want to introduce Robert Weissman, who is here accompanying Mr. Nader. Robert Weissman is president of Public Citizen, a nonprofit research, lobbying, and litigation public interest organization, with 150,000 members and supporters. He is co-author of a forthcoming book, Corporate Ethics International, examining how government can leverage its investment in Citigroup to advance public policy objectives. Mr. Weissman will not be testifying, but will be available to answer questions. I want to thank all of you for appearing before this subcommittee today. Now, any person who is going to be testifying, including the people who are sitting in the second row, if you may answer a question, I am going to ask that all the witnesses, including those who just may be only answering questions, please rise and raise your right hands to be sworn. [Witnesses sworn.] Mr. Kucinich. Thank you. You may be seated. Let the record reflect that the witnesses answered in the affirmative. Ms. Brown, you will be our first witness. We ask you to proceed for 5 minutes. Your entire statement will be included in the record. Once the light goes to red, we would like you to wrap it up so we can keep this moving. But whatever you submit to this committee will be in the record of the hearing, so you can just give us a summary. You may proceed. Thank you. STATEMENTS OF ORICE WILLIAMS BROWN, DIRECTOR, FINANCIAL MARKETS AND COMMUNITY INVESTMENT, GOVERNMENT ACCOUNTABILITY OFFICE, ACCOMPANIED BY A. NICOLE CLOWERS, ACTING DIRECTOR, PHYSICAL INFRASTRUCTURE, GOVERNMENT ACCOUNTABILITY OFFICE; PROFESSOR B. ESPEN ECKBO, TUCK SCHOOL OF BUSINESS AT DARTMOUTH; PROFESSOR J.W. VERRET, GEORGE MASON UNIVERSITY SCHOOL OF LAW; ANNE SIMPSON, SENIOR PORTFOLIO MANAGER FOR GLOBAL EQUITY, CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM; ALAN TONELSON, RESEARCH FELLOW, U.S. BUSINESS AND INDUSTRY COUNCIL EDUCATIONAL FOUNDATION; AND RALPH NADER, CONSUMER ADVOCATE, ACCOMPANIED BY ROBERT WEISSMAN, PRESIDENT, PUBLIC CITIZEN STATEMENT OF ORICE WILLIAMS BROWN Ms. Brown. Mr. Chairman, Ranking Member Jordan, and members of the subcommittee, I am pleased to be here this morning to discuss the Government's role as shareholder in AIG, Citigroup, Chrysler, and General Motors. As requested, I will briefly touch on three broad issues. First, from our previous work on Federal financial assistance to large firms and municipalities, we have identified three fundamental principles that provide a framework for considering and evaluating assistance: one, the problems confronting the industry need to be clearly defined, distinguishing between those that require an immediate financial response from those that are likely to require more time to resolve; two, determine whether the national interests will be best served through some type of government intervention or whether market forces and established legal procedures such as bankruptcy should be allowed to take their course, and, if Federal financial assistance is needed, clear objectives and goals for this assistance must be established; and, three, given the significant financial risk the Federal Government may assume on behalf of taxpayers, the structure created to administer any assistance should provide for appropriate mechanisms to protect taxpayers from excessive or unnecessary risks, such as concessions by all parties, controls over management, and compensation for risk. However, the recent crisis has posed unique challenges in adhering to this framework due to its sheer size and scope. Next, I will touch on the Government's role as shareholder, which differed by type of institution and assistance provided. For example, the Federal Reserve Bank of New York, as a condition of the secured loans it provided to AIG, created a trust to hold the convertible preferred shares it acquired as a condition of this credit. Conversely, Treasury obtained Citi common shares after Citi requested that Treasury's initial investment be converted to common shares to strengthen Citi's capital structure. For Chrysler and GM, Treasury obtained an ownership interest in return for the financial assistance provided to help the companies restructure. According to Treasury, it has developed several core principles to guide its oversight of its investments going forward. These included acting as a reluctant shareholder, not interfering in day-to-day management decisions, ensuring a strong board of directors, and exercising limited voting rights. Treasury has established conditions such as executive compensation requirements and voting on certain limited matters, and routinely monitored the companies' operations. Finally, as part of our ongoing work with SIGTARP, we are reviewing three areas: the extent of Government involvement in corporate governance and operations of companies that have received exceptional assistance; how Treasury ensures that companies are complying with key covenants; and the Government's management of its investments and divestiture strategies. One issue we are exploring is the advantages and disadvantages of a trust arrangement versus direct management. For example, directly managing the investments gives the Government greater control over these investments, but it also raises potential conflicts of interest when the Government is both a regulator and investor. GAO and SIGTARP are also reviewing the Treasury's plans for divesting, which are still evolving; and, except for Citi, Treasury has yet to develop exit strategies for unwinding the investments in others. In closing, I would like to note that Treasury faces a number of competing and, at times, conflicting goals. For example, protecting the taxpayers' interests must be balanced against its plan to divest its ownership interests as soon as it is feasible. Consequently, Treasury may have to balance its desire to exit as quickly as possible with the need to maintain its equity interests long enough for the companies to demonstrate sufficient financial progress. Second, establishing and monitoring benchmarks is an important part of Treasury's management of these investments because they inform the ultimate decision on when and how to sell each investment. Regularly monitoring the benchmarks will be important for Treasury to help ensure that taxpayer interests are maximized. And, finally, while many agree that TARP funding has contributed to the stabilization of the economy, the significant sums of taxpayer dollars that were invested in a range of private companies warrant continued oversight and development of a prudent divestiture plan. Thank you. My colleague, Nicky Clowers, who is knowledgeable about the assistance provided to the automobile industry, and I will answer any questions at the appropriate time. [The prepared statement of Ms. Brown follows:] [GRAPHIC] [TIFF OMITTED] T5130.008 [GRAPHIC] [TIFF OMITTED] T5130.009 [GRAPHIC] [TIFF OMITTED] T5130.010 [GRAPHIC] [TIFF OMITTED] T5130.011 [GRAPHIC] [TIFF OMITTED] T5130.012 [GRAPHIC] [TIFF OMITTED] T5130.013 [GRAPHIC] [TIFF OMITTED] T5130.014 [GRAPHIC] [TIFF OMITTED] T5130.015 [GRAPHIC] [TIFF OMITTED] T5130.016 [GRAPHIC] [TIFF OMITTED] T5130.017 [GRAPHIC] [TIFF OMITTED] T5130.018 [GRAPHIC] [TIFF OMITTED] T5130.019 [GRAPHIC] [TIFF OMITTED] T5130.020 [GRAPHIC] [TIFF OMITTED] T5130.021 [GRAPHIC] [TIFF OMITTED] T5130.022 [GRAPHIC] [TIFF OMITTED] T5130.023 [GRAPHIC] [TIFF OMITTED] T5130.024 [GRAPHIC] [TIFF OMITTED] T5130.025 [GRAPHIC] [TIFF OMITTED] T5130.026 [GRAPHIC] [TIFF OMITTED] T5130.027 [GRAPHIC] [TIFF OMITTED] T5130.028 [GRAPHIC] [TIFF OMITTED] T5130.029 [GRAPHIC] [TIFF OMITTED] T5130.030 Mr. Kucinich. Thank you very much for your testimony, Ms. Brown. Professor Eckbo, you may proceed for 5 minutes. STATEMENT OF PROFESSOR B. ESPEN ECKBO Mr. Eckbo. Thank you, Mr. Chairman and distinguished members of the committee. Thank you for inviting me to testify today. I argue in my testimony that the Government, as a large shareholder, should adopt a proactive stand in terms of exercising its voting rights to promote best governance practices. To be clear, I am not advocating direct Government intervention in the business operations of the firms in which it is a large shareholder. For that, the troubled firms should hire turnaround expertise. I do not believe the Government can morph itself into turnaround expert in competition with private equity and similar expertise. What I do recommend is the form of shareholder activism commonly exercised today by large institutional shareholders, such as pension funds in particular, and which is needed to ensure that the companies operate under the most efficient governance systems. My recommendations follow from the fact that the Government is a large shareholder, and not because it is the Government. The recommendations hold for any large shareholder, State or private. Minority shareholders benefit from the presence of a large block holder because only the latter has the economic incentive to exercise voting rights in an efficient manner. Thus, the Government is now in a unique position to improve inefficient governance systems and practices. However, to have this positive effect, the Government must take a proactive stance on share voting in accordance with the value maximization principle and existing best governance practices derived from this principle. My written testimony discusses the following areas: general director election reform, structural takeover defenses, downsize and combining the two roles, the CEO and board chairmanship, and executive compensation. The common theme underlying all of these areas of concern is a lack of confidence in boards. Should we be surprised that shareholders question executive compensation in a system where the director election system is rigged in favor of candidates nominated by corporate insiders, where the firm insists on an arsenal of poisonous takeover defenses, and where the top executive also runs the board? Things like shareholder say-on-pay, majority rules in director election, appointment of an independent lead director are simply band-aids to help offset the fact that a majority of shareholders find it too costly to actively vote in today's system. If shareholders can reasonably expect to be able to replace directors who they consider incompetent or unwilling to represent owners, why would anyone insist on say-on-pay? So the most important governance task in the United States today is to fix the director election system itself. SEC has begun to address this concern and now is the time for a large Government shareholder to voice its report. It is a common misconception that the shareholder value maximization objective is somewhat charitable toward shareholders. Rather, it is the very fundament on which our corporate system rests, much like a rising tide raises all boats, so that shareholder value maximization serves the interest of all constituencies higher up in the priority food chain. As a large shareholder, the U.S. Government, as the U.K. government before it, should actively seek directors who understand these fundamental points. Given the prominence of say-on-pay issues in today's debate, how can this issue be resolved? It is unlikely that shareholders are any better than boards in determining the right pay. Three points. First, executive pay should be structured so as to depend on firm performance; thus, the insistence on restricted stock options or restricted stocks representing large--typically 60 percent--of the total pay package. This is in line with the recommendations recently by Mr. Feinberg for TARP recipients. Second, the more difficult issue is to determine the total pay package itself, and not just the split between cash and stock. The total pay package ought to reflect the executive's value added, his or her marginal productivity. Unfortunately, while it is possible to get a reasonable estimate of the value added of, say, Michael Jordan joining the Chicago Bulls--which may be why no one seems to be arguing that sports superstars and others are overpaid--estimating the margin of productivity of a CEO who works in a large organization is much more difficult. Awarding millions of dollars in executive pay, without being able to forcefully communicate to investors why the CEO is supposed to be worth, is part of why shareholders demand a say. Here, boards and compensation consultants need to work harder. Third, pay packages will also reflect the relative bargaining power. High profile executives commonly hire professional negotiators to assist in negotiations with the board. The board often does not meet this challenge and risks being seen as pushovers. Since executive pay awards largely come out of the pockets of shareholders, it again comes down to whether the board understands its central role as maximizer in shareholder value. In sum, we need not only a more efficient director election system, but also to promote an efficient board structure and elect directors who understand the fundamental role of shareholder value maximization in the corporate system. We need better boards and for the Government to lead the way in its capacity as a large shareholder today. Thank you for your attention. [The prepared statement of Mr. Eckbo follows:] [GRAPHIC] [TIFF OMITTED] T5130.031 [GRAPHIC] [TIFF OMITTED] T5130.032 [GRAPHIC] [TIFF OMITTED] T5130.033 [GRAPHIC] [TIFF OMITTED] T5130.034 [GRAPHIC] [TIFF OMITTED] T5130.035 [GRAPHIC] [TIFF OMITTED] T5130.036 [GRAPHIC] [TIFF OMITTED] T5130.037 [GRAPHIC] [TIFF OMITTED] T5130.038 [GRAPHIC] [TIFF OMITTED] T5130.039 [GRAPHIC] [TIFF OMITTED] T5130.040 [GRAPHIC] [TIFF OMITTED] T5130.041 [GRAPHIC] [TIFF OMITTED] T5130.042 [GRAPHIC] [TIFF OMITTED] T5130.043 [GRAPHIC] [TIFF OMITTED] T5130.044 [GRAPHIC] [TIFF OMITTED] T5130.045 [GRAPHIC] [TIFF OMITTED] T5130.046 [GRAPHIC] [TIFF OMITTED] T5130.047 [GRAPHIC] [TIFF OMITTED] T5130.048 [GRAPHIC] [TIFF OMITTED] T5130.049 [GRAPHIC] [TIFF OMITTED] T5130.050 [GRAPHIC] [TIFF OMITTED] T5130.051 [GRAPHIC] [TIFF OMITTED] T5130.052 [GRAPHIC] [TIFF OMITTED] T5130.053 [GRAPHIC] [TIFF OMITTED] T5130.054 Mr. Kucinich. I want to thank you, Professor, for your testimony. I want to acknowledge the presence of committee members, ranking member, Mr. Jordan, Mr. Cummings of Maryland, Mr. Tierney of Massachusetts. Thank you all for being here. Professor Verret, you may proceed with your 5 minute testimony. STATEMENT OF J.W. VERRET Mr. Verret. Thank you, Chairman Kucinich, Ranking Member Jordan, and distinguished members of the committee. It is a privilege to testify in this forum today. My name is J.W. Verret. I am an assistant professor of law at George Mason and a senior scholar with the Mercatus Center. I also had the opportunity to consult for the Special Inspector General for TARP and the GAO on a corporate governance audit of TARP firms. The past year has seen some unprecedented events in the history of American business. Through the bailout, our Government has become a controlling shareholder in many bedrocks of the business community. Some political leaders have argued that since the Government owns these companies, it should seek to control their day-to-day business decisions. The reason I have joined you today is to explain why this view is not only misguided, but downright dangerous to the taxpayers' investment, as well as the pension funds and retirement funds of ordinary Americans. Government ownership in private companies perverts the accountability of both Government and business. To understand why, we must appreciate that Government leaders and business leaders are held accountable by entirely different means. Governments are accountable to voters based on their ability to get re-elected; business leaders are held accountable by their ability to maximize profits for their shareholders. And the overwhelming majority of those profits for shareholders go to Main Street investors. Working Americans like teachers, firefighters, policemen, all depend upon this mechanism to fund their retirements. Maintaining a buffer between short-term political interests and long-term financial soundness is absolutely critical. The economic evidence from around the globe is overwhelmingly clear that political ownership of private banks and financial companies results in lower GDP growth, increased need for subsequent government bailout, and politicized lending practices. I am concerned that we may see politics driving business decisions, such as TARP banks encouraged to subsidize lending in battleground States, for example. The Treasury Department owns one-third of Citigroup. This fact has given the Government enormous power over Citigroup's operations. Consider the case of Andrew Hall, a legendary commodities trader at Citigroup, who generated an average of $250 million a year over the last 5 years for Citigroup and Citigroup's investors, including their investors now, which would be the taxpayer and which would be the pension funds and retirement funds of everyday Americans. Mr. Hall was paid a percentage of that annual $250 million he generated for Citigroup. His annual salary was definitely high, but it was an entirely performance-based package. The pay czar decided that Mr. Hall's salary was just too large to justify to populous pressures, so Citigroup was forced to sell off Mr. Hall's division at a deep discount. Losing Andrew Hall will cost Citigroup hundreds of millions of dollars per year, and that cost will fall on Citi's investors, including the American taxpayer. But the decision was politically advantageous to the executive branch in the short-term, so it was inevitable because of the Government's share ownership. The case of General Motors is even worse. GM has been pressured by political leaders, responding to alliances with failed automobile dealerships, to keep those failed dealerships open. Political leaders have exerted pressure to force GM to overpay on its shipping contracts so that truckers using politically favored unions, like the Teamsters, win the bids. Make no mistake, the cost of this crony capitalism is borne by the American taxpayer. Government shareholders don't have to play by the same legal rules as the rest of us, a fact which will strain the governance mechanisms of our capital markets at a time when they are already in crisis. Bipartisan legislation pending in the House and Senate stand to address these problems and create a buffer between the taxpayers' investment and political leaders who would use that investment to pander to special interests. The TARP Recipient Ownership Trust Act of 2009, introduced in the House by Congressman Bacchus and in the Senate by Senators Warner and Corker, would require the Secretary of the Treasury to place ownership of TARP investments in trust to be held on behalf of the American people. The act would task the trustees of that trust, appointed by the President, with a fiduciary duty to maximize the value of the investment, and it would include a sunset provision to get out of TARP investments by December 2011. The prospect of the Government actively voting their shares in TARP recipients holds grave risks. Political leaders have stuffed the Federal budget with pork barrel projects at great cost to the American taxpayer. We must not permit them to do the same with the private budgets of private banks. If we do, the taxpayer will be left holding the tab. Thank you for the opportunity to testify. [The prepared statement of Mr. Verret follows:] [GRAPHIC] [TIFF OMITTED] T5130.055 [GRAPHIC] [TIFF OMITTED] T5130.056 Mr. Kucinich. Thank you for your testimony, Professor. The Chair recognizes Ms. Simpson. You may proceed for 5 minutes. STATEMENT OF ANNE SIMPSON Ms. Simpson. Thank you. Good morning. First of all, many thanks to the committee chairman, the ranking member, and the honorable members for an opportunity to testify before you. My name is Anne Simpson. I am the senior portfolio manager for Global Equities, as the chairman kindly mentioned, and, as such, I am responsible for CalPERS corporate governance program. As you will be aware, CalPERS is the largest public pension fund in the United States. We have assets of some $200 billion that we are responsible for, which we invest on behalf of 1.6 million beneficiaries. As a long-term global investor in more than 9,000 public companies, we have both a direct and an indirect interest in the success of the TARP program. We have a direct interest because, regardless of the reduced values that we still see in these companies, we hold well in excess of $7 billion in both debt and equity in recipient companies. We have an indirect interest, or I should say perhaps a systemic interest in the success of the TARP program because CalPERS is as close to being a universal and permanent owner as it is possible to be. We need the system to work. We rely upon this critical sector of the economy functioning as much as any others. My role here today, though, is to share something of CalPERS' experience in its corporate governance program for the following reason: We have taken governance very seriously, we devote resources to it, and we have seen, across our portfolio, that wherever capital is allocated, governance can make a difference to the mitigation of risk and also to the enhancement of returns. Specifically, I would like to just share with you what we do in addressing problems at financially troubled companies and how we use a governance framework to approach the difficulties those companies have. And, finally, I would like to say something about what we consider best practice to look like in this field; in other words, what we have learned about what can work and what doesn't work, and how we hope that the Government, as shareowner, will join the community of responsible shareowners in engaging with governance reforms. First, though, our experience on using governance as an approach to dealing with financially troubled companies. CalPERS, for over 15 years, has developed a program around the theme of the focus list. This is where companies in the most trouble, by sector, are identified each year on a number of screens. What we do is then analyze the governance of the companies to see where we, as an active and engaged owner, can have a positive impact on the company's health. We look at a range of issues, from the governance structures to the quality of the board, and in combination the results warrant some attention. Our external consultants will show up, monitor the performance of these companies each year, and their conclusions are that over the 5-year period of the engagement--note that is a fairly substantial period of time--these companies have been seen to outperform their benchmark by some 15 percent. The full details are referenced in our written testimony. We are firmly of the view that this form of transformation is something to be considered with TARP recipient companies, and we have conviction and we have, we feel, convincing evidence that transparency and accountability foster risk mitigation and value creation not just for TARP recipients, but we see this as important for the entire market. The issues that we think important are set out in our written testimony, but we want to focus on the principles of optimizing shareholder returns--maximizing is a word that perhaps suggests risk can be traded off for returns-- accountability to the owners; transparency; equitable treatment of minorities; and a focus on compensation for long-term results, including a concern with risk. Finally, we want to ensure that boards are led by not only independent directors, but those who have the skills and experience--and we would emphasize diversity in this context-- in order to break through some of the group think which bedeviled the companies that got into difficulty. Finally, governance reform is no guarantee, but it gives us a framework to hold boards accountable, and we urge the Government, as a fellow shareowner, to help us develop and use the tools we need to hold these boards accountable. Thank you. [The prepared statement of Ms. Simpson follows:] [GRAPHIC] [TIFF OMITTED] T5130.057 [GRAPHIC] [TIFF OMITTED] T5130.058 [GRAPHIC] [TIFF OMITTED] T5130.059 [GRAPHIC] [TIFF OMITTED] T5130.060 [GRAPHIC] [TIFF OMITTED] T5130.061 [GRAPHIC] [TIFF OMITTED] T5130.062 [GRAPHIC] [TIFF OMITTED] T5130.063 Mr. Kucinich. Thank you, Ms. Simpson. The Chair recognizes Mr. Tonelson. You may proceed for 5 minutes. STATEMENT OF ALAN TONELSON Mr. Tonelson. Mr. Chairman, ranking minority member, Members Cummings and Tierney, thank you so much, on behalf of the 1,900 member companies of the U.S. Business and Industry Council, for this opportunity to testify. Given the current economic crisis, which shows no real signs of easing whatever, this subject of this hearing could not be more important. Yet, USBIC's member companies are very encouraged by this committee's recognition that the ongoing debate about improving the Government's performance as a dominant shareholder, or even major player, in critical industries must be dramatically broadened. It is of course important to achieve greater transparency and greater accountability in rescues and bailout programs. It is of course important to develop sensible exit strategies. But the overriding challenges facing the U.S. Government in this shareholder role is how to ensure that it can not only support, but spearhead a viable recovery strategy for the entire economy. Since the crisis ultimately stems from the American economy's failure in recent decades to produce nearly as much as it consumes, and its decision to fill that gap by incurring dangerous levels of debt. A viable recovery strategy clearly must focus on greatly increasing production relative to consumption; that is, the genuinely productive, wealth-creating sectors of the American economy need to start reversing the recent pattern and start to grow more rapidly than the rest of the U.S. economy. And those productive sectors are dominated by manufacturing. Now, clearly, our 1,900 members have a huge stake in helping to achieve this reorientation; they are manufacturers. They have a longstanding commitment to creating jobs, and sponsoring innovation, and spurring productivity, and boosting production in this country. Think of them as Main Street manufacturers. By the same token, they will be prime victims of Washington's continued clinging to an outmoded economic strategy that has made this U.S. economy dangerously finance- heavy. But if this painful recession and this economic crisis teaches us nothing else, it has to teach us that everyone else will be hurt. Everyone else in this economy, every single actor will suffer unless this reorientation is actually completed. As my written statement details, since the recession's official beginning in December 2007, the economy has tragically moved farther from this goal of being more production-oriented, not closer to it. Notably, inflation-adjusted manufacturing output has fallen four times faster than the rest of GDP. Perhaps even more alarmingly, our manufacturing capacity--not capacity utilization, but the capacity itself--is shrinking at the fastest rate ever. Because our economy's sickness has developed over many years, the TARP and the rest of our economic recovery strategy--the same recovery strategy approved by the White House and endorsed by this Congress--cannot legitimately be blamed for most of this regression. But they haven't helped either, and show little promise of actually doing so. The problems reflect much more than the jaw-dropping gap between Government support for finance and Government support for U.S.- based manufacturing. And, of course, Government support for finance entails much more than simply the TARP program. Much more. The problems reflect the very goals apparently set by the administration for finance and for an automotive sector that is a bellwether for the rest of manufacturing. Let nobody be under the misimpression that the automobile industry is the only industry in the American manufacturing sector that has run into major structural problems. That is far from true. Nothing could be less true. The goal for finance seems to be encouraging this sector to return to its pre-crisis scale and full range of activities, productive or not, with only modest structural and regulatory change. The first apparent goal for the U.S. auto industry seems to be managed contraction, managed dramatic contraction, and even transition to niche-producer status. Not only is this strategy likely to contribute to the further shrinkage of the entire manufacturing sector, it flies in the face of everything known today about the prerequisites for automotive competitiveness. A second main goal seems to be turning the auto industry from a high-wage industry into a much lower wage industry. How in the world can that help middle class families repair their own finances without growth slowing belt tightening of a dramatic nature? How to ensure that Government, as shareholder, helps refocus our economy on wealth creation again? My statement makes numerous recommendations, but I will briefly focus on two. These are two that our--am I short of time? Mr. Kucinich. I appreciate your testimony. Your time has expired---- Mr. Tonelson. I am sorry. Mr. Kucinich [continuing]. But if you would like to just wrap it up and just tell us your two points. Mr. Tonelson. OK. First of all, the Government shareholding role must be coordinated with the entire recovery strategy actively and, second, policy success will require much better, much more detailed, and much more timely data about the economy as a whole and the manufacturing sector as a whole. Currently, too often, policymakers are flying blind. [The prepared statement of Mr. Tonelson follows:] [GRAPHIC] [TIFF OMITTED] T5130.064 [GRAPHIC] [TIFF OMITTED] T5130.065 [GRAPHIC] [TIFF OMITTED] T5130.066 [GRAPHIC] [TIFF OMITTED] T5130.067 [GRAPHIC] [TIFF OMITTED] T5130.068 [GRAPHIC] [TIFF OMITTED] T5130.069 [GRAPHIC] [TIFF OMITTED] T5130.070 [GRAPHIC] [TIFF OMITTED] T5130.071 [GRAPHIC] [TIFF OMITTED] T5130.072 Mr. Kucinich. Thank you very much, Mr. Tonelson, for your testimony. The Chair recognizes Ralph Nader for 5 minutes. You may proceed, sir. STATEMENT OF RALPH NADER Mr. Nader. Thank you, Mr. Chairman and members of the committee. It seems to be here in Congress the more important a hearing is for the people of this country, the less the press attends the hearings. It is kind of inverse proportion here. So you ought to be commended. In my written testimony with Robert Weissman, I give a lot of examples of our principle thesis: that the corporations which have been bailed out came to Washington. They entered the political arena and you simply cannot say, from an American Enterprise Institute framework, that you have to have the rules of private enterprise when General Motors and AIG, etc., fell all over themselves to be bailed out by the American taxpayer. So the question we are facing is proper political judgment when the Government is a common shareholder of considerable magnitude and when the Government also represents the taxpayer in terms of saving these companies, which have been characterized by colossal mismanagement, colossal recklessness with other people's money, and colossal self-enrichment. So it is the management failure that even tanked their own companies--although not necessarily their compensation plans-- that brought them to Washington. There has been very little attention paid to the procedural safeguards for Government bailouts. For many years, I have been urging Congress and the executive branch to establish procedural standards so these bailouts do not reflect secret edicts over weekends or dictates from the executive branch. The nature of the corporate State, that is, corporate government, what Franklin Delano Roosevelt told Congress in 1938, was fascism. That is the words he used. The corporate State requires concentration of power in one branch of government at the expense of the other two, and that branch is the executive branch. This was illustrated by the weekend massive bailout of Citigroup, when Robert Rubin went down and met with Mr. Bernanke and Mr. Paulson, and emerged with a press statement on the following Monday with a $300 billion guarantee of Citigroup's toxic assets and a $45 billion investment by the taxpayers. There was no notice to the public, no congressional input or participation, no taxpayer standing was permitted to challenge this edict, no judicial review, no standards. In other words, let's face it, dictatorship. This is a repudiation of the congressional authority under the Constitution. A lot of money was involved. A lot of money was obligated; it was done by the executive branch. Not even reaching the contemptuous four-page bill that Mr. Paulson sent to the Congress, where both Republicans and Democrats rebelled, which basically said give the Treasury all the authority, with no judicial review, plus $700 billion, thank you very much. So the procedural issue is very important here. The substantive policies, of course, reflect the procedural standards. When you have bad procedures, when you have autocratic secretive procedures, you tend to get bad performance substantively, and our testimony illustrates that in some detail. But the major thesis of the testimony is that when the Government is a dominant or controlling shareholder not of its own asking, the Government has an obligation not to invest passively; it should use its ownership powers to clean up management and, mindful of its duty to safeguard taxpayer financial interest, it should also pursue statutory public interest mandates in areas such as consumer, environment protection, financial stability, and financial honesty. And that reflects, of course, the state of workers, the state of consumers, the state of investors, elaborated in our testimony. Three quick examples. One is that the Government did not condition its bailout and equity infusion of AIG on the firm's credit default swap counterparties accepting a haircut. So it was basically not just a bailout of AIG, it was a bailout of Goldman Sachs and others. Again, very, very secretive; a stunning display of executive power without congressional participation. The second quick example is the double standard that you mentioned, Mr. Chairman. It is really amazing how fast they move to bail out crooked and reckless companies in the financial industry, but then they really hang the manufacturers out to dry. Not that they don't deserve a strong hand, but the contrast is really stunning in terms of the inferred dependency that the executive branch believes the rest of the economy relies on the financial sector. This is delegation run awry, when the GM deal was negotiated not by Congress, not by the executive branch, but by a delegated secretive White House task force made up of Wall Street expatriots with little or no experience in the auto industry. The other point I want to make is that people fall by the wayside here. The bankruptcy system now in the corporate area is a kangaroo court. Congress has to revisit corporate bankruptcy law. It is a prearranged, choreographed bankruptcy system where many interested parties are given no participatory roles or they are given arbitrary shortened participatory roles which are basically nominal. Mr. Kucinich. I would just ask that you wrap up your testimony. Mr. Nader. Let me just end with this example. Mr. Kucinich. Thank you. Mr. Nader. General Motors eliminated, under bankruptcy, its liability to victims of defective products it had sold before the bankruptcy. This is truly outrageous. This is a manifest injustice which is revealed by the person of Amanda Dinnigan, a 10-year-old girl from Long Island, New York, injured by the allegedly faulty seatbelt in a GMC Envoy that snapped her neck in a crash. Her father, an iron worker, estimates her health care costs at $500,000 a year. Her lost quality of life will obviously be tragic. That and hundreds of other cases were rubbed out by this bankruptcy court. Only legislation can correct this manifest injustice to innocent victims of corporate defective merchandise. Thank you. [The prepared statement of Mr. Nader follows:] [GRAPHIC] [TIFF OMITTED] T5130.073 [GRAPHIC] [TIFF OMITTED] T5130.074 [GRAPHIC] [TIFF OMITTED] T5130.075 [GRAPHIC] [TIFF OMITTED] T5130.076 [GRAPHIC] [TIFF OMITTED] T5130.077 [GRAPHIC] [TIFF OMITTED] T5130.078 [GRAPHIC] [TIFF OMITTED] T5130.079 [GRAPHIC] [TIFF OMITTED] T5130.080 [GRAPHIC] [TIFF OMITTED] T5130.081 [GRAPHIC] [TIFF OMITTED] T5130.082 [GRAPHIC] [TIFF OMITTED] T5130.083 [GRAPHIC] [TIFF OMITTED] T5130.084 [GRAPHIC] [TIFF OMITTED] T5130.085 [GRAPHIC] [TIFF OMITTED] T5130.086 [GRAPHIC] [TIFF OMITTED] T5130.087 [GRAPHIC] [TIFF OMITTED] T5130.088 [GRAPHIC] [TIFF OMITTED] T5130.089 Mr. Kucinich. Thank you very much, Mr. Nader. As Chair, I am going to now go to the question period. I would like the gentleman from Maryland, Mr. Cummings, to begin. So if you would go to 5 minutes of questions. Mr. Cummings. Thank you very much, Mr. Chairman. I want to read an excerpt from a column that Carl Icahn write in The New York Times on March 29th of this year. He writes, ``Sadly, though, under American corporate law, share ownership does not count for much. Barney Frank might be surprised to learn that a lawsuit would have almost no chance of success in court, even for a majority shareholder like the government. AIG would most likely argue that the oft-cited 'business judgment' rule gives management wide latitude to set compensation without shareholder interference. What the government should have gotten was board representation in return for its large investment in AIG.'' I just want to ask you all--whoever feels best qualified to answer the question, please do--while we know that AIG now has a substantially different board, Mr. Icahn still points out that shareholders have the deck stacked against them. In your opinion, was Icahn correct or is the current model--for example, the Credit Facility Trust--the best means of representing and ultimately extricating the Government from its investment in AIG? Mr. Verret. Well, Congressman, I would offer that one of the things that concerns me about corporate liability is that, typically, a controlling shareholder would share the same liability to the other shareholders as the board or the executive. But when the Government is the controlling shareholder, it has sovereign immunity, so it would not get any liability at all, any chance of liability. Now, I am aware that Mr. Icahn is critical of the business judgment rule, which is part of State corporate law. You know, sometimes shareholders win and sometimes they lose. I know that a challenge to Citigroup is still ongoing in the Delaware Court of Chancery, and it survived a motion to dismiss, and I know that there have been a number of cases that have won, a number that have settled, and some of them don't. So I think there is a healthy debate about the business judgment rule. Mr. Cummings. I was intrigued by your testimony, Professor, and I was just wondering how do you react when we have the AIGs of the world taking Government money and then basically saying screw you to the American public as they go off and do all kinds of wonderful things, junkets and bonuses and whatever? How is the American public, who owns it, how do you think it is best that they exercise some control over that? Mr. Verret. Well, I worry---- Mr. Cummings. Or you don't think they should have any control? Mr. Verret. I worry that the exercise of control will revert to the sort of pork barrel---- Mr. Cummings. I got all of that. But what I am saying to you is that--you are a law professor? Mr. Verret. Yes, sir. Mr. Cummings. And I know law professors, you sit in those nice offices and everything. But I am talking about the real nitty gritty. We have the American people who are losing their houses, losing their savings, losing their jobs, losing everything. They give to these corporations their hard-earned tax dollars, and then we have these corporations basically spitting in their faces and saying, you know, screw you. So what happens from a political standpoint, it becomes very difficult, after you have helped somebody extricate themselves from a drowning situation, to have them do that to you. So the question becomes--I got all the corporate law. I got that, I understand it. But how do the American people then get some kind of foothold in this governance so that they can make sure that those things don't happen. You follow what I am saying? Mr. Verret. I appreciate your concern---- Mr. Cummings. Mr. Nader, I would like for you to chime in on this, if you don't mind. Mr. Nader. Yes, of course. We have recommended a principle which basically says if the Government doesn't facilitate the civic organization of the ultimate beneficiaries--workers, investors, etc.--no regulatory or bailout process is going to be fair and going to be enforced. What you are talking about is reciprocity. Look at what people have given up involuntarily: their jobs, their savings, their pensions, their consumer protections. And what are they getting in return? An in-your- face attitude by these managers who directly or inherited reckless management that basically says we are going to continue business as usual and we are going to pay our people enormous bonuses. There is a level of arrogance and lack of remorse here that is unprecedented in American corporate history. Mr. Cummings. So you think this is new. You said it is unprecedented. Mr. Nader. In its magnitude and its face. In Japan, they would apologize on national TV for far less transgressions, the corporate executives. Mr. Cummings. Thank you very much. I see my time has expired. Mr. Kucinich. I thank the gentleman. I am going to recognize Mr. Jordan for 5 minutes, then I will go to Mr. Tierney, if he would like. Go ahead, Mr. Jordan. Mr. Jordan. Thank you, Mr. Chairman. Professors, did you ever think you would see the day where, in the United States of America, we would have, in fact, a Federal Government pay czar telling private American citizens how much money they can make? And before you answer that, I want to go to what Mr. Nader--because I think he does have a valid point. In the limited context we are talking about, these institutions came to the U.S. Congress, stuck their hand out and asked for money. Maybe it is understandable, but when you think about where we are today and couple that with statements made by some Members of Congress, particularly Senator Schumer, where he indicated that maybe in the future we should look at any publicly traded company, executives at those companies, being subject to the pay czar. Did you ever think you would see that day? And I want the professors to have first whack at it. Mr. Eckbo. I think you actually saw say-on-pay demands back in the 1930's after the crash. You saw it also in the early 1990's, and you have seen say-on-pay demands in Europe for a while. So I think the issue of shareholders wanting to have a say on pay is not terribly new. I did not expect to see it here as much as I have seen it, but I think it has to do, as I said before, I think it has to do with a failure of boards in general. So if you can trust your board, you can also trust their pay policies. I don't think shareholders or taxpayers are asking for a say on pay because they don't like the numbers per se, but because they don't trust the decision process that went behind those numbers. That is why I am saying we need to reform our ability to get boards to represent ourselves as taxpayers or as shareholders, more specifically. We need the election reform to be accepted. Mr. Verret. I think in answer to your question, Congressman Jordan, and also in answer to Congressman Cummings' question, I think one of my concerns is that, look, most of the investors in Citigroup, in Bank of America are pension funds and retirement funds. Ordinary Americans are investing in these companies, and I think they have already been hit hard enough. Look, they have foreclosures, they are facing unemployment, and now Government leaders are going to use their pension funds and their 401-Ks as a vehicle for more special interest spending for special interests, and I think that is the last thing they need right now. And I would also offer, with respect to say-on-pay. A lot of folks make an analogy to say-on-pay as it is used in the United Kingdom. One of the major differences between us and the United Kingdom is most of their investors are--most of their large institutional investors are insurance companies and private company pensions. We have a lot more union investors here, and I think that offers a lot more conflict of interest if you empower a certain minority of the shareholder electorate that has a special interest---- Mr. Jordan. Let me just change gears for a minute and I will let you jump in here. The transparency issue that some brought up and particularly Mr. Nader brought up I think is very valid. I happen to live in a district where they closed the General Motors facility. I remember being on the conference call the night before they were going to make the announcement and the folks on the--Mr. Sperling on the conference call said the Government, the auto task force will only weigh in if it is a major decision. Many Members of Congress were on that call; they asked questions. Finally, it came to my question and I said, How do you define major? And he didn't have a definition for it, which means it can be any darn thing they want. We actually know that auto task force submitted General Motors, the executive of General Motors submitted a report to the auto task force their restructuring plan. It was denied. So who is making decisions? We would like to know what was in those--I have asked to see those. Oh, proprietary information; we can't get access. So I can see both sides of this equation, but this lack of transparency, and when you couple that with what I believe Ms. Brown said in her testimony, exit strategies are still evolving. We don't know where this is--and that is the biggest concern. We would like to know where this is going, how the taxpayers are going to get out of this, what it means for our economy. So talk to me, if you would, professor, about what I view as a lack of transparency with where we are right now, and then I will go to Ms. Simpson--I know you wanted to jump in--and Mr. Nader. Mr. Verret, you can go first. Mr. Verret. Sure. I would absolutely agree. I think this is where the liability for controlling shareholders comes in as well. Usually, if any other controlling shareholder would have done some of this stuff, they would have been taken to court and they would face tremendous liability. But Treasury gets a complete get out of jail free card from its securities and corporate liabilities; it is free to engage in insider trading if it wants to. So we have seen no accountability and no transparency. Mr. Jordan. I am out of time. Ms. Simpson and then Mr. Nader real quick, or whoever wanted to jump in. I am sorry. Ms. Simpson. Thank you. Briefly. I would like to comment on this question about accountability because it is quite normal in a board election, in an American company, that the shareholders can't vote no; they cannot actually remove the board. Likewise, it is expensive and fiendishly complicated to actually put a director forward. Therefore, we must take the bigger picture here and realize that the reforms on majority voting, as it is called, and proxy access, as it is called, are critical to giving owners the ability to behave responsibly and hold boards to account. Power--a vacuum and we have a vacuum. So, in the U.K., I would suggest that say-on-pay was a sort of additional extra. The reason pay is better aligned with performance and the multiples are not so eye-popping is because owners have the right to vote no when boards come up for election and it is very simple to put candidates forward. So we hope that those two wider reforms do come to pass in the United States and we think it will be a big step forward. Thank you. Mr. Kucinich. I thank the gentleman. The gentleman's time has expired. We may have a second round of questions; I think we will, given this panel. The Chair recognizes Mr. Tierney for 5 minutes. Mr. Tierney. Thank you, Mr. Chairman. I am struck, Mr. Verret, by some of your testimony here. I guess the way I read your theory is that even though the companies came to Washington on their hands and knees looking for a bailout, and that, in exercising the shareholder responsibility, the Government should still just step back and let those same failed executives and people go about their own way without any interference; that even as people with an interest in it, we should just step aside and let it go, meaning that they can then continue to disregard whether it is tax law or labor law, environmental law, regulations or whatever that protect what now is a principal shareholder. I don't think I quite get that reasoning. Mr. Verret. Well, that is not where I am going, Congressman. I would offer that I would like to see a trust set up to run the Government's investment in these companies. I would like to see these trustees, appointed by the President, insulated from short-term political pressure in the net election. Those sort of conflicts---- Mr. Tierney. What would the relationship between those trustees be with the taxpayers whose money is what is invested? Mr. Verret. Well, in the bill that has been introduced by Senator Warner, Senator Corker, and also by Congressman Bacchus in the House, they would have a fiduciary duty to maximize the taxpayers' investment. Mr. Tierney. Much like the way there is a fiduciary duty for these failed executives to maximize the investment of their shareholders, which they did by taking exorbitant salaries and many times other violations of good management practices? Mr. Verret. Well, I wouldn't bail out this trust any more than I would have bailed out these companies, and I think that is a big part of the problem, the moral hazard problems of bailouts; and I am not a supporter of the bailout any more than I think a lot of Members of this body. Mr. Tierney. So you would have let AIG and Citigroup and all those banks just go down? Mr. Verret. I would have let some of the banks go down, absolutely, because I think they got a great deal. Mr. Tierney. All of them or just some of them? Mr. Verret. I wouldn't have given AIG nearly as much as they did; I would have cut the counterparties' exposure; I wouldn't have given---- Mr. Tierney. But you would have given them something. Mr. Verret. Oh, I would have tried to make sure they didn't bring down the financial system, but I wouldn't have given such a giveaway that I think we saw---- Mr. Tierney. So yours is a question of degree. You would have bailed them out; you just would have bailed them out differently. Mr. Verret. Well, I wouldn't have bailed out Citigroup; I would have let Citigroup fail, absolutely. Mr. Tierney. Well, but AIG? Mr. Verret. I think AIG, you had to do something because it would have brought the whole---- Mr. Tierney. So you would have bailed them out; you just would have done it a different way than the people that made the decision like Paulson and others. Mr. Verret. I would have given them a very small percentage of what they gave them. And I think---- Mr. Tierney. All right. I just want to establish it is a matter of degree that we are talking about. Mr. Verret. Sure. Mr. Tierney. A different look on that basis. Mr. Tonelson, what are your specific ideas on how we rebuild our manufacturing base? I read your testimony and I agree with some of the generalities you have in there, but if you had to say there are three or five specific policies that we ought to start embarking on right now to reestablish manufacturing, what would they be? Mr. Tonelson. Well, thank you so much, Congressman Tierney. There is no doubt that there are steps that have already been widely discussed that urgently need to be taken and, in my view, in fact, in the view of my organization, the most important steps involve the transformation of U.S. trade policy; and I will be very specific. There is no excuse for Congress, under Democrats, not to have passed a strong currency manipulation bill. The practice of exchange rate protectionism by China and other Asian countries is an abomination--should be an abomination to anybody who styles themselves the champion of the free market. It has been going on for 10 years, at least; it has crippled the American manufacturing base, American manufacturing output, American manufacturing jobs. We have been talking about this problem since 2002 or so. I can understand why a Republican administration in which the two non-trade policy was called by outsourcing multinational companies refused to act. I don't understand why this Democratic President and this Democratic Congress refuses to act. The second recommendation, there are already very important Buy American provisions in the stimulus bill. These Buy American provisions need to be expanded to cover all Federal procurement. And I understand there are problems regarding our World Trade Organization obligations. Unfortunately, these obligations may need to be suspended. We face an economic emergency; it is a crisis. That word is used for a reason and times of emergency require emergency measures; and when international obligations like this prevent us from taking common sense measures not only to rebalance our own economy, but to rebalance a dangerously lopsided world economy, then those obligations need to be set aside. So those are two very specific steps that can be taken this week. Mr. Tierney. If the chairman will give us unanimous consent, I just have a few more seconds, Mr. Nader, I would be interested in hearing your comment on that. Mr. Kucinich. Mr. Nader, you may respond to his question, and then I will go to the next---- Mr. Tierney. Thank you, Mr. Chairman. Mr. Nader. OK, thank you. I think, first of all, the China example is perfect. You can't have free trade with dictatorships. Why? Because dictatorships impose the costs and keep the costs down, like labor costs and prohibition of independent trade unions. So China has not only a dictatorship advantage in terms of trade, but it also has an absolute advantage. The late Paul Samuelson, economist emeritus at MIT, changed his views in a recent academic paper and basically said the costs of outsourcing are expanding beyond the benefits of outsourcing. That is what absolute advantage does. Third is the under-valuation of the currency, the yuan. Fourth is the rampant criminal counterfeiting of products that are coming into this country from China and other countries. And, finally, there is no consumer protection. There is no consumer protection treaty with China. We are getting contaminated fish, defective tires, ingredients in our pharmaceuticals that are hazardous--in one case it has already killed 200 Americans. There is no consumer protection treaty, so you have a superior advantage of shoddy goods coming in, driving out goods that meet consumer standards in this country. And then we need a level playing field. The idea of all the Federal subsidies and tax expenditures favoring the fossil fuel industry creates an unlevel playing field with sustainable energy and energy conservation. Part of it is being remedied in Congress in recent years, to be sure, but still the subsidies, for example, to the nuclear energy industry is massive in terms of no nuclear plants can ever be built in this country without 100 percent Federal loan guarantee, according to Wall Street finance firms. So that isn't true for solar energy, for example. Solar energy doesn't get 100 percent guarantee. And solar energy can be one of the great manufacturing segments of our economy in terms of jobs produced, in terms of innovation applied here, in terms of climate change and other environmental issues, and, above all, in terms of its decentralized nature, contrary to highly centralized fossil fuel and nuclear installations into every community in the country creating jobs, production jobs and maintenance jobs. Mr. Kucinich. Thank you. Thank you very much, Mr. Tierney, Mr. Nader. I voted against the bailouts because I don't believe that Government should be picking winners and losers in the private sector. Now, the testimony that I have heard here from some of the witnesses and, indeed, the debate that goes on between some Democrats and Republicans in the Congress is that the corporate State and the Federal Government are somehow two distinct entities. I want to look at that in light of just one example, today's report, ``Tax Deal is Worth Billions to Citigroup; Deal Made to Recover Bailout; Firms Exempted from Rule when U.S. Sells Its Stake.'' The Federal Government quietly--quietly-- agreed to forego billions of dollars in potential tax payments from Citigroup as part of a deal announced this week to wean the company from the massive taxpayer bailout that helped it survive the financial crisis. Now, one of the concerns that I have had is that the personnel between corporate America and the Federal Government has basically been interchangeable at the top. You look at Citigroup, they are in the top level, decisionmaking level in the Government; there are people who used to work for them, as is the case with Goldman Sachs. So you wonder why there is very little change between one administration and another. You look at the bailout, the terms of the stock ownership; you look at TARP, post-TARP, the relationship between the Federal Government and the corporations. If I look at what happened here with this Citigroup deal, you would assume that the Government, if it is taking ownership, would protect the taxpayers, first responsibility. But the Citigroup deal that was exposed today, the Government, instead, is protecting shareholder interests over taxpayer interests, to ceding billions of dollars in taxes. So it raises the question whether or not we have had a merger that has occurred here, kind of a hostile takeover of the Government through the TARP by Wall Street. You want to talk about moral hazard? How about the destruction of a democratic system using our own money? This is why TARP was dangerous, because it is not only the Government reaching in to direct private enterprise, but it is private enterprise reaching in the other way to direct the Government. Who owns whom? This is one of the answers to the questions. Citigroup has a blank check. And I don't think it would be different with a Democrat or Republican administration; it is the same thing. I have a question for--and I speak as someone who has been following these issues for years, and we are going to--fair warning for the Treasury Department, which is coming here tomorrow. They are going to be asked a lot of details and for documents on this Citigroup thing. I said it before in my opening remarks. Matt Taibbi, in Rolling Stone, did a pretty good piece on detailing the financial connections between Wall Street players, how they are now in the administration and how policies seem to follow ways that help Wall Street at the expense of Main Street. Now, the question to Mr. Nader and Mr. Weissman. Some have said that the Federal Government did impose conditions before bailing out the companies. With respect just to the four companies which the United States now owns, how would you assess the significance and effectiveness of those conditions the United States did require, and what should the Government have required of TARP recipients but failed to demand? And then I will invite others to comment if we have time. Mr. Nader. Let me ask Mr. Weissman to come up and answer that part of the question. Thank you. Mr. Kucinich. Mr. Weissman has already been sworn. You may proceed. Mr. Weissman. Thank you, Mr. Chairman. I think you raise the core distinction in your opening remarks. There were the most minimal standards imposed on the TARP recipients, and I think we should really distinguish between the TARP recipients and those in which the Government took a controlling interest, which, as an aside, is the core issue at this hearing and is completely different from receiving loans. The conditions were minimal. Ultimately, there were some very modest executive compensation conditions imposed. In the case of AIG, they did demand the very short- term CEO step down. The contrast is with the conditions imposed on General Motors, as well as Chrysler, where there was an extremely intensive review of policies that were being proposed by management, ousting of management, new management has come in that has since come and gone in the case of General Motors. The conditions, however, that were imposed, the scrutiny that was imposed in the case of General Motors I think was admirable. The criteria, though, by which that was applied raises several questions. It is not at all clear what the aim of the task force was in imposing the stringent conditions. Mr. Kucinich. Can you give any specific examples of where you think that we lost out on opportunities? Mr. Weissman. Well, one--well, maybe two. One striking example is that the administration, the Obama administration bragged that it imposed more severe wage cuts on the auto workers, and General Motors and Chrysler, than the Bush administration had done in its negotiations with the auto industry. It makes no sense whatsoever to bring down the wages both of those workers but, more importantly, the standard in the auto industry and manufacturing overall. As owners of these companies--we are not lenders to these companies; we, the public, are owners of the companies; they are are the dominant owners; they are effectively our companies--we have important statutory public policy objectives that we ought to be pursuing. We are, right now, in the midst of climate change negotiations. Mr. Kucinich. So whose interest did we represent, then, did the Federal Government represent? Mr. Weissman. I think in the case of--it is actually a little bit difficult to say, in the case of General Motors, what the objective was. I think the ultimate objective was to keep it as a going concern, just as a going concern, but without regard to why it is the public would want to maintain General Motors as a going concern. In the financial area, I think we actually represented the interest of management and, to some extent, the interest of maintaining Wall Street and the financial system. Mr. Kucinich. My time has expired and I try to be fair in the allocation of time here. We are going to have a second round of questions. I want to get back to that and ask other people to join in. The Chair recognizes the distinguished gentlelady from California, Ms. Watson, for 5 minutes, then we are going to go to a second round. Ms. Watson. All right. Mr. Kucinich. Thank you, Mr. Weissman. Ms. Watson. Thank you, Mr. Chairman. I am going to be very quick on this so that we can get around the second round. Mr. Nader, I am glad you are back at the table. I missed your first presentation, but if, as you assert, bailed out companies have no legitimate interest apart from Government when Government becomes the dominant shareholder, is it appropriate to re-purpose the companies' objectives and policies toward, for instance, consumer service, environmental responsibility, and worker investment, and to delay the relinquishment that these changed priorities are achieved or protected even if that delays return for functionality or profitability? What is your opinion? Mr. Nader. Well, I think there is a congruence between statutory purposes and the health of a company like General Motors. After all, it got into trouble, one, because it didn't have fuel efficient vehicles and it had a bad mix of choice of vehicles, relying so heavily on the SUV. It got into trouble because, as Ross Perot said, its management, in his words, ``Hates its customers, hates its workers, and hates themselves.'' It was entirely at cross purposes with what professional management should incur. I could argue also that General Motors' fit and finish got them into trouble, compared to Honda and Toyota. So a lot of the statutory purposes already on the books advocated as not only taxpayer representation for value, but also shareholder power, would enhance the health of General Motors. This whole area is one of cognitive dissonance. The more the Government helps GM, how does Ford react, you see, which didn't ask for Government help? There are all kinds of conflicts here. But one thing that seems to be sure is that a basic principle of capitalism is that the owners control what they own, and that principle is massive and historically violated by big business that basically says to shareholders, institutional and otherwise, if you don't like the way we run the country--the company--that was a slip--if you don't like the way we run the company, sell; in other words, exit, not voice. And that is why, in response to Congressman Jordan's point--and that is why I am always amazed by people calling themselves free enterprise conservatives. What is say? What is say on pay? There is no say on pay proposed in Congress or by these corporations; it is just a non-binding referendum. It is an opinion poll by shareholders. If shareholders own the company, they should be able to mandate high executive salaries and they should be given a very small staff to do so. So I have no problems at all in terms of strengthening corporations in this country once they desperately come to Washington and get on their knees for a bailout in terms, as our testimony points out, in terms of exercising shareholder power as a model for the rest of the country--not passive shareholders--as a model for institutional shareholders, who should be at least as aggressive as CalPERS, and also to represent the taxpayer investment; and I don't think they are necessarily contradictory at all. Ms. Watson. Let me---- Mr. Kucinich. [Remarks made off mic.] Ms. Watson. Yes, just one more question connected. Thank you. Mr. Kucinich. Your time expired, but if you want to--OK, continue with your question. Go ahead. Ms. Watson. I wanted to go to Professor Verret. You said that we probably should not have bailed out to the degree that we have. But you know what? It is connected to jobs. Michigan is suffering greatly from unemployment. When I go back to my district, Los Angeles, California, they don't ask me about debt; they want to know what we are doing to get them back to work. So I see the connection between capitalizing the banks and bailing out so that they can hold on to employees. The unemployment rate is unacceptable right now. So can you give me an opinion as it relates to jobs and less bailout? Mr. Verret. Sure. In answer to your question, I would say that I share your concerns about jobs and about employment. My concern is about process, is about the ability to keep everything off budget, off the Federal budget. We saw it once before with Fannie and Freddie, and folks said, well, Fannie and Freddie is off budget, they are not on the Federal budget. Well, they are on there now. And, in fact, they have been the beneficiary of the largest guarantee of these companies. Fannie and Freddie have been the beneficiary of a $400 billion guarantee. This morning the Wall Street Journal reports the Treasury is going to ask for more very soon. So I am worried about this sort of off budget stuff. I think we can help folks through the Federal budget and not have to keep it off budget, because ultimately the taxpayer is going to be left holding the tab anyway, in the future. I think keeping it secret is what I have a problem with. Mr. Kucinich. I thank the gentlelady. Ms. Watson. I yield back. Mr. Kucinich. Thank you very much. Appreciate it. Mr. Tierney. Mr. Tierney. Thank you. Mr. Verret, can I just ask you what is your take or your opinion on real say-for-pay by shareholders? Not the referendum Mr. Nader was talking about, but ought they not have the ability to really determine what the pay is going to be of their executives? Mr. Verret. Well, right now they do have the power to get rid of compensation committees, and I know that the California Pension Fund and a number of other institutional investors do a lot of good work in targeting compensation committee members that aren't doing their jobs; and they say, look, you have to go and they use their majority voting powers to get rid of them. I think that is a very effective way to do things. I worry on say-on-pay just because I worry about some special interest shareholders using this power as part of their negotiations with companies, and I think we have seen some shareholders misuse powers to the detriment of all the ordinary Americans that own shares through their 401-Ks. Mr. Tierney. That is a pretty subjective view. You say they are misusing their powers, but they are shareholders, and who is not to take the other argument that they are acting on behalf of those people whose money they are holding and going to drive that interest, which is in fact not special to them. Everybody has a special interest; every shareholder has a special interest. The board of director member who is a shareholder who sits on there and pads the pockets of the executive because he is an executive somewhere else and is going to be reciprocated when the guy whose pay he is jacking up is going to sit on his board and jack his up, that is pretty special interest. I just take note of that on that basis. Mr. Nader, can you think of any reason why we continue to allow corporations to deduct, as a business expense, from their taxes exorbitant pay for executives? Ought we not look at some point at protecting taxpayers by just saying beyond some point that is not going to be tax deductible? Mr. Nader. Well, you know, the Congress established a million dollar limit---- Mr. Tierney. I meant a real limit, though. Mr. Nader [continuing]. And they circumvented it with stock options and so forth, so it is like trying to block water going downhill. So if you are going to restrict the tax deductibility of executive compensation, you have to also pay attention to how they are going to circumvent it; and they are very creative in circumventing it. One thing we have to understand, this whole subject of this committee, Congressman, is that corporations are very fast learners in gaming regulatory and bailout and subsidy systems from Washington, and Citigroup is a perfect example of that in today's Post. They are very, very creative in gaming, so you have to make sure that if you restrict it in one area, you have to take into account other evasive processes. But I think that if you give shareholders the authority to decide, not just to give their opinion, and you have pension funds and institutional shareholders, that will take care of a lot of the problem. They are not going to approve the pay of $70 million for Goldman Sachs' CEO if they are given the authority. And why shouldn't they be given the authority within their framework? They own the company. But the split between ownership and control, which was pointed out by Berle and Means back in the 1930's, is the way the executives dominate the corporation and strip the owners of control. The professor just noted that there could be some mischief by some shareholders. Well, they have to get over 50 percent, don't they? If 51 percent is mischief, I don't know what your definition of mischief is. Mr. Kucinich. The gentleman desires to engage in a---- Mr. Tierney. I am happy to pass that along, Mr. Chairman. Mr. Verret, I think it is a fair question to you. Fifty-one percent, does that satisfy you that any mischief is at least interpreted differently than what you might view? Mr. Verret. Well, the voting rates of shareholders aren't 100 percent, so some shareholders vote more often than others, and folks who hold shares through their 401-Ks don't have time to vote their shares everyday; whereas, the union pension boss has time to vote their shares every day that they do. Mr. Tierney. Do you think it is the so-called union pension bosses that are voting for $70 million pay raises? Mr. Verret. In answer to your question, if shareholders valued---- Mr. Tierney. I don't think--is it a yes or a no? Do you really believe--do you believe that it is the pension funds and others like that, or the union pension funds that are voting the head of these firms $70 million in compensation? Mr. Verret. I think they are voting based on their own interest, and I think they will vote for things based on what they can get from it. Mr. Tierney. Please, Mr. Verret. You are a professor and you know better. All right? Do you really believe that those are the people that are voting a $70 million compensation package for the chief executive officer? Mr. Verret. I think they will or will not--I don't know what they are voting for, but I know they will or will not vote based on what sort of deals they can work with the company, and I worry about---- Mr. Tierney. I think your credibility suffers a loss there when you answer that way and you are not just forthright on that, because I really have to believe that you don't think for a minute that they are the ones that are voting the $70 million pay packages. And if you do, then, as a good professor, maybe you will go back and look at your documentation a little bit on that. Mr. Verret. Well, I would disagree completely. I think that we have seen a lot of collusion between unions and firms on all sorts of deals. So I think they might vote for it if they got some sort of special deal for themselves as well. And I think when unions and boards collide or when governments and boards collide, the taxpayer and the ordinary Main Street shareholder is the one who is left holding the tab. Mr. Tierney. I have to press this a little further. So the only special interest you see sitting on boards are people that represent labor pension groups? Mr. Verret. Well, there are all sorts of special interests involved, absolutely, sure. They are not the only ones. Mr. Tierney. Right. Thank you. Mr. Kucinich. I thank the gentleman. While we are having this discussion, I am thinking of all these workers whose pension funds began to evaporate with the fallout on Wall Street and whose pension funds get collapsed in bankruptcies. This will be the last series of questions here. Start with Professor Eckbo. Your testimony, sir, outlines how the Treasury's passive voting strategy could, in principle, allow a director to be elected with just one vote of a minority shareholder. Would you explain or expand on what you see as the perils of passive shareholding, what corporate tricks or even scandals could fester while the United States is the dominant shareholder? And, as a followup, could the companies repeat the excessive compensation practices, short-sighted vision, and, in some cases, potentially criminal behavior while the United States is the dominant shareholder under Treasury's plan for shareholding? Professor. Mr. Eckbo. Mr. Chairman, I think it is important to start with the fact that the U.S. corporate system is a board-driven system from a legal perspective, so whatever decisions the boards are taking is going to be binding for the firm. And as we talked about earlier today, shareholder control of its own corporations is a function of how costly it is to replace these board members when they turn out not to be so good. Mr. Kucinich. What about the Treasury as a passive shareholder? Mr. Eckbo. In my mind, when you finally get these large shareholders who have all the incentives in the world to actually take the world and pay the cost of being an active shareholder, which is the problem with the small ones, then we would like Treasury to play that role. Mr. Kucinich. To play the role of? Mr. Eckbo. As an active large shareholder. Mr. Kucinich. And what would that mean? Mr. Eckbo. That means, for example, it means, in my mind, to try to restructure the system on a broad scale to support, to push for election reform for directors. It means go into the company and vote charter amendments, for example, where we take away staggered board provisions; we separate the chairmanship and the CEO position, which is common today in the United States. It is illegal in some other countries because of conflicts of interest that are involved. So you take these actions in order to get--and, of course, you get directors that you think are capable of running the company the way it should be done. Mr. Kucinich. Does anybody want to chime in here, any other panelist? Ms. Simpson, what do you think about Treasury's passive voting strategy? Ms. Simpson. I want to just come back to this point about-- -- Mr. Kucinich. No, what do you think of that? I know you want to talk about what you want to talk about---- Ms. Simpson. It is critical for all shareholders---- Mr. Kucinich [continuing]. But just answer the question, would you? Ms. Simpson. It is critical for all shareholders to be active responsible owners and to push this governance overhaul, which is absolutely necessary. So majority voting, yes. Proxy access, absolutely. Removal of all the barriers to accountability like staggered boards, super-majority voting, poison pills, you know, there is a list of a dozen or so barriers to accountability and we want all owners to actually engage with these reforms; otherwise we have simply missed a huge opportunity. Mr. Kucinich. Anyone else want to join in? Anybody. Professor Verret, do you want to join in? Mr. Verret. In part, I wonder how passive it is, just because I know that they have said that it is passive and we have seen that they have a press release about it, but there is no binding regulation about it; and that is part of what worries me, is that there is no binding regulation on Treasury on how it is going to vote, and I think you lose some separation of powers and some accountability to the people and the Congress through that. Treasury also lists some exceptions. It says we won't vote shares, with the following exceptions. Ironically, it lists all the things shareholders would want to vote on; election of directors and dividends and things of that nature. So I think we probably share a concern with respect to---- Mr. Kucinich. You know, you raise a point as to what is passive. At what point, when you are sitting there as a large shareholder, you pick up a phone and talk to someone, that can have an impact. What is the transition from passive to active? And is passive like a wall saying, we don't want to look, we don't want to hear anything? That, of course, would have some hazards if you are doing due diligence. Mr. Tonelson. Mr. Tonelson. Just one really fast point. That is why it is so essential that this Government shareholder role be tightly coordinated with the rest of our economic recovery strategy, because you don't want the situation where Government, as shareholder, decides to push a certain set of policies that may be good for the well being of that particular company if the whole economy happens to be moving in an entirely different way. Mr. Kucinich. So you see the position of the Government as shareholder in a broader economic context. In other words, you have to look at economic policy. Mr. Tonelson. You have to. Mr. Kucinich. Not in isolation. Mr. Tonelson. You can't silo these things anymore. Something that used to be as big as GM, and that still has such a vast supplier chain--and let me say I am not here as the champion of GM. Lots of our member companies have done business with it and, you know what? They didn't find it to be a lot of fun. OK? But a U.S.-owned automotive industry is vital to American economic success. We will not be a prosperous country without a big healthy automobile industry owned by Americans. And the strategy for that cannot be set simply by U.S. Government representatives voting in piecemeal ways on individual decisions and challenges that GM faces as a company. That role has to be integrated with a much broader strategy toward incentivizing more production, more job creation in manufacturing in this country. Mr. Kucinich. You know, Mr. Nader used the term cognitive dissonance earlier. I am sure this is something that is troubling a lot of economists and people who try to see a division between the public sector and the private sector. But you are putting your finger on something in terms of looking at the macroeconomic implications of the policies, because if we are told that some firms are too big to fail, if we take that view--I don't happen to believe that. I think that you break them up if they are too big to fail. But since we have that model that we have essentially confirmed the other day, then we better look at the macroeconomics and better play a role in determining that, because, on one hand, we can't say too big to fail and then, on the other hand, say we can't look at what you are doing. Mr. Tonelson. Exactly. And I will give you one very specific example. No one would like to see GM make a great small fuel efficient car more than me. However, we have to keep in mind that no economy on this planet, in its history, has ever produced small fuel efficient cars profitably while keeping their automotive markets open. It has never happened. The Europeans haven't done it because their auto markets are closed; the Japanese haven't done it; the South Koreans haven't done it. Their markets are closed. The margins just aren't there, and especially when you force American companies into competition with foreign rivals that are either highly subsidized or that put this tight lid on labor costs, you have a total no-win situation. You are forcing GM, for example, to take an absolutely suicidal course. Mr. Kucinich. You know, we are in a whole new era here in the era of bailouts, because what we have done, we have actually, unwittingly, created symmetry between our bailout policy and our trade policy, where trade policy does not admit to workers' rights, human rights, environmental quality principles, and with the Government as shareholder trumping taxpayers' rights in favor of shareholders. There is an alignment there with trade policy and bailout policy that could actually result in moving jobs out of this country. Mr. Tonelson. Oh, absolutely. Mr. Kucinich. Actually accelerating the movement of jobs. Mr. Tonelson. You could create--I am sorry. Mr. Kucinich. Mr. Nader and then I am going to go to one final question. Mr. Nader. Can I just elaborate quickly? Mr. Kucinich. Yes. Mr. Nader. On the China thing, imagine. Just look at this flow: worker taxpayer dollars, small business taxpayer dollars go to Washington; they help fund the bailout of General Motors; the U.S. Government owns 60 percent of GM. GM's policy is to move its future into China; that is going to be its big market. It is already huge. So what happens? If the Government, as shareholder and representative of the taxpayer, plays a passive role, they are basically allowing GM, with U.S. taxpayer support, to dislodge and hollow out communities here, go to China and export back into the United States. Do you see the conundrum here? These are hard questions, but you certainly, as a matter of principle, don't want to say to workers whose taxes go to Washington and small business that they are going to finance the hollowing out of their communities by GM's declared policy to expand in China and a non-binding promise that, temporarily, they won't export back into the United States. But everybody knows that is not binding. And if the U.S. 60 percent share doesn't kick in, that is the way it is going to go. I mean, this is unbelievable. We are stripping down our economy on behalf of manipulative dictatorships who determine costs. No marketplace determines labor costs in China. These are dictatorially determined costs and we call it free trade. Mr. Kucinich. Mr. Tierney for 5 minutes. Mr. Tierney. No, I don't want 5 minutes. Are you, Mr. Tonelson and Mr. Nader, then advocating that we just get out of General Motors or that we differently exercise the authorities of power that you have as a basis of your stock or your stake in the company? Mr. Tonelson. General Motors, just speaking for USBIC, has to be run in the way that will give it a real chance for success. You absolutely needed a viability strategy, but the Federal Government's viability strategy, the Obama administration's viability strategy failed completely to acknowledge the globalized nature of automotive production. It just ignored that; it didn't exist. Let's make believe it hasn't happened for the last 20 years. How in the world can that succeed? How can you expect General Motors to succeed in that context, with that lack of forethought? Mr. Tierney. Mr. Verret, what do you say to all that? Mr. Verret. Well, I don't profess to be an expert on the automotive industry, so I don't want to go outside of my expertise too much. But I will say---- Mr. Tierney. Give it your best shot. Go ahead. Mr. Verret. Sir? Mr. Tierney. Go ahead, give it your best shot. Mr. Verret. Yes. I will say that I worry at taking the macro view. I do worry about both the effects of bailouts, the incentive effects. You know, we bailed out Chrysler before and I think it is a supportable proposition that the reason why we had to bail out Chrysler and GM was in part because they saw that they had that safety net, and I think it led them to take more risks than they needed to. And I think that is why--I know we focused a lot on what we disagree about, but I admire the chairman's vote on the bailout; I think it took a lot of courage and I think that is an admirable vote and a way of thinking that I think we should consider more. And I worry about the off-budget nature of some of the sorts of deals that governments and business tend to make when they get in bed together. Mr. Tierney. Thank you. I yield back, Mr. Chairman. Thanks. Mr. Kucinich. This is going to be the final question of this hearing, and this would be to any witness that would care to respond. Is Treasury the only, or even the best, entity to control the U.S.' shares? Now, Professor Eckbo calls attention to the U.K. approach in your testimony in establishing a special corporation to exercise the government's shareholding, improve transparency, and provide clear lines of accountability. I know that Ms. Simpson is familiar with this as well. I would like to ask any of the witnesses that they think about this concept and, in particular, Mr. Nader and Mr. Weissman, to comment on what model might be implemented to facilitate the broad principles or best practices that you outline in your testimony. So, Mr. Nader, would you want to comment on that, Mr. Weissman, and then maybe go back to Mr. Eckbo and Ms. Simpson? Mr. Nader. I think everybody knows eventually the Government is going to sell its shares in General Motors and these other companies, so my view is, instead of having another delegation--from the congressional to the executive to some trust fund--that the Treasury, under clear standards provided by the Congress, behave as a shareholder with multiple obligations, which I don't think are, in the short-term, conflicting. They have to represent not only taxpayer value, shareholder value, but the whole purpose of bailing out GM, the main purpose is to save communities and save jobs and keep a major factor of an industry in this country. So inescapably, when GM came to Washington and prostrated itself in front of the Congress, it went into the political arena. There have to be political judgments because of all the public investments, and those judgments can be made in the most enlightened form through congressional participation, openness, and standards of accountability. For the record, I would like to put in this review of Corporate Governance, the Role of Institutional Shareholders by Robert A. G. Monks, who arguably---- Mr. Kucinich. So ordered. Mr. Nader [continuing]. Arguably is the leading shareholder activist in the country. And he has some very good recommendations to the point of your question, Mr. Chairman. Mr. Kucinich. Without objection, so ordered. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T5130.090 [GRAPHIC] [TIFF OMITTED] T5130.091 [GRAPHIC] [TIFF OMITTED] T5130.092 [GRAPHIC] [TIFF OMITTED] T5130.093 [GRAPHIC] [TIFF OMITTED] T5130.094 [GRAPHIC] [TIFF OMITTED] T5130.095 [GRAPHIC] [TIFF OMITTED] T5130.096 [GRAPHIC] [TIFF OMITTED] T5130.097 [GRAPHIC] [TIFF OMITTED] T5130.098 Mr. Kucinich. Anyone else want to join in? Mr. Tonelson. Mr. Tonelson. The Treasury Department has absolutely no expertise in fostering productive activity, in fostering wealth creation; it is not the Treasury's job. It is not their fault, but they shouldn't pretend that they have that expertise. Second point is that---- Mr. Kucinich. So what do we do, then, with this situation we are in right now? Mr. Tonelson. These responsibilities have to be given to those sections or those agencies that have that competence. And if we can't find them, or in the right combinations, new forms have to be created. But one other critical point. If the U.S. Government is not--if it doesn't have a voice in making these critical decisions that will literally make or break critical industries, in a globalized world economy, those decisions will be made by foreign governments, and their first priority will not be the well being of the American people or their economy. So we have no choice but to act. Failing to act amounts to making policy that will damage us grievously. Mr. Kucinich. Before I go to Professor Eckbo, I would like Ms. Simpson to comment on this. Your fund deals with many troubled companies. How do you handle that, in terms of the interest of your members? Ms. Simpson. What is critical to this is separating out the different objectives. CalPERS's sole purpose is a fiduciary objective; we are there to invest on behalf of the beneficiaries. The U.K. model is intended to separate out government's interest for addressing political issues, which are quite legitimate from investment objectives; and, as an investor, it sets out in its mandate that it will vote, that it will engage with companies, and that political questions will be referred to ministers for proper political judgment where ministers can be held accountable. So, on CalPERS's side, we would like to see the fiduciary part of the agenda taken forwards and, as we said earlier, would welcome the Government as an owner working alongside us with a fiduciary objective. Mr. Kucinich. OK. Professor Eckbo. Mr. Eckbo. My recommendation of the U.K. FI as a model was very much because I wanted a separation between the Government, the political influence over the management of the shares, per se, and it creates more transparency and more responsibility on the part of the trust or the corporation that you are setting up. I also said in my testimony that I would probably put all the shares in the same unit, both the banking shares and the auto shares, because I don't see a tremendous difference in terms of the qualifications of the people in that trust that they need in order to manage that trust properly. I just wanted to make one comment, if I can, on this issue that you raise, which is very important. If I, as a taxpayer, would like to subsidize employment in Michigan, should I do it through my ownership stake in GM? Mr. Kucinich. By what, sir? Mr. Eckbo. Through my share ownership in GM. Should I use GM as a tool, as a taxpayer, as a tool to further my goals to get employment subsidies in Michigan? In my view, sometimes you can have your cake and you can eat it too. If you operate GM, as we heard across the table, to maximize the value of GM, I think the U.S. Congress will also have more funds to do its goals, which is to subsidize employment in Michigan. I don't think we have to tie the two together, necessarily. So I think the answer to your question should you be an active investor, I say yes in the governance area. People say what about these other social goals that you are pulling in, the macro economy and the employment record. I am saying we should probably separate the two, in my mind. Mr. Kucinich. Well, you know, it is an interesting point you raise, because what has happened in the latter part of the 20th century, a whole body of investment information came alive dealing with socially responsible investing, and that is there was an understanding that your investment choices had a social impact; and that social impact could be monetized. Mr. Eckbo. Right. I agree with that. The Congress also operates under the--it needs revenues to further its goals, and I think the tax revenues that you are looking for can be maximized by having these corporations do their jobs as well as possible within the private sector. So I think mixing those two could be costly. Mr. Kucinich. OK, now, Ms. Brown, you have been very patient sitting there. Would you like to comment on this, or is there anything that this discussion--that has occurred to you that you would like to comment on or say? Ms. Brown. I would only note that the work that we currently have underway, we are looking at the issue of the Government says it has taken a hands-off approach. We are actually looking at what the Government is actually doing in all of the institutions that have received exceptional assistance. So we are looking at Bank of America, Citigroup, AIG, GM, Chrysler, GMAC, as well as Fannie Mae and Freddie Mac. So we are actually looking at kind of what the Government says it is doing and what it is actually doing. And I would note that when it comes to the Government being a passive investor, the Government has been involved in changing the board structure in certain situations. If you take AIG, for example, there is primarily a new board in place. The trustees had a role in identifying members for the board; they did an analysis of what they thought the new board needed to look like, the expertise they needed to bring into the board. And I would also like to note that when it comes to AIG, there is a provision that if AIG does not pay four consecutive dividend payments, the Government has the right to vote two members to the board of directors. Mr. Kucinich. Thank you. Last question to Mr. Weissman. Is there any practical advantage the Government now has as a result of being a dominant shareholder that it did not have before it became a shareholder? Mr. Weissman. [Remarks off mic.] Mr. Kucinich. Could you speak directly into the mic so we can hear you? Mr. Weissman [continuing]. The question that you have been raising, and I wanted to disagree with Professor Eckbo on a comment that is in the GAO report. The GAO experts consulted said that the Government should manage its shares as if it were a commercial investor. The Government is not a commercial investor. We did not get into General Motors, AIG, Citigroup because we thought there was a profit opportunity there. We made a policy decision that there were certain broader implications that required the continued existence of these firms. That suggests that, as we manage our shareholding opportunity, we have to take into account exactly those same broader policy considerations. To your previous question, I think that means, therefore, that you do not rely just on Treasury to manage the share decisions, you involve agencies like EPA or NTSA or Department of Commerce, if they are appropriate. Also, I think it speaks absolutely to the need for Congress to have much more oversight and engagement in this, because it is not going to come, as we see now, from this administration. Finally, to the point that you raised at the outset that is also related to this, we have to address the issue of exit. We now have the exit strategy emerging with Citigroup. There has to be some standard about what the exit is, it can't just be that we got in to help you out for a little while; we will get out whenever it is convenient to you. The you, the companies are us, the Government. The exit decision has to be managed in terms of what benefits the public and the Government interest in these corporations, not in the interest of the corporations themselves. Ms. Brown. Chairman, could I clarify? Mr. Kucinich. Go ahead, Ms. Brown. Ms. Brown. The comment in our statement about the commercial manner, this was not GAO's assertion that is how it should be; that was part of a discussion of how the Treasury explained they are managing the investment. So we were not endorsing that approach, but simply saying this is how it is being managed. Mr. Kucinich. I understand. It is a matter of record now. Mr. Nader said he wanted to make a comment and then we have just been notified that I just have a few minutes to go make a vote, so if you would make a brief comment. Mr. Nader. OK, very briefly. Here is the conundrum. The Government says they want to be passive investors. There is no such thing, when you own 60 percent of the company, of being a passive investor without tilting the dynamic in favor of the non-passive or the commercial investors. Let me give you an example. Proper role for the Government should have been to deal actively with who is going to be on the board of directors and who is going to run General Motors, because, historically, General Motors has been run for the last 60 years by finance executives or marketing executives, not by engineers, the way Henry Ford and Chrysler and others started the auto companies. That, of course, degraded the concept that most people who know the industry believe is central to the recovery of the auto industry; it is called product, product, product. So now GM is run by an ex-telephone executive with a lack of distinguished members of the board of directors. They have just fired the replacement for the original CEO, Fritz Henderson, and there is chaos at the top. So this is what happens when the Government, which has major responsibilities for GM's recovery, takes a standoffish position. And it would be good for the Government Accountability Office to provide Congress with information as to the degree, if any, the Government ratified these lack of distinguished boards of directors and the top management of GM. As Automotive News--which is no patsy for the industry, but it is an industry trade journal--has said repeatedly, especially in its current issue, General Motors needs an auto guy; it needs somebody who knows automobiles, production engineering, and innovation. Mr. Kucinich. What a thought. Mr. Nader. On that point, I want to submit to the record a report that we did a couple years ago called Innovation and Stagnation in Automotive Safety and Fuel Efficiency. Mr. Kucinich. Mr. Nader, we will accept that for the record. I am going to have to---- Mr. Nader. Just one sentence. Mr. Kucinich. I am going to have to---- Mr. Nader. The theme is that General Motors has been denying the practical innovations that its major suppliers have been putting forth for decades, and that is a management failure. Mr. Kucinich. I want to thank you for your testimony. We have another vote and we have covered a lot of the territory today. This is the Domestic Policy Subcommittee of Government Oversight and Reform. Our topic today has been the Government as Dominant Shareholder: How Should the Taxpayers' Ownership Rights be Exercised? We have had a distinguished panel. I appreciate each and every one of you participating. You have opened up other areas for inquiry which this committee will address. Tomorrow we are going to have Treasury here to testify and, as I said earlier, we are going to be asking them about a lot of things, including this Citigroup development. The committee now stands adjourned. Happy Holidays. Mr. Nader. Thank you, Mr. Chairman. [Whereupon, at 12:53 p.m., the subcommittee was adjourned.] [Additional information submitted for the hearing record follows:] [GRAPHIC] [TIFF OMITTED] T5130.099 [GRAPHIC] [TIFF OMITTED] T5130.100 [GRAPHIC] [TIFF OMITTED] T5130.101 [GRAPHIC] [TIFF OMITTED] T5130.102 [GRAPHIC] [TIFF OMITTED] T5130.103 [GRAPHIC] [TIFF OMITTED] T5130.104 [GRAPHIC] [TIFF OMITTED] T5130.105 [GRAPHIC] [TIFF OMITTED] T5130.106 [GRAPHIC] [TIFF OMITTED] T5130.107 [GRAPHIC] [TIFF OMITTED] T5130.108 [GRAPHIC] [TIFF OMITTED] T5130.109 [GRAPHIC] [TIFF OMITTED] T5130.110 [GRAPHIC] [TIFF OMITTED] T5130.111 [GRAPHIC] [TIFF OMITTED] T5130.112 [GRAPHIC] [TIFF OMITTED] T5130.113 [GRAPHIC] [TIFF OMITTED] T5130.114 [GRAPHIC] [TIFF OMITTED] T5130.115 [GRAPHIC] [TIFF OMITTED] T5130.116 [GRAPHIC] [TIFF OMITTED] T5130.117 [GRAPHIC] [TIFF OMITTED] T5130.118 [GRAPHIC] [TIFF OMITTED] T5130.119 [GRAPHIC] [TIFF OMITTED] T5130.120 [GRAPHIC] [TIFF OMITTED] T5130.121 [GRAPHIC] [TIFF OMITTED] T5130.122 [GRAPHIC] [TIFF OMITTED] T5130.123 [GRAPHIC] [TIFF OMITTED] T5130.124 [GRAPHIC] [TIFF OMITTED] T5130.125 [GRAPHIC] [TIFF OMITTED] T5130.126 [GRAPHIC] [TIFF OMITTED] T5130.127 [GRAPHIC] [TIFF OMITTED] T5130.128 [GRAPHIC] [TIFF OMITTED] T5130.129 [GRAPHIC] [TIFF OMITTED] T5130.130 [GRAPHIC] [TIFF OMITTED] T5130.131 [GRAPHIC] [TIFF OMITTED] T5130.132 [GRAPHIC] [TIFF OMITTED] T5130.133 [GRAPHIC] [TIFF OMITTED] T5130.134 [GRAPHIC] [TIFF OMITTED] T5130.135 [GRAPHIC] [TIFF OMITTED] T5130.136 [GRAPHIC] [TIFF OMITTED] T5130.137 [GRAPHIC] [TIFF OMITTED] T5130.138 [GRAPHIC] [TIFF OMITTED] T5130.139 [GRAPHIC] [TIFF OMITTED] T5130.140 [GRAPHIC] [TIFF OMITTED] T5130.141 [GRAPHIC] [TIFF OMITTED] T5130.142 [GRAPHIC] [TIFF OMITTED] T5130.143 [GRAPHIC] [TIFF OMITTED] T5130.144 [GRAPHIC] [TIFF OMITTED] T5130.145 [GRAPHIC] [TIFF OMITTED] T5130.146 [GRAPHIC] [TIFF OMITTED] T5130.147 [GRAPHIC] [TIFF OMITTED] T5130.148 [GRAPHIC] [TIFF OMITTED] T5130.149 [GRAPHIC] [TIFF OMITTED] T5130.150 [GRAPHIC] [TIFF OMITTED] T5130.151 [GRAPHIC] [TIFF OMITTED] T5130.152 [GRAPHIC] [TIFF OMITTED] T5130.153 [GRAPHIC] [TIFF OMITTED] T5130.154 [GRAPHIC] [TIFF OMITTED] T5130.155 [GRAPHIC] [TIFF OMITTED] T5130.156 [GRAPHIC] [TIFF OMITTED] T5130.157 [GRAPHIC] [TIFF OMITTED] T5130.158 [GRAPHIC] [TIFF OMITTED] T5130.159 [GRAPHIC] [TIFF OMITTED] T5130.160 [GRAPHIC] [TIFF OMITTED] T5130.161 [GRAPHIC] [TIFF OMITTED] T5130.162 [GRAPHIC] [TIFF OMITTED] T5130.163 [GRAPHIC] [TIFF OMITTED] T5130.164 [GRAPHIC] [TIFF OMITTED] T5130.165 [GRAPHIC] [TIFF OMITTED] T5130.166 [GRAPHIC] [TIFF OMITTED] T5130.167 [GRAPHIC] [TIFF OMITTED] T5130.168 [GRAPHIC] [TIFF OMITTED] T5130.169 [GRAPHIC] [TIFF OMITTED] T5130.170 [GRAPHIC] [TIFF OMITTED] T5130.171 [GRAPHIC] [TIFF OMITTED] T5130.172 [GRAPHIC] [TIFF OMITTED] T5130.173 [GRAPHIC] [TIFF OMITTED] T5130.174 [GRAPHIC] [TIFF OMITTED] T5130.175 [GRAPHIC] [TIFF OMITTED] T5130.176 [GRAPHIC] [TIFF OMITTED] T5130.177 [GRAPHIC] [TIFF OMITTED] T5130.178 [GRAPHIC] [TIFF OMITTED] T5130.179 [GRAPHIC] [TIFF OMITTED] T5130.180 [GRAPHIC] [TIFF OMITTED] T5130.181 [GRAPHIC] [TIFF OMITTED] T5130.182 [GRAPHIC] [TIFF OMITTED] T5130.183 [GRAPHIC] [TIFF OMITTED] T5130.184 [GRAPHIC] [TIFF OMITTED] T5130.185 [GRAPHIC] [TIFF OMITTED] T5130.186 [GRAPHIC] [TIFF OMITTED] T5130.187 [GRAPHIC] [TIFF OMITTED] T5130.188 [GRAPHIC] [TIFF OMITTED] T5130.189 [GRAPHIC] [TIFF OMITTED] T5130.190 [GRAPHIC] [TIFF OMITTED] T5130.191 [GRAPHIC] [TIFF OMITTED] T5130.192 [GRAPHIC] [TIFF OMITTED] T5130.193 [GRAPHIC] [TIFF OMITTED] T5130.194 [GRAPHIC] [TIFF OMITTED] T5130.195 [GRAPHIC] [TIFF OMITTED] T5130.196 [GRAPHIC] [TIFF OMITTED] T5130.197 [GRAPHIC] [TIFF OMITTED] T5130.198 [GRAPHIC] [TIFF OMITTED] T5130.199 [GRAPHIC] [TIFF OMITTED] T5130.200 [GRAPHIC] [TIFF OMITTED] T5130.201 [GRAPHIC] [TIFF OMITTED] T5130.202 [GRAPHIC] [TIFF OMITTED] T5130.203 [GRAPHIC] [TIFF OMITTED] T5130.204 [GRAPHIC] [TIFF OMITTED] T5130.205 [GRAPHIC] [TIFF OMITTED] T5130.206 [GRAPHIC] [TIFF OMITTED] T5130.207 [GRAPHIC] [TIFF OMITTED] T5130.208 [GRAPHIC] [TIFF OMITTED] T5130.209 [GRAPHIC] [TIFF OMITTED] T5130.210 [GRAPHIC] [TIFF OMITTED] T5130.211 [GRAPHIC] [TIFF OMITTED] T5130.212 [GRAPHIC] [TIFF OMITTED] T5130.213 [GRAPHIC] [TIFF OMITTED] T5130.214 [GRAPHIC] [TIFF OMITTED] T5130.215 [GRAPHIC] [TIFF OMITTED] T5130.216 [GRAPHIC] [TIFF OMITTED] T5130.217 [GRAPHIC] [TIFF OMITTED] T5130.218 [GRAPHIC] [TIFF OMITTED] T5130.219 [GRAPHIC] [TIFF OMITTED] T5130.220 [GRAPHIC] [TIFF OMITTED] T5130.221 [GRAPHIC] [TIFF OMITTED] T5130.222 [GRAPHIC] [TIFF OMITTED] T5130.223 [GRAPHIC] [TIFF OMITTED] T5130.224 [GRAPHIC] [TIFF OMITTED] T5130.225 [GRAPHIC] [TIFF OMITTED] T5130.226 [GRAPHIC] [TIFF OMITTED] T5130.227 [GRAPHIC] [TIFF OMITTED] T5130.228 [GRAPHIC] [TIFF OMITTED] T5130.229 [GRAPHIC] [TIFF OMITTED] T5130.230 [GRAPHIC] [TIFF OMITTED] T5130.231 [GRAPHIC] [TIFF OMITTED] T5130.232 [GRAPHIC] [TIFF OMITTED] T5130.233 [GRAPHIC] [TIFF OMITTED] T5130.234 [GRAPHIC] [TIFF OMITTED] T5130.235