I assure you I will not blink and, obviously,

conflicts of interest is an important area that we're reviewing with

GAO, whose done an excellent...

I don't think they will.

MR DODARO: Now's not the time to start, Mr. -- Senator --

-- and we won't.

Well, I think the CBO, under the TARP legislation,

the Economic Stabilization Act, is required to use the credit reform

principles in doing...

The numbers that our specialists have used in

evaluating this suggests --

Sure. You bet. We hired Duff & Phelps, it's a

publicly-traded company that's in the business of valuing companies,

and we did it after a...

No, they are not in the ratings business.

They're in a different kind of business here. And

they were aided by Professor William Goetzmann and Professor Deborah

Lucas -- I want to...

-- finance professors who helped us out here. And

they were also aided -- we did a legal analysis at the same time. As

appalling as this...

Yeah.

I think that's been part of the communication

problem all along here.

(Cross talk.)

Right, well they made the initial decision to go

with the large banks and then started the capital purchase program

with a process using...

Well, Senator Shelby, I think it's clear that

Treasury did not use market mechanisms, and I think, frankly, if we

just read their public...

They pay the uniform price. And as soon as you pay

a uniform price -- that is, they said, "We're going to pay the same

amount. We'll give...

Well, if the goal --

Senator, Treasury simply did not do what it said it

was doing.

I can't say that more clearly.

Well, they did not do --

-- what they said they were --

They announced one program --

-- and implemented another.

Senator, it's more than that --

Yes, Senator, they did, but it's more than that.

It's even in the program that they moved to -- in the second program.

They described that...

-- and the other seven were not.

Two areas: First is the -- one of the audits that

we are announcing today is designed to detect the impact of outside

influences -- of all...

(No immediate response.)

I don't know.

I think -- I think it is too early to tell whether

it was been -- it's been wisely spent.

Senator Shelby, I think your question asks a

number of questions. And, obviously, I think that any institution --

No, no. I think any institution that has violated

the terms of its agreement, obviously that's very much a wrong thing.

Banks that misuse...

Actually, it's both, Senator. The entire "healthy

banks" purchase program was to use exactly the same approach and

exactly the same pricing...

The warrant is the central mechanism. Yes, sir.

As we indicate in our report, (I think ?) the

warrants were uniformly priced by the same methodology, which would be

(a) 20-day trailing...

Well, I think it's a very creative idea, the notion

that your own money is on the line, and your own future, rather than

just that of the...

Yes. First, right after the legislation passed we

were the only organization that was really able to get in right away,

until Mr. Barofsky...

We focus on where I think where we can add the

most value. And the key, from our audit perspective, is coordination,

because GAO is the...

It's posted on our website along with out hotline

and we are committed to protecting whistle-blowers.

I see my role as much more -- we look at things like

the structure overall, whether or not we have a framework that's going

to work here...

Well, I think this is a really hard question. I'm

not confident, A, that we would've done something else. It's not as

if there was only...

Please.

Yes, one of the other roles that we're tying to do

is to develop a set of indicators that can kind of track this over a

period of time,...

Well yes, Senator, because this was actually a point

we raised back in our December report and that we have raised in our

meetings with...

I'm sorry. I apologize.

Senator, we can't tell. One possibility, they could

say, they're not lending because there aren't good lending

opportunities, that's certainly...

Right.

Yes, Senator.

Yes, Senator, I think that's important.

No, no. We value the whole package.

Yeah, yeah.

It's not, Senator.

Well, Senator, I think we start by telling the

truth. And that means if we have financial institutions who have

liabilities up here and...

Senator, the point is, we've got to acknowledge if

there is a gap, we have to acknowledge what that gap is, and then

we're just going to...

I think there are enormous risks and enormous costs

to doing this slowly over time, because I do believe markets are

smart. They see it...

I think that's right, Senator.

When Treasury decided that it was going to use the

same terms for all banks and not engage in risk-based pricing -- which

is what the market...

No.

That's correct, February 15th.

We do not include it in our report, I'm sure we

can get you that information.

Not yet. The dividend payments are at 5% and a lot

of the payments under the initial capital purchase program are still

being made. The...

Senator, I work in the bankruptcy much of the time

-- my academic work -- and it's pretty much the case, the data showed,

the CEOs lose...

Certainly, and I think that enforcement -- it

drives some of the things that we've done early on and insisting and

recommending that treasury...

Yes, when we first addressed this issue in early

January -- and what we did is we worked off the term sheet in the

initial briefing -- we...