.. global movements opinion because that is their primary constituency. but in terms how the mechanism

works i wish i knew. they don't expose the side of them. implications for the rise for al qaeda, i think that he's done his damage, so the next question is what happens if he dies. so i think he already missed the movement up to a level of sophistication that otherwise would not have been and i think he's prioritized the importance of terminal logical security of all these things i've already talked out. it's now on everybody's radar. he's made his contribution so the longer he lasts the more damage he can do it was reported a few months ago or maybe last month he had been killed. unfortunately have had mixed reactions because that is a short book. but i do think he's one of the most dangerous terrorist cell there because of his mind. in terms of lucky, i think the

fact is he is really bad. i think he actually was a religious adviser to al qaeda and the peninsula it seems to me and so i think yes, he was a five-year breeding sheik after he left the u.s. for a while and that's bad enough but i think he was actually doing that stuff so it was probably necessary. >> chris can answer questions about yemen better than i can but i will say one thing. i will mention again this op-ed yesterday when he talks about a new strategy which i generally agree with ed and his death by 1,000 cuts, it's not dependent on a large scale attack 9/11 style. i think that's accurate. he says there are five pieces, one is to create background noise of economic warfare, the antial qaeda alliance, it actively exploited field states and urged western recruits. and these five are interesting because it allows us to ask who can do those things well and

effectiveness really breeds leadership then who else besides chechnya is a successor. i don't think that jarret would say abu yahya is the donner 100%. there's other folks out there and by the wish to ask the questions because one thing that made bin laden bin laden is he was effective. he got stuff done. the embassy bombing of 1998 and the american response with cruise missiles raised bin laden's stature with inside afghanistan, and pushed mullah omar to give him more influence over the foreign groups operating there. so it's true, and so the answer to your question about is our attention being paid to raising his stature i would say yes, absolutely it is. we should be careful because there's lots of some ways we could go about undermining somebody might al-loki because he's written things in the past criticized, he has been -- he

was declared by abdul the faisal -- ceramica arrested for prostitution krug to the eckert -- charges. speed there's a lot of things we could be talking about al-loki and from the communications standpoint would be great for us as a nation to be talking about to undermine this guy. but we have a problem when somebody like this comes up that we always seem to elevate. what we need to do is look at these people as human beings because it is their human nature that is their weakness and that is how we exploit them and get them. they are not 10 feet tall, none of them. >> thank you. i think this has been a great session, and sitting and listening to this reminds me of all the names i don't recognize, it reminds me of the importance for why we need to study these things and it's shocking to me eight or nine years into this conflict there is still not an

organized format and organized funded way to study this and i think it's shocking if you look back during the cold war there is a whole science of criminology and russian and soviet studies and chinese and communism and it's amazing there isn't a more coherent and organized and funded structured program to understand this conflict we find ourselves in now. so please join me in thanking the speakers. i look forward to the book. [applause] [inaudible conversations]

did you know that the number one for each application for your iphone or ipod touch is c-span's retial? now you can get quick and easy access to three streaming audio channels. tab with links tous c-span anda

all the podcast including q&a and after words and it's all free and available from the apps store. our interview with npr and fox news political analyst juan williams. appeare the washington journal this morning before an audience of the george washington university students. this is 45 minutes. >> host: we welcome juan williams of national public radio and fox news channel. let's get beyond the headlines what we've seen over the last 72 hours with comments from harry reid. is this a teachable moment in race relations as president obama referred to with what he was talking about last summer? >> guest: i think this is. it's interesting also many levels life again part it's generational, stevens, when you talk about teachable moment especially here with ought of the people in the audience laughing when they hear a word like negro i think their paniers cockup. what exactly is he referring to.

is this intended as an insult, is that word the equivalent of the n-word? why are people upset about that word and the notion of dialect? again, i think it's rich for exploration and as you say it's teachable. i also think that when people get into an issue like this can color someone is more electable in the opinion of a major political figure like the senate majority leader because they are of a lighter skin color. i think it is a window not just into sort of the perception of the american electorate and found we never had an african-american president and we've never had any president who wasn't a white male. i think it's also a very revealing window about conversations that take place inside the black community. about skin color. i don't think white people necessarily have those conversations and i am not sure they think about these things, greatly but believe me, it's a point of concern and interest and fascination and arguments about what amounts to duty and

acceptability and when you want for your son and daughter. so all of this is real. if you look at politicians who have success in american life who are african-american, you know, you think i just stopped and model the of barack obama but he think about someone like colin powell, condoleezza rice, it broke, who was the first african-american senator in the modern era and again he think overwhelmingly of light skinned african-americans and so again, it allows us to have a conversation or teachable moment describing it as a consequence, do you think this really matters or is this something we shouldn't be doing publicly? but it allows us to engage, it allows the dialogue to get started and i think that is why it is a teachable moment. >> this session from the washington journal coming from the george washington university. we are five, six blocks from the white house in downtown washington, d.c. and gathered in the auditorium representatives

of 60 colleges and universities all part of the washington center for two weeks to learn about government and politics and journalism we are going to get to their questions and your phone calls and one questions here up front. go ahead, please. >> negative end from suffolk university of boston. my question is whether or not you think the republicans can win the senate race in massachusetts. and house of the national party kind of missed the ball cleanly getting involved in that race in the last couple of weeks? >> host: before he answers you are for massachusetts. what do you think is going to happen? >> i think it will be closer than people think. i'm kind of disappointed in the national gop for not being in this race from the start. >> again you stop and look at the state and think about what people say about massachusetts, your home state, no doubt but people forget that as a liberal bastion and they think of course if you look at the numbers its two democratic senators, democrats in congress, democratic governor, it seems

overwhelmingly. mitt romney had success by the people see that as exceptional and that's why there wasn't much effort by the national party initially. but now it has taken on larger significance city if you think of it in the terms you're thinking of which they had come out early on if the head with a lot of money into scott brown a flight out of the box after he had won the primary that he would have a better shot now. i think that there calculation was he doesn't have a chance to win. this isn't a good seat, a good opportunity to claim the seat. now i'm not necessarily convinced the republican party believes they can win even now but what they do believe is that they can really take a shot at the democrats in this white house as a sort of warning shot if you will that says to them you know what, there will be big losses in november by the democrats and look how close its way to be in massachusetts and that is a warning shot this is to people who are democrats get

out, every sign, don't run and this is to republicans they are looking to recruit to run for office in november this is our season, or cycle, get in. we can win a and idp are using it for this purpose is much more so than what might appear this morning which is everybody thinking about you. what happens if scott brown wins, what happens to health care reform, what about these democrats in massachusetts deleting certification of the election so brown and wouldn't have a vote allowing kirk as the senator who would vote for massachusetts on health care reform. all of that is the immediate but republicans are now looking long term. >> host: you're next, go ahead. >> [inaudible] -- you just mentioned you feel that the republicans may gain seats or the majority in congress and the next midterm election. i wonder how you feel this will affect the 2012 election and if the republicans could maybe get someone in office in 2012.

>> i didn't say i felt the republicans could gain the majority in 2010 in the midterms. michael steele didn't think so either. of course he changed his mind now, the republican party chair. but i do think they will gain seats and is widely if i was to go with a sort of conventional wisdom around this town would be between 20 to 25 seats republicans would pick up the would not allow them to claim the majority that would allow them to say that this was a rebuke of the democrats and obama administration and specifically over health care has become the issue in the copley brown race in massachusetts. it is going to be the dominant theme of the 2010 race short of any sort of catastrophic national security event, terrorist event so that's where we are going and what impact does that have on 2010? well, you know what? i've been around long enough so i have historical perspective, and if you look what happened to bill clinton after 94 and when

the republican contract with america happened and tremendous losses and a look at ronald reagan and what happened to him and 82 again, tremendous losses both of them came back and they won their reelection. president obama remains tremendously personally popular with the american electorate. i think some of his policies are in question without bet but our people willing to end their relationship? their but have to be tremendously convincing and powerful republican personality to come on board. you know bill clinton was that personality who broke in on george h. w. bush back in '92 with quote kuwait's the economy, stupid." so we will see is it possible for someone to say -- to make the argument that republicans have been making in such a galvanizing way that the american electorate turns away from the historic presidency of president obama. >> another question.

that we will get to one or two of the phone calls. >> my name is jessica and i durham bart kawlija at sigell massachusetts, and my question i have for you is how do you feel that the current political discussion on expanding health care for minorities and do you think this is an important discussion and national discussion to have? >> when you say expanding health care for minorities you're talking as part of the health care reform bill or something different? >> c2 >> guest: it's part of expanding health care -- musette for minorities. obviously it does not apply to people who were here illegally to illegal immigrants. it would apply to all americans and their for minority, majority, everybody in terms of people who are not covered for health insurance pewee we've already seen some expansion in terms of children's health care. so it's for everybody, not just minorities unless i'm missing some per of your question >> [inaudible]

>> guest: no? okay. what we think of the expansion? to me this is a major moment of american life. this is to me akin to the historic efforts for example to put in place medicare and medicaid but i think it is more like to my mind covering the seniors. seniors are no longer the poorest americans. young people are now, kids. there was a day in american life seniors especially older women really were in need of protection, social safety net we saw some of that with social security and don't forget covers widows or if it's that kind of thing and then of course with medicare again to pick up the idea we should not be struggling for health care coverage and now i think the extension would be to make sure all americans have some basic level of health care coverage and people don't have to scrap for, don't have to worry about having some kids to kill mr. will bankrupt them and it's not only then.

we think it in terms of individuals, but i can't tell you how often when i am not doing reporting i come across people who are small business owners who complain to me about the high cost of health care benefits for employees, and of course we see what happened with auto companies. so it becomes larger, snowballs quickly by come back to the individuals you were speaking about. i think for people at the lower end of the economic scale this is a revelation. this is a major moment in american life a major commitment. now i know there are critics who say this is an extension of some sort of socialistic ideology that we are trying to take care of everybody, it's going to drive up the national debt. it definitely has cost to it but in terms of a basic commitment to the wellbeing of the american people i think it is a watershed. >> host: you are a contributor to the fox news channel. sarah palin is the latest contributor. >> guest: she is, yes. [laughter] >> host: door reaction?

>> guest: i think it's tremendous. looker, sarah palin is a ratings grabber. i think she's, you know, like a lightning rod in terms of american politics right now. i think people will be fascinated to see what she is like on camera. can she do it, what does she have to say, how well one for mr.? will have not only people fans of sarah palin lodging but critics of sarah palin lodging and examining every word she says because they want to either mock her or proved she wasn't up to it in the latest book that's the talk of the town right now all this business she doesn't know the business between north korea, south korea i think everyone will be fascinating to read exactly what is going on with sarah palin and is she preparing for a run a presidency or the senate, whatever. so, to me again i think that the management at fox brought in under superstar. >> host: what advice would you give her when she is on with bill really? >> guest: understand she is not the start of the show.

[laughter] that is o'reilly's show and that may be difficult for someone who's a politician because they are used to being the focus of attention. it's interesting for example in this exchange you allow the guest to speak but if you are dealing with o'reilly part of it is people tune in to watch bill and they are fascinated by his opinions, his thoughts on his arguments and it's almost like the guest is a foil that allows o'reilly to reveal himself to blossom. so they might have to take a second, also deal with people, the likes of meat to the coming contract bargaining. i'm not sure that that kind of fast paced exchange and people taking shots at you is what she's used to. she sees to critics from afar but when they are in your face it is d to nda in kansas city and we remind the audience we are coming from george washington university campus and the students are part of the washington center. go ahead on the democrats' line.

>> caller: the low. yes, i just want to let all the americans know why should we put the republicans back in office? when they were in office they didn't do anything. the literally brought on the whole company. i am a democrat. i'm thinking about changing, giving independent. i am disappointed in the democrats and i also disappointed in the republicans. i think that both of them have made a of this with regards to health care. i do want to give teeth aldermen -- keith olberman a shot out. the health care meeting in kansas and missouri. i want one of them that did go. i don't have insurance. i've been laid off a whole year and i went and i found out that when i did go high found out that i was a diabetic and i also

found out i had high cholesterol and i think god for them coming here and i did follow up, i followed up with my doctor. it cost me $90 i paid out of my pocket. i did -- the did drama of love and the doctor's office so i didn't have to pay forhe -- to go to the ladder and get that done but i did have a lab billed for $218. i just want a health care to be passed. i want it to be fair and i also am a person that has been in the insurance field for over 30 years, and it's never been about between the doctor and the patient. it's always been about the insurance and the doctor. >> host: thank you. >> guest: well, you know, the interesting thing she said to me was of the very start she's thinking of changing to independent. she starts by criticizing republicans say and she's a democrat but is highly critical of the democrats and it's considering becoming an

independent. when you look at the numbers right now, the trends in american politics beyond the headlines, the biggest political force of the moment seems to be populism, people who are disgusted with both sides, both political parties, even as president of hamas numbers go down at high levels of disaffection with a democrat -- democratic majorities in the house and senate you don't see commensurate rise in terms of identification with republicans at this this juncture. people are highly critical of obama. people remain highly critical of the republicans. and i wonder what is going to happen with things like the tea parties, the town hall meetings, that energy. that energy is anti-government, antibig tax big spending. it would be surprised on the left there is still a great deal of dissatisfaction about the war effort and president of polis commitment -- president obama's commitment. what happens to that as we approach 2010? it is as we were saying earlier about things like health care.

it is about the president's expressed agenda in the congress on energy, cap and trade and the like but if you are out in the grassroots talking to the american people they are much more focused on the idea we just want more change. obama was once the vessel for change. that was the genius of the campaign. but the question is now if you see obama as part of the problem, if you see him as part of washington, then exactly what constitutes change? is it not durham we know is on the cover of one of the magazines this week as possibly the first senator from the two-party down in florida. what happens to these people who are disaffected from both republicans and democrats? is it possible the republican establishment is able to get comfortable and clean some of those folks? sarah palin by the we would fit in with that, or is it the case this is the founding energy for a possible third-party we get back to the likes of ross perot,

john anderson were most recently ralph nader that somebody out there would say it's time to break apart this larger structure. it's difficult to do it but at the moment there's no question in my mind that is the political energy of 2010. >> who writes the rules, who controls the money, who has printers of media, that is the structure, that is what we built. and to try to break that down as a humongous effort would be herc regardless whether you're republican or democratic company by show of hands are first-rate were disappointed with the democrats or president obama. just raise your hand. how many are frustrated or disappointed with republican party this is what is going on in america. how many of you voted in the last election? >> guest: that's good news. i'm thrilled when i see that. because oftentimes what i'm talking to young people they are

very cynical about the political structure. they are all steven colbert fans and mock politicians but i'm glad to see that you guys got involved. >> host: we will go to david joining from springfield massachusetts on the independent line actually brian i apologize from michigan on the democrats line. go ahead, bryan. >> guest: have a lot of respect its laws of to do over the years. one of the greatest tools we have as americans is news media of course house. how can politicians hide away from direct questions such as you are getting right now? news conferences? we depend on the media to ask direct questions and try to get direct answers but it is a president, whether it is this president or the last president does not come out in front of them and avail themselves of

questions how can we learn more about where they are going and where to cut through all this clutter i don't believe president obama has had a direct news conference since july. >> guest: that's been a topic at the briefings last few days as reporters are beginning to pepper robert gibbs, the white house spokesman with questions about -- it's interesting because on the one hand you have people who say president obama speaks too often and he's in public too often. we've got a state of the union coming with major even sadder to celebrate what is happening with health care reform bill. but your question to me is one that fascinated me about washington life and politics and media which is how to get someone to answer a question. how do get some the to answer a question but remember there's so much tremendous media management that takes place in this town that it's hard to recruit

because ronald reagan used people who were red but they were all seated properly so that he would know where they were a there was a chart and all presidents use it and all presidents no as they go into interviews and the kind of set up and how will it be used, what's the direction of question oftentimes there are suggestions job as to where the president or major political figures are willing to play, willing to make news and that courage is in the anchor or interview were to go in a certain direction so that they are on the same wave length with the person being interviewed and they can get someone out of it and make music because that's what you want as the reporter for your interviews of the question is how to the american people learn what's going on and what is in the mind of all part of the politician. i think increasingly people look away from the center and away from the managed responsive to any set of questions and start to look at things like the person's character, what kind of

person, what do they see about them from their family, what do they see in on script moments where they have had a problem, how do they handle let. they want to know more and more about what makes the makeup of this person rather than their public statements and i think that is clearly the direction we are going because news management has become so sophisticated in this day and age. >> host: another question right here in the back. >> guest: from bradley univ. my question is who do you think are the future leaders of both political parties? >> guest: that stuff if you're to ask me who is running in 2012i guess if that's what you're talking about i would point to people like tim pawlenty the former governor of minnesota, i point to haley barbour, the governor of mississippi i think about sarah palin, former governor of alaska and my new fox colleague, but i

think i would also more and more it seems to me that the energy is with women and so i would be looking for some of the surprising leadership that's coming from when an and the idea that women strike people as much as president of the first african-american president did as someone who could be a game changer to the political process. and i think that is still the overwhelming desire. so that is some of the new faces and energy that would be coming from the republican side. now if you are talking about the democratic side, again, i think that it's not so much new faces as players who may not have occupied center stage coming to center stage with all the pressure on harry reid backend nv. what happens if harry reid moves on, then you are looking at people like durbin. in your looking at people like chuck schumer, moving into more prominent positions and becoming

more significant in terms of their ideas and their policies in the future. >> host: david is joining from massachusetts on the independent line. go ahead, please. >> guest: >> caller: hauer doing? and converse because i had a statement and secondly have a question about the constitution of the united states. first, the state. as an independent voter i think the people in massachusetts are going to vote for the person that represented their voice. i know in massachusetts we feel this health care bill is a violation of our state rights. now we live in a society where naturally we are not going to leave somebody to die on the streets. but unfortunately the hospitals and institutions are carrying the bill. >> host: david but we ask a couple of questions. you are an independent voter. who have you voted for in past elections in massachusetts? >> guest: i voted for john kerry. i voted in the presidential election might vote for john mccain. i voted for mitt romney as governor. i have voted for senator

kennedy. it doesn't matter your political party. it matters who you are as an individual and how outspoken you are as an individual and are you going to represent my voice as an individual. >> host: based on that, martha coakley and scott brough will you vote for? >> guest: >> caller: basically scott brown for the stand on the bil as a middle class individual i see marvelous the line as somebody that's not experienced the hardships of the world. i see, i don't much of the difference i see lieutenant colonel and national guard. this is somebody who has endured and i see that as a fine candidate. >> host: i want to come back to the earlier point was we to happen on tuesday what is your prediction? >> guest: i believe brown will win because the voice of the independents are the speaking giants of massachusetts. >> host: the reaction and follow up with you. >> guest: the numbers don't suggest that you get the numbers are closing, but i think if you look at the "boston globe," if

you look at even some of the polls that just call people sort of on the phone, those are the ones that have it now account double-digit, ten maybe less. but not much. >> host: it's a special election. is the key -- >> guest: i was going to say is, steve come in a special election it is to actually shows up and it's going to be lower turnout than would be for a normal election and that brings us back to the fact that there was a strong democratic machine in massachusetts that they can produce the votes. now with the brown kerry is counting on the fact some democrats may not show up or have much energy for this and their force is coming back to this populist and antagonism toward health care reform. those people will have a reason to go to the polls to show their concern about health care. but can't those numbers overwhelmed the power of the democratic party in massachusetts? to me it is unlikely. remember we are talking about it kennedy's seat three >> host: back to david. go ahead.

>> caller: >> host: david, are you still with us? we moved on. that's the question from a student here. right up front, go ahead >> i'm from suffolk university of boston. >> guest: good morning. >> good morning. a previous speaker, ed gillespie, mentioned the iraq war was an unnecessary war. do you feel the united states should continue this kneal little approach to the foreign policy? and continue to act as or become a prominent international police force in the world? >> guest: i think we are the lone superpower. there is no question about that. i was interested in your use of the term kneal liberal. from my perspective, you have is the argument for kind of being spreading democracy for intervening in iraq when of course it was a tie rack the detectives on 9/11. would be in neoconservative argument. so, interesting to see what you mean when you say a kneal liberal.

>> it depends on which the artist of international the nearest you read and which term the lead with neoliberalism. neoliberalism in the book i'm reading right now, statecraft, refers to an international approach that deals with intervening not only militaristic leave it also economically and in every way possible in order to establish countries as democracies to make them partners in the world. >> host: again it's interesting. i haven't read statecraft, but what i see is this has been an effort and is part of the bush administration's political theory was that in fact we want to promote democracy worldwide. we want more democracy. especially in the middle east we want the voice for people to be represented. and remember after the fall

failure to find weapons of mass destruction than there were different arguments as to why we were in iraq. exactly what is the justification, and one of the principal arguments was because we want to foster space principles, space representation of the people of iraq so that we can in fact have a more stable political structure as an example for the rest of the middle east and those coming from the bush said that as russians i don't think they'd be comfortable being described as the liberal, and in fact of the left in the country i think was much more quick to say it's time to get out once we didn't have weapons of mass destruction and once it looked like things were going against us and it was the bush administration again that insist on the surge and the idea we cannot afford to lose that war and would signal be, would the cost because of the ramifications on the road historic kleeb if the u.s. was forced to leave. that is why we are still there and that is why i think subsequent to the bush

administration the obama administration said we are going to set a time line, drawdown of troops, but and we will agree to the state of forces agreement but what we really want to do is exit in such an orderly fashion that we leave behind some structure that will in fact satisfy the idea that we've created more of a space iraq and was there previously. >> host: another show of hands. how many of you are interested in government and public policy? hopefully it is unanimous. [laughter] >> guest: dak. crusco raise your hands of height. how many are interested in someday writing for elective office? >> natalie velt is for miami-dade college. in the current economic situation, i would like to ask in terms of education what is your view on teachers being laid off and so underpaid. health care is also important

that shouldn't this be a priority as well? >> guest: it's no doubt education to ease the be all and end all. i wouldn't be sitting here in front of you if it wasn't for education because i grew up a poor kid and education has been the life changer for me. so, you know, my mom really focused on education. she was a beast about school and it's paid off for me, my brother and my sister. i don't think there is any question so when you ask me about education i think that is the key civil rights challenge of this generation. maybe even more so than health care because every child should have the opportunity to get a foothold on that ladder of upward mobility to be somebody in american life, and you can't do it without education. you've got to have in this society and i think it is becoming much more a society even in economic terms of the haves and have-nots, and i am not talking necessarily about money because you can go up and down in terms of your economic

fortunes. i'm talking about people who have education and those who don't it's almost impossible to compete in what i think of as an innovation based economy where we are creating things. we've got to be sufficiently sophisticated and almost a world traveler to deal with the fact we have a global economy. you have to have an education to be economically efficient in this world. so, to me the idea you are firing teachers, laid-off teachers, i think it is a tragedy. i will say this. i think that there have been excesses' especially in some of the feeling big city public schools and those excesses' include wasting money and so you get an argument like poor people spending let's say here in the district of columbia might be higher than it is in some of the suburbs are not here and yet student performance outcomes don't match that spending and then you get into arguments about unions and teachers and halting possible school reforms and i think that is why you see

people in the likes of bill gates, warren buffett, eli broad and others putting tremendous money into education to try to make a political issue to say everybody should be thinking about education as a political concern and here in washington you know about race to the top and fact no child left behind was a controversy item under the bush administration so this is an area of concern and when you look at the polls right now education is falling down in terms of preoccupation of the american people that's not on the screen as a major political item. >> guest: i think it should be and let you feel that way but it's not necessarily about increasing the dollars. it may be we are in an age where we have to reshape not only elementary and secondary education but we have to rethink the thye experience you're having a college what is necessary and unnecessary because look at the cost about what your parents are paying but here at gw it is a big ticket to come to school more than 50,000

so that becomes prohibitive and that helps cement that class divided and has implications for who we become leader in this century as an american people. >> host: to the audience of the city or conversation with juan williams, part of the washington journal at the dw cam campus. where did you grow it? >> guest: went to prep school in new york and went to college at philadelphia andsyania. >> host: and bill is running on the republican line from new orleans. please, go ahead. william, go ahead, please. we will get a question from of the students here. >> i am just a cover mcpherson college. do you think the middle class will benefit from health care reform? >> guest: that is a great question. i think that there are levels of benefits if you are thinking purely in terms of taxes let's say i would say probably not.

there's all sorts of different definitions about who is rich and who is not rich do you start to pay some of these what they call the millionaire tax the would be paid at chollet 200, 255, 100,000 etc so there will be additional taxes there and as you know the unions over the white house just yesterday complaints about the cadillac tax because to cut your individual is 8,000 padilla, 24,000 there would be additional taxes on those health care plans. it's something like 40% of union members therefore subject to higher taxes because they get some of those plans as benefits oftentimes in lieu of pay hikes so in absolute terms i think there will be a cost, and don't forget that despite the kind of scoring we've seen from cbo being deficit neutral it is likely it is to cost something for the american people so it

may cost us in terms of increased deficits, inflation and all that. it's going to be a price to be paid but i think there's also been a bit in terms of who we are as an american people. did you say to yourself is it important to you that everyone have some basic level of health coverage and our society, are you willing as an individual to pay for that? that is a very political question. i as an individual to say yes it's important to me as a moral stand, as a part of my american values. it's important to me to think i am not walking past some of the street who can afford to see the dentist or for health reasons can't afford to go and see a doctor or child that can't be seen. i don't want that as part of my society. it's important. am i willing to pay for it? yes. how much am i willing to pay? that becomes again, highly political. but if you are asking will the middle class benefit one other

factor is i think employers who see limits, who understand there is some control in terms of health care costs are more likely than to say as long as i know what my costs are going to be and are not going to jump through the ceiling i might do a better job of hiring. the other side of that is they might because they are adding costs and penalties for them not persecuting and offering health benefits, some employers might be less likely to higher but i think overwhelmingly is going to be to the positive side. more people saying as long as i know that my health care costs are not going to drive me into bankruptcy i can do more in terms of feeling i have a secure business and therefore more hiring. post lead time for one more call and one more question. go ahead, please. >> guest >> caller: i have an assignment for the frustrated democrats in the audience.

please go to www.democratz.org, that's democrats with a z instance s. we are going to take all the corporations that give money to conservatives. we are going to boycott the dead and forced their ceos to go to the congress and get us the legislation they blocked. thank you very much. tell your friend -- tell your parents all over this country we are going to take this country back. [laughter] >> host: with that plug we will get to a question from one of the students here in the interest of time. >> my name is marshall and i represent miami-dade college. as we all know the president of the united states is a very important figure and ask far as i have seen mr. president barack obama is an amazing speaker. he, does he really mean all of these words or does he talk for

talking? >> guest: you need to politicians say what they mean? again, we were talking year earlier about media management, stagecraft and the like and politicians at their best know their audience come speak to their audience as concern and they are trying to win your support. so, any politician is speaking in such a way as to try to help them gain or not only vote but for financial support. i don't think there's any question. of course president obama is part of that group. he is a politician. so, does he mean his words? i happen to think that obama stands out in my mind for being brilliant in terms of able to explain policy. it's almost like a seminar and oftentimes he does it off the cuff at news conferences. he can go on and on about the details and depths of an issue in a way that is just astounding. i think he does mean it. the thing is where does he stand? i'm not always clear even after listening and the wild by his performance and knowledge not

only clear about where he stands. i think that is because he prefers to hear all sides of the argument to be familiar with it, to try to let the kind of marbles sift out and see what comes but it's not that it comes from him in terms of his principal. so if he were to ask me do i know what he stands for and if you ask me as you did, does he mean what he says, well negative he means he's looking at all these ideas but it's not the case based on an obama speech i would say the exception here is i thought the nobel peace prize speech where he talked about just war principal and why it was we were present in iraq and afghanistan. i thought he had come to the point where he now felt this is who he was and what he was standing for. but in general, is a little bit of a site through when he gives speeches we are not clear where he is free to put his political capital, but he is willing to sacrifice for. it would be the challenge with

obama. >> host: quick question and response over year. >> negative patrick from suffolk university of boston to a quick question. how do we help the mom-and-pop businesses getting killed off by juggernaut corporations such as wal-mart? >> again this is part of the argument of the day. i'd sure the folks in wal-mart would say they are offering lower prices more unionized and all that kind of thing but as you travel around there is no question wal-mart peaks business away from small business along the street. now is this a benefit to the american people to the american consumer? i guess because clearly people are taking their dollars to wal-mart and i don't think wal-mart is even in the midst of the recession. wal-mart has been doing pretty well. but if you are talking just in terms of like american values why is it a mom and pop start up struggling and shouldn't we care about that, well i think we should care about that in terms of hiring and retaining the kind

of opportunity for of japan doors to discuss the six entrepreneurs and small-business lawyers also suite of small business to succeed in america. what can we do? i don't know at this point if you were asking me how can they battle against a gargantuan enterprise that gets us a comic skills of benefits from being so it is very difficult so what i think you are talking about is small business assistance, tax breaks for small business. you are looking at regulatory relief that would allow them to compete in ways the big boys can't. and all of that is on the table. it's interesting if you look at the small business policies that both president bush and president obama pursued the believe in small business. it's just the president bush was much more about the tax cuts, president obama much more on the other end of believing if you give them health with health care reform and help them with some of the kind of subsidies

allow them to get started then they could prosper but in this economic environment it comes down to working with the banks and making sure the banks are willing to open up the credit and support small business and especially the start-ups. the small businesses that are already going to enterprise. >> host: juan williams, thank you for the students for the washington center to be we conclude with a round of applause and thanks to the students. [applause] and also the host at the jack morton auditorium at george washington university, thanks for being with us. >> guest: my pleasure. it's a good audience. they know politics. i like that. >> host: come back again.

vice president joe biden delivered a eulogy today at his mother's funeral and wilmington, delaware. gene biden by last friday at the age of 92. the president and first lady attend the service along with house speaker nancy pelosi and others. this is 15 minutes.

>> bishop, reverend clergy, every one of you assembled here has played some part in the life of my mother and my family and me. spiritually or academically, personally. and we are grateful for your being here. and all of you know and everyone knows we just heard the best of the family. [laughter] you've known that a long time. but so have i.. so have i. and so have frankie and jimmy. as long as valerie is alive, mom is a life. [laughter] catherine as my mother would say, god love you, dear, you are the voice of an angel. katherine is special to us

because she's the daughter of one of val's best friends and one of our best friends, tina perlo who made only one mistake, marion billy meyer's. [laughter] was also a great friend, pilot in vietnam and man of courage and friendship. mr. president, michele, president clinton, my good friend speaker pelosi and governor mark kel, my friends from the house and senate and my co-workers in the cabinet and members of the white house and office of the vice president and president staff and all the delaware elected officials that are here to note as all too well don't tell them all you know about us. [laughter]

we are honored you do my family a great honor by being here today to celebrate the life of our mother. mr. president, i especially want to thank you for the way in which you treated my mom with such warmth and personal affection. warmed my heart and hers as well. one of her favorite pictures is a picture on election night in chicago as we were about to walk out on stage and she has barack -- pardon me, mr. president, you were jean than -- barack in her left arm and me on her right arm and as my granddaughter said my mom is leading us out on the stage. [laughter] she thought very highly of you, mr. president and president clinton's, she worried.

she thought you were most like me or i was most like you. [laughter] i remember something or wife once said kidding to me she's a library you and my husband might have been separated at birth. [laughter] i consider that a compliment, mr. president. i want to thank my old dear friend, thank god for the seal of a confessional. [laughter] you all know too much about us. [laughter] but for being there to celebrate every milestone in the life of my family. and the birth of my children to the marriage of my children to the death of my father and my mother. you are a good friend, tom. and bishop malooly, it is an honor to have you here.

it's an honor to have you on the altar and my mother said it was about time we got back an irishman. [laughter] it really is a pleasure and i am honored. on behalf of the whole biden family i want to thank you, and all the parishioners here at the immaculate heart of mary for allowing mom to come back to the church she called home from 1955 and on. she was here the cornerstone and lead in the church that is now the jim we lived in a field, and my two brothers went to grade school when having fond memories and the other wishing he never went to school. [laughter] and our songs were advertised -- baptized here at ihm.

catherine eugene jean finnegan biden was defined as a remarkable woman. she is the daughter of ambrose and geraldine finnegan. growing up in pennsylvania in the collective embrace of her four brothers who she adored, jerry, bosey and her jackie. certain in their love, secure and their protection and nurtured by their loyalty and affection. by their words and their deeds they instilled a sense of self-confidence and competence allowing her to learn and trust her instincts and never be afraid to take risks knowing she

was any man or woman's equals. as long as i can remember in scranton mom was referred to by her family, her extended family, her friends and neighbors as our jean. it's kind scranton thing as the scrantonians know. that was at least until she met the man she referred to as the most handsome man she ever met, joe biden from wilmington delaware, our dad. in our view, mom was the sole spirit in essence of what it meant to be an irish-american mother. devoted to a roman catholic faith, proud of her irish heritage, fiercely protective of her family and deeply committed to her husband and always loyal

to her friends. to mom, the greatest virtue was courage. she taught her children the thickest of substance was blood when jimmy, frankie, val and all i and all of our family have lived by that code. bishop, cini, all four of her children are so grateful to god and i mean that from the bottom of my heart mom lived long enough for our children, our grandchildren and our great grandchildren to know her love and feel her strength. to each of us it was not sufficient that she raised and nurtured us. we all want this and i mean this literally, we wanted her to

raise our children and our grandchildren and our great grandchildren because we knew -- we new mom could give them something we couldn't at least not in the same measure. those intangibles, confidence, balance, the feeling of absolute security and unconditional love and a total sense of what it meant to be family. consequently i don't think that -- i mean this literally i don't think there is a week that went by from the time boe was born until the time her youngest grandson, nick, spent the night with her, that there wasn't one of our children in her home stay in the night.

we ferried them back and forth. we did it because we really did know if they were new mum mum they would get that special thing. mum mum had a six -- sixth sense. she had a way. we desperately wanted each of our children to feel that. ..

she taught us to be respectful toward everyone, but deferential to no one. our mother was proud on the edge of the finance, generous to a fault in committed to all those she loved to the end. she believed in nuss. so, we believe in ourselves. how could we do less? when we triumphed, she was quick

to remind us that it was because of the others. there is no one better than you. every man is your equal, and every man deserves respect. that was her greed. that he must be a person of your word, for without your word you have no honor and without honor you cannot be a biden. that was her word. she taught us, she taught us never to be intimidated by power, wealth or station. that we did not have to accept social convention and we could set our own standards, one that was based on character alone.

she called it the biden standard. and if we did set such a standard, other people would respect it and respond to it. mom taught us that courage was not defined by the lack of fear, but by the willingness to act in spite of your fears. that bravery lived in each of our hearts, and that her expectation was that we would be summoned to reach for it. she taught us that god sends no cross we cannot bear. and as long as you are alive you have an obligation to strive. you are not dead until you have seen the face of god. my mother lived and died by that code. she never stops driving and now

she has seen the face of god. it said-- it is is if dad whispered into god's ears the words of james weldon johnson, she is weary, go down death and bring her to me. mom is back in dad's embrace, where she belongs. and we are all at peace. ♪

>> the government today announced an investigation into federal housing administration approved lenders with high foreclosure rates. the department of housing and urban development will-- fha insures nearly 30% of all mortgages in the u.s.. this is 15 minutes. >> thank you for being with us today at the robert c. weaver buildings department zero conference room, and also welcome to those joining us by webcast and on the telephone.

after some opening remarks, those of you here in washington will be able to ask your questions. hud's office of inspector general has issued a news release which is available on our web site at hud.gov the candidates under the header of featured news and of course i will be able to answer your questions later on. my name is michael zerega and my name and phone number are available on the news release as well. are two principle speakers today are kenneth donahue, but the's inspector general and he will be joined today by fha commissioner david stevens. inspector general donohue do you want to begin? >> thank you. good afternoon and thank you for coming today. i have a brief statement and i will then ask fha commissioner david to join me on the podium to make remarks and then we will both take a few questions.

this morning agents and auditors from my office served subpoenas on 15 mortgage companies with poor performance records and the federal housing administration's mortgage insurance program. these companies are located throughout the united states and their activities are provided to you in the handouts. the subpoenas demand documents and data relating to failed lawns which resultant high claims paid out by the fha mortgage insurance fund. many of these charter loans did not less but a short time before defaulting. leading to a suspicion they process of loan origination was forward by several possible factors. we will learn the reason for failure which resulted in a significant cost to the fha insurance fund. we will conduct an investigation of appropriator to determine who was responsible and recommend that appropriate action be taken against individuals and

corporations. my office identified these directed norseman companies from analysis of loan data focusing on companies with a large number of claims, loan underwriting volume, a high ratio of the faults, and claims compared to the national average and claims that occurred earlier in the life of the mortgage. both commissioner stephenson die have been concerned and alarmed by the high-profile failures of some of these direct enforcement lenders and the fha program. it is another example of the commitment by both hud and the inspector general's office to send a clear message to the mortgage industry, we are watching very carefully. on behalf of the american taxpayer and will hold them responsible for their business practices. i now turn this over to mr. david stevens. >> i would just like to make a couple of brief comments. first upon being sworn into my

position as commissioner, we took quick action on the number of institutions and continue to do so. starting with taylor, bean and whitaker and others to send a message that we believe that lenders that to not participate within the rules of the fha's system but the taxpayer at risk in the consumer at risk. i very much appreciate this collaboration with the inspector general. i thank you ken for your leadership in this effort. this cooperation between fha and the office of inspector general i think is paramount to bringing safe practices back in to the fha business line. the key component of this is to reduce risk and crack down on bad practices. so, if you think about what we have already announced over the past months in my short time here, this partnership with the inspector general in terms of

what the office of inspector general has announced today it is very much in concert with the actions we have been taking and will continue to take to ensure that the fha program that the participants in the program are quality institutions that deserve the right to be able to originate loans using the fha eaglen again. i want to thank you for your leadership in this effort. >> okay, let's have an opportunity if we can to ask any questions. just a moment. let me just get you a mic. and whti qaim thee identify yourself and your affiliation? >> i am stephanie with the nightly business report on pbs. i am curious if you are going take further steps on adjusting risk and do things like tighten lending standards more broadly?

>> as we announce, as the secretary announcing his recent testimony from of the financial services committee, we are going to be taking additional steps to improve risk-management and get the capital ratio back to where it needs to be and get the capital reserves back up. we committed to announce those changes by the end of january and we remain committed to that date. >> hi, could you tell me how many loans are we talking about here in terms of the bad loans that you guys are looking at and how big these institutions are? >> would you provide your affiliation? >> i am sorry. i am with "the washington post." >> i think the number itself, i

think-- we looked at institutions that had at least 1,000 fha mortgages. we looked at, they hit above the two wonder% ratio of claims. and of course as david indicated direct endorsement lenders. we did not include automated underwriting, exclude automated underwriting programs and we excluded the streamlined refinancing program as well. >> and the institutions are spread across the country and the rage-- range in size. >> just a follow-up question. could you also tell me how big a problem the early defaults for in targeting these institutions? i mean you mentioned as a factor, most of loans that had gone bad or early default loans are is that a mix of stuff?

>> your question is, where they default once? feed you had mentioned in the press release here that early defaults were problem on some of these loans that went back early in the life of the loans so i am wondering carlotta the loans you are looking at, is that the problem at the crux of it? >> we counted 90 days and delinquency. >> we are focusing on once-- >> this is jim. >> we focused their selection on claims, those that went to claim within 30 months. >> thank you. >> china central television. the oral reports and discussions about the second wave of mortgage defaults, are we heading, are we heading for a mortgage crisis, a major

mortgage crisis, the second wave of the mortgage crisis? does your initiative have anything to do with the situation of the overall market situation? thank you. >> this action today is not in any way a relationship, in any way a prediction of future mortgage crisis. in fact, the nonperforming loan challenges with the fha portfolio date to previous book years of 2006, 2007 and 2008 primarily. these institutions and the loan selected in terms of the analytics to select these institutions were primarily loans originated in 2007, is that correct? otis from a previous book year. current long performance inuit wheatridge knit-- originations did not indicate any kind of the second way that this time. >> the best way in my response to that question would be to think about it as an early-warning system.

and that is it. as we are looking at this information we want to reduce the information and make a perfect determination whether it requires any further action, but your question as far as what we do have had and oig is chorus fraud activity in the past year we have seen an increase of 85% increase in the amount of investigations that we will be actively involved in. >> a number of the firms on your list have previously been sanctioned by the mortgage review board. but they remained in the program. does this indicate you are going to move to use your subpoena power and bypass the borjeau use your subpoena power more aggressively? >> first of all, as we indicated there were 15 subpoenas issued today. this past year we issued one, i believe it was 1,033 subpoenas this past year active as far as

the oig, our oig office but our intention is never to bypass the mortgage review board. i think that is in the department's domain and i think it is an effective way of being able to do that. we do our own investigations and order activity. we use our subpoenas were appropriate and if they act accordingly and quite frankly we act in some of the concert with regard to mortgage review board activity. >> the thing i would add is, as we have stated publicly, as the secretary has stated we believe that we need broader capabilities to enforce the standards of the fha and those of the kinds of things you should expect to see us talk about in the weeks and months ahead. and, just to be clear, and they think is important terms of how we communicate what we are doing here. first, this investigation is very valuable because it is focusing on the worst, many of the worst performers in the fhc portfolio and i am personally

very interested to see what comes out of the audit work that is being done looking at these institutions to the subpoena process to determine what is causing this quality impacted if there was wrongdoing at very much support the inspector general's initiative here to take all action possible if there was wrongdoing involved in any transactions related to these institutions or to individuals in these institutions so to that extent this is critical work. i think for all of us we need to be focused on the fact that there is a responsibility within fha as a public institution to make certain that those lenders that the participate in the system do so responsibly and perform to the standards expected by fha's of this is just one initiative the inspector general has taken on that works in concert with the mortgaging review board and other policies that we have in process and will be putting in process in the weeks and months ahead. >> i just need to clarify one

thing that the fha commissioner said. this is not an investigation. this is strictly a servicing of subpoenas. we will go through and determined to make those determinations appropriately. >> what is the first steps for these companies? are there any other companies who are likely going to bring into this and do you see any tools that you don't have for further investigations that he would like to get? >> these 15 corporations the nol suggest there other lending institutions and were currently looking at as well. is you know we will not comment about ongoing investigations as well. as far as additional tools, we are a principle partner on the president's financial fraud task force being run by the

department justice. the collaboration goes on between ourselves and the fbi in the state attorney general and other state agencies is to me unprecedented so i think the court nation that is going on to address these matters whether it be local and national are being done and we are so glad to be part of the process in the days ahead and in the future. >> one follow-up question. several of the entities on the list are approved to sell their fha loans to investors with the jenny may guarantee. how will this affect their ability to continue to sell those loans to investors? >> at this point, this is just the subpoena, so they are not prohibited from continuing doing business as they currently are allowed to today. so it should not affect any of the ability to sell pending the outcome of the inspector generals and-- war work from the

subpoena. refute, thank you. i will get this semantic right. >> this is mary kenny. >> microphone, marie. >> this is mary kenny with jenni may and to respond to the question, a list of lenders, only three of them have been or are ginnie mae issuers. one is inactive, one is dormant and one is the wind down as only 48 bones r.n. jenni right now so to speak for the list is not impacting the jeni program and we are working closely with the fha and the inspector general's office on all of these issues. >> i think that about wraps it up. want to thank everyone for

attending today and thank inspector general donohue and commissioner steven for their time and attention to this important matter. thank you. [inaudible conversations] three original documentaries from c-span, now available on

dvd. a.u. knee jenny to the iconic homes of the three branches of american government. see the exquisite detail of the supreme court. go beyond the velvet ropes to public tours of the white house, america's most famous home and explore the history, art and architecture of the capital. american icons, a three-discvd set. it is $24.95 plus shipping and handling, one of the many items available at c-span.org/door. >> the future of fannie mae and freddie mac was the focus of the discussion hosted today by consumer advocate ralph nader and his center for responsive law. both fannie mae and freddie mac were placed under federal conservatorship in september 2008 in the wake of the housing downturn. speakers during this 90-minute ent include an advocate for privatization as well as a supporter of the complete government takeover.

[applause] >> our next baker that i want to invite to the podium is peter wallison who is a resident fellow at the american enterprise institute. he is the author of numerous books. he is the former general counsel at the treasury department during the first reagan administration term. and now he is the co-director of aei's program on financial market deregulation. peter. >> thanks very much. a pleasure to be here. i would actually like to thank ralph for inviting me. naturally ralph and i go back a long way on gse's strange edley nut. someone asked me this morning in fact, you are going to be speaking at a nadir conference.

why is that? and i said well, ralph i thank has always seen fannie mae and freddie mac is poster children for corporate welfare and that is about the way i have always seen them too. so we always had a common view of fannie and freddie in that sense and i suppose that is the one of the reasons why ralph has been kind enough to invite me here. i want to start off i think by saying some things that are somewhat different from what sarah said when she talks about her program. and particularly the motives for what fannie and freddie did. there are 26 million sub-prime and alt-a loans, that is the other non-prime loans, in our financial system today. that is almost half of all mortgages, first mortgages in the united states are sub-prime

or alt-a, in other words week and likely to produce failure. now, why did that happen? fannie mae and freddie mac were important elements in that process. about 10 million of those loans are on the books of fannie and freddie, and one of the problems with this is that it raises questions about the usual narrative that we have heard about why we have these loans. the usual nehr that is, these two are seen a lot in the media, is that they were made because of the agreed of underregulated, underregulated mortgage brokers or the greed of wall street. but, there are 10 million such loans on the books of two agencies that were working for the federal government, who were controlled by the federal government an additional

$5 million on the books of the fha. that is about 15 million loans, sell more than half of the sub-prime and alt-a loans are in fact there, because of the demands of government policy. that is the point i want to make. now, sarah suggested that in fact what happened here is that fannie and freddie were competing with wall street. wall street has about 7.7 million loans, almost, about one-third of the total sub-prime and alt-a loans that are out there are wall street loans, and that is a significant number but it is a very substantial minority. sarah suggested that ndn freddie was competing for were competing with wall street. that is why they made the sub-prime and alt-a loans. but there are some reasons to

suspect that that was not what happened. those loans decreased over time as the authority and housing regulations in the department housing and urban development rose over time. they started in the early 1990's at about 30%. that is fannie and freddie had to buy, of the purchases they made, 30% have to be too low and moderate income borrowers. by 2007, that was 57% and about half of those had to be made to firrea low income borrowers. now it was probably extremely hard to meet those obligations, without finding who had difficulty meeting the usual underwriting standards that fannie and freddie pursued before they were subject to this

mission which began in 1993. and i think that is probably what happened. they were complying with their requirements. they were required by law to heed the market. they were criticized for not leading the market. they were criticized for not doing any better than the private sector as bill shares adjusted so that is what they began to do and as a result of these government activities, we have an unprecedented number of sub-prime and alt-a bones in our economy and that they think ultimately is a much more complicated story but ultimately that is the reason why we have had this terrible financial crisis. i won't go into any more of it but i was happy to hear in a sense that sarah wartell's point was that fannie and freddie were competing with wall street and that is why they made these loans because that means the narrative has change. otis no longer that these loans were simply forced on people by

underregulated mortgage brokers. but now instead of just wall street greed or mortgage broker crete, it is now gse crete, so we are getting to a more sophisticated narrative to explain why we had all of these loans but my explanation i think is the right one and that is they were falling government requirements. okay, what we do about fannie and freddie? we know where they are, we know what they are doing now and we know they are absolutely essential to the financing mortgages in the united states today. if we did not have them functioning now under government control in the conservatorship we would not have a financial system for mortgages. iec for alternatives for fannie and freddie, nationalization, the conversion to some sort of public utility or cooperative, a return of course to gse status and then finally privatization and what i'm going to try to

explain is why none of the alternatives, none of the options makes very much sense, except privatization and then i will suggest how we get from where we are today to a privatize market. first of all nationalization is very attractive to some people, because it would simply allow an organization like fannie and freddie, maybe both of them but probably merging them into a single institution to do what they have been doing and that is to buy and sell mortgages in the secondary mortgage market. the trouble is that that has severe budgetary consequences. if there nationalize and in fact even if yes sir is suggesting, their mortgage-backed securities and guaranteed specifically by the government, that will go on the budget each year. and in a growing mortgage market, there are likely to be many more mortgages being

securitized, and thus charged to the federal budget then mortgages that are running off, so that it will have substantial adverse budget-- budgetary affects cent congress i don't think at this point in our history is willing to take on yet another activity, another program that will add to the deficit, so although there are some things that make nationalize program attracted to people, i just don't think it is politically, politically feasible. so, the second idea that has attracted some attention and it is an interesting idea is this notion of a public utility. the advocates of that say well, what we would do is we would have this utility regulated significantly so it is not taking severe risks, and at the same time we would rate to regulate them, so that homeowners would get a good deal

, and that is attractive to some people. and also we have to have rate regulation in order to assure that there was a fair return to the shareholders. i am assuming here that this utility would be deemed privately owned, because they think the notion is to make sure that it doesn't go on the federal budget. the reason fannie was in fact originally privatize was to get it out the budget and i don't think as i indicated before, there is much likelihood that anyone is going to want to put it back on the budget in any form. so, if we have some sort of utility structure it would be privately owned and then you have to have a steady return to the shareholders, like a public utility, the way in the electric utility or a water utility would work and i think that is the model some have in mind. the problem is this a somewhat

different than the electric utility or a water utility and that is these institutions if there in the securitization business which i think is what people are samming, will be taking real risks. we know that fannie and freddie took real risks. that is why they are probably going to lose for the taxpayers about $400 billion, maybe more, when we get to the end of the line. so they will be taking rail risk sunlight kate electric utility or water utility which rarely gets into trouble for taking risks. in the case of fannie and freddie they will be dealing in a very cyclical and illiquid market, and that is in the whole business of dealing with mortgages. and in that situation, you have to have some supportive price. that is the trick in an insurance kind of situation, which is what they are doing. you have to have a pricing

system that reflects a risk. well, how to integrate a private system like that that is a rate for their activities, which reflects the risk that they are taking with something that is a public utility? very hard to do i would suggest in much harder to do when they are functioning under the watchful eye of congress because again, the whole theory here is they are regulated not to take too many risks or the risk that they are taking are going to be carefully watched and they are rate regulated so congress is watching them and under and the kind of regulatory system like this, congress is going to put downward pressure on rates. they are going to insist that rates be kept low, and they are probably going to insist that they are not be any discrimination in the kinds of mortgages that this entity will

buy. that is just the way congress behaves and i don't think we can expect them to behave any differently. so, what will happen here is that fannie and freddie, or fannie combined with freddie in a single entity that would be this to public utility will be required to take a very significant risks in what it buys a double not be able to charge a rate that compensates its for the risks that it is taking. this is just the way things work when you are under the control of congress. we see this now with the fha, which is also probably insolvent and probably will have to be bailed out, and the reason that occurred is that over time, congress insisted that the fha take more and more risk without changing any of its charges for taking that risk. so, unfortunately, i don't think the public utility model is going to work very effectively

and they think we ought to try to stay away from it. well, what about returning them to layed gse status, what they had before? ire brauchli oppose gse's one i started out of the american enterprise institute because it seemed to me there was an inconsistency between a public mission of some kind in the private profit-making entity, and what would normally happen in that situation, where there is a public mission and public support, is that the management on behalf of the shareholders would exploit the subsidy that was available from the public sector. i mean it is just such a natural thing to do and there is almost no way to prevent that from happening, and so that is what we saw happen in fact. fannie and freddie took

advantage of the public benefits that they were getting. they made tremendous amounts of money for a period of time but it's the same time they took their substantial risks. the same thing will happen if we restore them to gse status. now i happen to believe that restoring them to gses dat this is what will happen, and the reason it will happen is that this is extremely attractive to congress. it is attracted to congress because it is kind of a form of earmarking that doesn't involve all the trouble of the actually going through the appropriations process. congress is able to influence what fannie and freddie do, because they have control over fannie and freddie. fannie and freddie are not on the budget. they don't go through an appropriations process. come a powerful congressman can induce them to do certain things

that those congressman wants, to projects in their districts in their states, get the benefit of the expenditure of fannie and freddie's funds, which are borrowed under some sort of explicit or implicit support from the government, and helps the congressman, the senators on the one hand on on the other involves fannie and freddie solving their political problems in congress because they are doing things very effectively for these lawmakers. in that case, however, there isn't any market discipline and there would be much market discipline in the future now that the market has seen that they were right all along. that this isn't just an implicit guarantee by the government. this is as close as you can get to an explicit guarantee of fannie and freddie's obligations by the government because right

now, as we speak, as we sit here the government is backing everything that fannie and freddie did or will do in the future and in fact now they are being used by policy purposes by the administration to try to stabilize the housing market. so, without market discipline, with unlimited amounts of funds coming in, fannie and freddie will do exactly the same thing in the future as they have done in the past. will they have in the future a requirement for affordable housing? it is not entirely clear. fha's actually has that responsibility and they did it very well until fannie and freddie started to compete with them and the reason that fannie and freddie was established to compete with the fha is that the fha is on budget, so congress was limited in the amount that they could actually provide for

fha's functions by the normal preparations process and the pressures that come to bear when you have a deficit, so fannie and freddie were created and given the same authority essentially that fha had so that they could spend much more money on the same general activities without having any budgetary effect. now they are having their budgetary effect, but while they are functioning, because of their losses, but while there were functioning they had none and that will happen again because all of these things operate kemal of these things operate in the same general way and that is the incentives are always the same. the incentives for management are the same. the incentives for people in the market who are looking for safe investments that they know the government will bail them out that if there is any trouble and the incentives for congress to establish and exploit these

institutions are also the same. so nationalization doesn't work. i think the public utility does not work as an idea and i think the gse's although they were likely to be the solution that congress chooses would be a terrible policy idea so i am left with only one remaining idea, and that is privatization. we know how privatization would work. there would be many companies competing. there would be no government obligation if they failed. competition drives down rates in promotes innovation and efficiency. the pricing would be according to risk and that would mean that everyone would actually get an opportunity to use the services of the private sector, but he would have to pay for the risks that you create rabid then having cross-subsidies between high-quality mortgages and low-quality mortgages. everyone whose mortgages used in the private sector contacts

would pave for the cost of that mortgage. the problem has always been how do we get from here to there? how you solve the problem of government managed programs like we have today and turn it into a private sector program and i think actually it is easier than we might expect. one of the ways to do this, one of the ways to do this, once our housing finance system is stabilized which will take several years, i don't think any of things are going to happen soon but once it is stabilized-- i have a minute. once it is stabilized, what i think we would do is start to reduce the conforming loan limit. right now it is, i forget what the number is, i think it is 750,000-dollar boeri vaughn. we would start to reduce the overtime, 650, 600, 550 and 400 on down and as the conforming loan limit is reduce the effect would be to allow the private

sector to come in and take over more of the market above the conforming loan limit and as more and more private sector companies would come into function in that market and eventually you could come as congress decides, you could actually eliminate fannie and freddie entirely by bringing the conforming loan limit down to zero or you could leave it at some very low level and allow the rest of the market to be held, to be handled by the private sector entirely. that is an easy way to accomplish this purpose but as i say i'm kind of doubtful that congress will abandon the enjoyment that gets from controlling these two companies as government sponsored enterprises. thank you. [applause] >> we have about ten minutes for questions. go ahead.

>> john taylor from the national coalition. i always enjoy your remarks. but, i guess, you started out by talking about, it really wasn't wall street and then things. it really was fannie and freddie because of these government rules that somehow force them to buy bad loans. >> that is right. >> maybe someday explain to me where it says in any of these regulations that fannie and freddie purchased unsavored unsound or on savory loans. but that is not my question. >> i would like to answer that when you get finished though. >> my question really is fannie and freddie, the mackey talk about in the 90's they pretty much stayed out of this predatory, and savory come mcgreedy malfeasance kind of lending practices until really a around 2003 when they got into it in the earnest and even then i think they had more screens than the private sector has, but

what is interesting is fannie and freddie don't make loans. the obviously gist purchase them in after verse stearns led the way and what happened to bear stearns but after they lead the way and show everybody how you could make money on the so-called lowentown loans and cra loans, a whole industry developed around that called countrywide, the new century and all of these other businesses that practice all of these unsavory practices because the new wall street would purchase them. at the time, wall street, okay. here is my point, 2001 to 2003 fannie and freddie went from $2,006,000,000,000,000 of management and they lost a trillion dollars in the two and a half year period and that is when their shareholders and others said look are we going to be relevant to this market and that is when they got into the sub-prime market in earnest wits events luben the market collapse brought them down, but to say that they created these loans

and the government told them to buy these on savory loans, or that the market really didn't leave this whole charge into this business is just not consistent with historic facts. so i guess this question is in there. >> somewhere in that there's a question and what i would like to say is that fannie and freddie were buying sub-prime and alt-a loans in the 90's. the market what's much smaller but they were leading the market then in buying these loans, and the amounts as you suggested get larger in the 2000's, but, it was getting larger as the market as a whole was getting larger. still, the fact remains that when you look at what fannie and freddie bots and you look what fha pot, they were more important in creating the bubble in creating this sub-prime crisis that we have than wall street. i mean you can blame wall street

for being first and so forth, but in fact they were a smaller factor in creating all of these loans and why were the loans created? why did countrywide thrive? they were selling most of their loans to fannie. they were fannie's principle supplier. that is why countrywide was doing so will end frank rains-- raines had to go in hand to make sure that angelo would continue to sell him the sub-prime loans. >> it is pretty much reported widely about angela missy low a private sector person using his influence at countrywide to say to fannie and freddie, look, one of you are going to do this and buy my bonds or i'm not going to do business with you. it is again still a private sector deriving this which gets back to my original question of can we create the regulatory apparatus that insurers these

malfeasance practices are not allowed to blossom again? feed you ask an interesting question when you say can we creedon apparatus? i think it is fairly conclusive the least to me that the that they bought more than wall street and have no more than wall street created, who was really driving this market but let's leave that aside and you and i will debate this at every meeting we have. but on the question of whether regulation can prevent this, i think the answer to that is no. actually i think one of our problems in general and public policy is we have an excess of faith in regulation. the banks in the united states are the most heavily regulated institutions in our society. they have been very heavily regulated since the federal deposit insurance corporation improvement act was adopted in 1991 when people were saying, now we have the toughest regulatory system can possibly have and all of these problems that came from the s&l's and the

failure of banks in the late 1980's and early 1990's arnell sayah-- now saltzburg and now of course we have the worst banking crisis we have ever had, so we have to look very carefully at whether the regulation is affected that what we expected to do and if we are going to try to rely on regulation to prevent fannie and freddie from taking more risks, i think it is hoped. >> i want to dominate, but it is as important as having the regulation and if you don't have regulatory enforcement and you've heard some luminaries like bernanke and greenspan say we really didn't enforce the way we should have so edison just tabbing regulation. you have got to have a share that is willing to impose that law for to be affected so we will continue the debate. >> we will. >> we have one question over here. >> i am from the american

antitrust institute, which may give a hint as to what i'm going to ask you. you start out and talking about privatization, that there would be many companies and they would be permitted to fail. okay, what they really be permitted to fail, especially if the many companies become a few large, countrywide and a couple of friends? won't we be back in the too big to fail problem, or solution include some sort of cap on size of the vendors that would be permitted? if not, then aren't you back into the same problem? >> i think we would be in trouble if we had only one or two such institutions that were doing this. well, well, went to get to a point where the failure of one or two out of a group of ten occurs, there would be no effect

on what is really important that is the ability of people to finance homes. if you had one or two and one of them failed, yes, that could cause congress and cause the administration to believe that they have to bailout that institution, but normally in a market where people are doing the same thing, which is secondary market securitization you could have an unlimited number of such competitors. there isn't any reason why that market should consolidate. it was forced to consolidate on fannie and freddie because of the advantages they were given by the government but in a case where there aren't any advantages provided by the government i don't think that would happen naturally. there is ralph. >> peter, since we now know there are more management sponsored enterprises that are too big to fail and have an

implicit government guarantee like general motors or the smaller number of larger banks, would your objection to the g.s. tb attenuated if you were convinced that a, there could be strong capital standards and other more numerical regulatory criteria that could be enforced, and b, if the government wanted to pay back the tax payer, and exercise their 1,000 per share and block the 80% or just under the 80%, and went to into in fact the business of restarting the as a regulated gse, fannie and freddie in order to increase the one sent out of 1,000 or whatever the share would cost to a few dollars per share in pay back the taxpayer by then selling off the stock?

>> as i suggested, i would be very suspicious about any system in which the government is backing any private company that is a profit-making company, because there is i think an unavoidable incentive on the part of management in that case and on the part of shareholders, to exploit to the maximum degree possible the value of that subsidy, and the only people in most cases, the only group in most cases that has any interest in stopping risk-taking, any substantial interest in stopping risk-taking are creditors and in the case of the government back institution like gse the creditors don't care, because they know that they will be taking care of if risk-taking goes beyond control. so, all of these suggestions, which are perfectly good suggestions if you believe that

regulation is efficacious, would be to other people may be very persuasive. they are not persuasive to me for the reasons i expressed. >> you describe concern for risk-taking to shareholders. if they organized and if they had rights of ownership. >> that is possible. but, shareholders buy shares in order to profit from their ownership of shares. i don't think there's anything wrong with that, of course, but the way that you get more profit is to take more risks, to have more leverage. that is okay, as long as you can sail. that is the control, and in the gses situation, udall failed. >> we have one final question over here in the front. >> i just wanted to get a clarification of something you said earlier. i think you said that the

sub-prime mortgage-backed securities then to wall street investors. i wanted to clarify that was the statement that you made and if that was the case, when did that phenomenon began to occur? >> in the late 90's, but they don't own more. wall street issued sub-prime and alt-a mortgage-backed securities. they own a substantial number which they began to buy in the late 1990's, and bought up until maybe 2,003, when after which they started to go into the business end effect in a large with themselves but they hold a very substantial number of these wall street issued mortgage-backed securities. >> thanks peter. [applause] mao i would like to invite

thomas stanton up to the podium. mr. stanton is the author and editor of a couple of books on government managed entities, and he is a fellow at the center for the study of american government at johns hopkins. thank you. >> it is a pleasure to be here, and ralph has arranged a program so that everybody can hear various alternatives and really wait for yourselves the pros and cons. i happen to be the author of a book, a state of risk, will government sponsored enterprises be the next financial crisis? that book was written in 1991, so you can tell my timing was off. but, in fact, you can point out the structural and liabilities of an institution, but what you don't know is when the stresses will head that actually bring it

down. so what i would like to do today is first talk about why they failed, fannie mae and freddie mac and then make a couple of points about their future. and then leave time for dialogue, which in this kind of form is really important. there are a number of reasons why fannie and freddie failed. i would like to highlight two of them today. the first was a centerpiece of this book, which was their high leverage. fannie mae and freddie mac fought to have capital standards that allow them to operate with one-third to one-half of the shareholder capital that a commercial bank or thrift at the same line of business would that have. so, they built in what their political dominance a structural vulnerability that made them week at the point that a stress would hit. and then of course, as we have

heard, fannie mae and freddie mac in the early 2000's, the mid 2000's maybe series of really her in this business decisions to plunge into, the nontraditional market schmoke it that is sub-prime, alt say it etc gist at the point that savvier players were looking and saying, there may be a problem here. in fact jim collins in his little book, how the mighty fall, talks about fannie mae as one of his poster children for how big institutions essentially start to fail, and he points out there are five stages of potential failure of an institution. the first one is hubris. that is the first stage. we forget that fannie mae and freddie mac in the mid 2000's

had complete failures of their internal controls. warner rodman was charged by fannie mae's board which was a little shocked by this because the failure of internal controls mean bad things happen in management does not know it until it happens. warren rudman was charged with doing a post-mortem of fannie mae and he talked about the culture of arrogance. that is his term. the second jim collins stage is on disciplined pursuit of risk, and that you found with fannie mae and freddie mac in the mid 2000's, where they plunged into the non-traditional mortgage market. we are losing market share to the rest of the world. we had better become relevant, and they plunged in. and it was an undisciplined pursued of risk. ..

leadership disregarded the warnings of the risk officers as

they plunged into what jim collins called the undisciplined pursuit of risk. and of course there's the denial of risk or peril don't worry, be happy. fannie mae and freddie mac were fighting for capitalization as late as june, 2008, with respect to the new legislation that was enacted in july. and then there is a fourth and fifth stage grasping for salvation and then collapsing but the government stepped in at that point and gave them their salvation and put the two companies into conservatorship. so i would like to make two points about the future. the first point is for the next five years, and i think everybody agrees on this, we need serious government involvement to shore up the

mortgage market that is essentially failed at this point. mauney recommendation is that they become a wholly-owned government corporations for the next five years. putting them into conservatorship as the government did means you've retained private shareholders and legally conservatorship means the government and board of directors and the management of those entities aren't working to restore those entities to financial health and earlier structure on behalf of shareholders so the same wipsawing that occurred at fannie mae and freddie mac and the press, writes shareholders which is in every law book the first responsibility of management besides being the law -- the tension continues to exist in conservatorship today which means we can't use fannie

and freddie for a number of things the were asked about. fannie and freddie could forge mortgages in a prudent manner. you could build a national housing trust fund into their business so that they would keep a certain percentage of their income, put it into a pool and use that to subsidize in a controlled way because you don't have this open-ended exposure of a government guarantee subsidizing low income housing. you could provide a central consumer protections for borrowers. i don't know what is going to happen with this little consumer agency but it would be placed between an industry that's trying to kill it and banking committees that have traditionally been fairly receptive to that industry. but those consumer protections, if at ministered by fannie and freddie as government corporations could involve changing ways of doing business. the way in the early 70's fannie and freddie standardized

mortgage forms so they could provide alex pollock's one-page mortgage disclosure form. they could provide more effective bar or counseling. and they could provide increased pre-foreclosure lost mitigation services among other consumer protections. finally, and a lot has been talked about with fha and it is stumbling. there is no question fha is an accident waiting to happen to the federal housing administration part of hud but fannie and freddie underwrite other systems we've already paid for s taxpayers. why not take those systems and use them, kalona them and adapt them for fha so that if ha doesn't blow up as a number of people are concerned might happen. and this can happen once you've removed shareholders from the equation and given these entities a single tract mission

which is to support tax payers of the united states and the housing market while we are in trouble. that is a first stage for five years. the second stage we've got to decide what we want to do. and my only plead is let's not go back to the model of privately owned organizations with government backing. people talk about co-ops is an alternative to investor ownership. we forget that the farm credit system which was a cooperative blew up in the mid-1980s because aco what has an incentive to lower its profits in order to benefit its member users so you have distorted incentives there as well. now how can i say don't we create the gses? banks, thrifts, bears stearns,

all kind of institutions failed, and i would say this is my specialty which is government organization and design, that infected of gses have special vulnerabilities. first of all, they are dealt with as unique institutions, which means congress can give them lower capital standards than competing banks or thrifts. when they are unique institutions, you are essentially giving them high leverage which i would contend is a very dangerous subsidy. so whatever happens they should have the same capital requirements as anybody else doing business with them because if you have to work capital requirements, what happens is you arbitraged across the mortgage market and drive in the case of fannie and freddie trillions of dollars of mortgages to the place where leverage its highest and government ownership is the weakest. fannie freddie doubled in size every five years since they were

created as gses because of that dynamic. only when you make capital standards equivalent across institutions can you reduce the dynamic. the second problem with a gses is the live or die according to the charter. if i can get the congress to tell me i get lower capital at higher leverage than any of my competitors that's worth a lot more than knowing anything about the marketplace. so if you read the gse annual reports the talk about, quote come up with chris and hire their ceos to manage political risk. people who are well watered both on capitol hill and with whatever administration is currently in power. they are not hired with respect to their ability to manage a multi trillion dollars institution and that is what we saw as they went down, as they made a systematic bad decisions as one speaker said this morning they doubled down on their bets

just as everybody else was backing out of the market. these people and internal controls simply don't know how to manage an institution of this size. everybody talks about government agencies being inefficient. well i'm afraid fannie freddie turned out to be more inefficient and costly than a government agency. finally, and they how you're the ceo was for this, gse is are politically powerful. we cannot assume what was called this morning robust oversight, seeley as regulation today is going to last into the future. if you watch the progress of statutory changes for the anemia and freddie mac since they were chartered as gses, you could watch the gses overtime peeling away one accountability provision after another. they had a lot stronger accountability provisions and stronger capital requirements

which i studied. when they were chartered the and when they went down in 2008. so i want to close by quoting the former fannie mae ceo dan mudd and this is an important quarter. i would advocate moving the gses out of no-man's land -- he was a marine. even have shown how difficult it is to balance financial capital market, housing, shelter, bondholder, homeowner, private and public interests in a crisis of these proportions. we should examine whether the economy and markets are better served by fully private or fully public gses. richard siren, ceo of freddie mac similarly talked about getting whipsawed between the obligations to shareholders and public mission and all of the pressure that was being put on the gses to show it to they

were in fact relevant to the housing market in particular the affordable housing market. and if we don't pay attention to mr. mudd and, if we don't avoid recreating gse then i would like to offer this fine book as a road map for the next time around. thank you. [applause] >> tom, thank you for your remarks. our luncheon speaker is going to talk about gses and the danish mortgage system. here is you've been talking to peter about the secondary market but there's a third of financing mechanism well established in europe called covered bonds. to what extent have you looked at the relative efficiencies and safety of covered bond financing where lenders retain ownership of the mortgage and fund them

with covered bonds compared to trying to perpetuate the very inefficient their secondary mortgage system that we have in this country that depends on gses? >> i haven't studied it nearly as well as you have. i have drawn a couple of preliminary conclusions. one is it is definitely a model to look like and i think the treasury has taken a position. but number two, for the next five years when i'm talking about using a government corporation and then deciding dewey reena the charter or not, for the next five years our problem is the covered bond model requires substantial capital and that's something that is missing in the financial system today. so i think it is after those five years a very promising possibility but i will defer to you because i've not studied the issue and i look forward to the luncheon speaker to becoming informed. no questions?

>> over here. >> i didn't want to hold the microphone by asking the second question. laura from the interface center on corporate responsibility the previous speaker offered a simple sort of framework for how do we move from where we are to what he was recommending? do you have a prescriptive that is equally simple and elegant? >> no one can match peter's elegance, but basically the first step is to remove shareholders from the equation and put both companies into receivership and then use them in receivership as government corporations. the second step is, and i think the concerns, are there, will anybody buy the debt or mortgage-backed securities if it just has a quote effective government guaranteed we may have to provide a full guarantee

of business going forward. we've already accrued the losses we are going to accrue and that will require a step forward in terms of the budget process and i think peter is right that is difficult. but i frankly think it is preferable not to get mired in budget issues if we think that a particular solution is on the ground of the most effective solution. there are answers to these budget questions in various forms as the world's greatest body has exercised over time and i think we could apply some of those answers here. and i want to be very clear. i am a specialist in organizational design. every inch waist has positives and negatives and that's why this kind of conference is important. you've got to weigh them in a

disciplined way where you scrape away the rhetoric and get down to what is it we are really talking about on the ground. >> my question before the other participants as well do you expect to see the obama administration come out with a specific detailed proposal for handling fannie and freddie mac and four restructuring that incapacity or do you think they will basically a rehash the existing options debated and discussed and leave congress to kind of take the lead? >> bill from gao declined to speculate but not being from the gao i will speculate but you've got to understand this is a very low rate particular observation. it was my understanding initially there was a post be a full trial review of the gse options, and in fact some point my friends told me that's not happening. so i suspect in fact there is a

reasonable prospect we are going to see the status quo carried forward and that ties in with my personal observation and i assure all of ours the this administration has a huge amount on its plate. in between the two wars, healthcare, climate change if that ever is on its agenda is a serious we -- there are just a whole bunch of things out there. the future of financial service regulation generically. i have a feeling there is probably this feeling of you know, we have enough balls in the air let's not throw this one not yet. so that would be like conjecture but it's only conjecture. >> given the hundreds of thousands of innocent shareholders saved would be labeled a couch by management received as late as april of 08

when the head says things are okay, remember that famous one by lockhart? >> he said there were adequately capitalized and was a term of art. >> given the deception and there are hundreds of thousands of shareholders, not just the few to show all shareholders who were in affect insured this was the safest investment after the treasury's and given that the government has authority now to buy ten shares for a penny up to an 80% ownership, and given that the taxpayer should at least have a chance to be paid back by don't you take the first five years of your state to reconstitute and restore under the present system that fannie mae and freddie mac so the government gets 80% of the shares dirt cheap 1 penny for every ten shares and restore it to a healthy state, sell off the

shares at whatever, five, ten, $15.5 years pay the tax payer and let's see the shareholders left with a very small portion of what they had. they've already been punished. at least have a chance to retain what they have and not be wiped out. >> first of all, high leverage which is what fannie and freddie assiduously lobbied for benefited shareholders on average before their internal controls failed they were making 20% return on equity per year up to 39% for one of the two and 40% for the other so shareholders were amply rewarded for the risks they took when these things went down. secondly, with the share trading now between 1 dollar or $2 a share i would suspect the original holders are long out. what we have now are holders that are betting on the future

of government policy. and by the way it really need lawsuit because the terms of conservatorship seem to have been transparently violated as these companies are used in a very tentative way for public purposes rather than to support the private owners. mize instinct is let's get rid of shareholders. they had a good right and they knew these were shares, and let's create government corporations for the next five years that can take some steps to improve the way mortgage transactions are conducted. there was a horrendous amount of damage. i don't need to tell you, to consumers with what i would call over lending. pushing mortgages on people when those people really wouldn't qualify with any reasonable stress out all themselves or otherwise, and i recommend elizabeth morgan's book, the to

income trapp seeing how that dynamic works. i would just assume use the gse as governor corporation to try to establish some really good rules for how the market should work and in the rain -- embrey in those in the transactions we have going forward rather than benefit a whole bunch of holders now that lost moksha of their value, a whole bunch of holders now who are probably bidding on a really good lawsuit. >> final questions? thank you. >> there's one. >> there is one in the back. sorry. >> -- the obama administration is doing now with in terms of what they're disclosing how they are using the alt-a, what they are doing with the gses and whether you think they actually know what they should do with the gses.

>> i don't know the answer to any of those questions but once again i always a soccer for conjecture. i have a feeling they are what sold by the same tension between having private owners. remember the government only owns warrants at this point. the shareholders are still nominally the owners of the companies. they are with salt how far can we go in using fannie and freddie to achieve public purposes in the mortgage market. and that is a difficult problem. but given the number of things on their plate, my instinct is they are basically saying this is a problem that isn't blowing up on us. let's sit this one of sight for a while. that's my conjecture. i should really go over to treasury and ask

thank you. [applause] >> our final session is with one of the leading consumer advocates in the country, ed from u.s. public interest research group as well as mr. ralph nader. come on up, ed. as i said is a leading consumer advocate whose work on a variety of issues including telecommunications reform, banking reform and other issues. >> i don't know if they've been told but john taylor and lisa rice, i've been asked to ask you to join it if you are available and interested. yes, up here at the front. we will make a round table. this is supposed to be a round table, not a square or not a

classroom. thanks, charlie. again, ed with u.s. public interest research group and john richards and ralph nader thought it might be good to have a couple of housing experts which i confess not to be to come up here and join me so, without a bed planning to be a pure, i'm confident they will do a fine job. lisa rice is vice president of the national fair housing alliance and previous to that was a founder and ceo of the toledo number zero negative the development agency which is a community development financial institution that works on bringing affordable housing to neighborhoods and john taylor of course is president and ceo of the national community reinvestment coalition, a leading organization of some 500 groups that works on community reinvestment act protection and other housing issues. two things we have in common, we each have blood on our foreheads

from our terms of the consumer advisory council dinging our head against the wall at the federal reserve board trying to get the federal reserve to take on more consumer and community work over the years. at least that is the way i remember my term. i don't know if john or alisa remember there's the same way. second all three of our organizations are founding active members of the coalition americans for financial reform. all of the nation's leading consumer housing labor and civil rights and community groups or members of this group. our financial security bald ortiz website. we are leading the fight for the community groups and consumer groups and investor protection groups as i said for taxpayers, homeowners and consumers. another way to look at it against the phalanx of bank lobbyists who are working

against financial reform. the people who caused the system to fail are trying to preserve the system that failed and believe it or not they are making headway on capitol hill. one of the reasons they are making headway on capitol hill as they have some 1500 lobbyists according to a study that was done by bloomberg news and that isn't counting the ones who are not registered to lobby. it's only the ones who actually registered against some 58 consumer lobbyists. at one time, i may be exaggerating just a little bit, and convinced fannie and freddie themselves had a 1500 lobbyists. i was at a conference like this 12 years ago. i will tell what little story and ask questions of my colleagues. i was at a conference that ralph nader and the center put on 12 years ago, 11 years ago, when was it, 1998? and chuck lewis was the keynote speaker. chuck lewis was the founding director of the center for

public integrity, public integrity.org, the leading investigative reporting organization that studies political power and he told this story that they had studied every leading power broker in washington, every influence peddling organization from the chamber of commerce to others and he said they all higher former members of congress. they all hire former staff members from the hill but fannie and freddie with only once the center studied that hired the spouses and the children of the former staff members and former members of congress. that's how much political power they sought to have. in fact at the conference, ralph, you might remember nobody would ask any questions. they were afraid to ask questions so ralph was at the front of the room and had to hand out index cards so people could pass their questions forward because if you ask a question in public about fannie or freddie your playlist.

you got phone calls. everybody in your office got phone calls. the money to your organization dried up. if you remember of congress to stop getting political campaign contributions. you can't describe how much political power they have and then it tom stanton pointed out the book how the mighty fall, they sell but we have got to figure out a way to decide what to do with what is left of them and i think that is why this is such an important event we are putting together to aid. by the way they fell because the nexus between political and corporate power and to those of you interested understand the supreme court did not come out with a decision today in a very important case on opening the floodgates to corporate money in political campaigns. they still might come out with a delauro to keep tune, but in terms of the future of fannie and freddie, what to do with fannie and freddie i want to

pose the question to john or lisa and open up to questions and comments from people in the audience. what should president obama do if you were writing this new report for him what is the most important thing that your organization thinks he should be saying in a report or what is the most important thing you've learned today that should go into the report? >> if you allow me i would like to back up a little bit, and i think the various presenters' touched on this theme through the course of their presentations. but i think one of the first things that needs to be discussed is what is the purpose of the fms to read we want them to serve a public purpose? of the purpose is to buttress the mortgage market and make the market more affordable and accessible, and it just sort of seems to me the fms cannot be

a private entity. so, i think that one of the first things the report needs to do is back up and look at the whole issue of purpose. what role do we want them to serve? will they be serving a public purpose? and is it necessary? is this still important for them in this day and age to serve a public purpose? >> john taylor, in crc. i want to emphasize when you were talking about as well, and also thank ed mierzwinski for what you do in particular. it cannot be discounted in terms of the contribution. but this whole business of campaign contributions and more so the lobbying in general from fannie and freddie, one of the good things that happened, small but things that have been by suppose through this mess is with the collapse and takeover of the gses the government made it clear they could no longer do lobbying because the

government owned them but now that we know all of these organizations that do too big to fail and in many ways you can call some of the private wall street firms and some of the big banks government sponsored enterprises. the taxpayers certainly feel that way and it seems to me that ought to be extended to them in terms of the lobbies. it's ridiculous to be on capitol hill and be tripping over blue suited lobbyists fighting against all of the meaningful changes to make sure our system does not have the kind of malfeasance and bad practice to get us into this mess. whether you want to blame fannie and freddie for being the leaders of this which i think is absolutely absurd or whether you want to blame wall street were the big banks i think they all played a role but what we need to do is make sure we create a system that doesn't allow that to happen in the future. i think there's an important role for the gse is providing it's important not to throw the baby out with the bathwater but to make sure whatever form they take -- liben like to think that

being -- continuing to be a government sponsored enterprise that could make enough profit sycamore of its original mission and that is to help people into the mortgage market who otherwise may not be able to be in it would be a good thing but there has to be safety and soundness and other types of oversight that ensures that happens. what is very ironic and some of you may have guessed working for an organization like the national community reinvestment coalition someone would probably attach a label to me of being a liberal, and that's okay and they will stick on me and i'm very proud of it but what is ironic about that is the amount of times i was invited in to congress to the hearings and meetings to speak, invited by republicans and conservatives because my views relative to fannie and freddie. feeling they were not doing enough with the government sponsored benefits they had in this too big to fail benefit. and so i would argue for stronger housing goals and for them to go deeper into the

minority neighborhoods and so on because of the benefit and privilege they occupy and i would find myself siding with democrats over this who felt i was critical of fannie and freddie but that is what i was critical of them for. i was in critical for their core mission and what they were doing. and here is the rub. ten years ago the american market system was the envy of the world and now it's with the danish system? that's pretty rough. but there was a time the mortgage system worked very well. there was a time and regulatory oversight and a time that the gses worked very well but unfortunately, we allow the industries with private sector involved in two areas without oversight and without safeguards or anybody bringing them in to the point where it brought all of us down and i think we can correct that without throwing the baby out with the bathwater. >> can i have another comment?

i'm glad to hear your proudly wearing the red letter l. i do too. >> that means something else. [laughter] >> i think also any report needs to look at because we talked about the fact the fms has a mission that any report needs to look at how well they fulfill their mission. did they actually do a good job? que is, john, where i'm going to differ with you a little bit. i don't think they did particularly in underserved markets. i don't think the fms did a very good job of fulfilling their mission when it comes to underserved markets and that needs to be looked at and analyzed. from where i sit and based on the work that i have done in the field working of course primarily in the states of ohio and michigan, the underserved markets will serve as an incubator for the subprimal market to if he will and home

mortgage industry to sort of hone and perfect some of the practices that it used and then extrapolated to the larger market. and i think that if they had done a better job of penetrating those underserved markets that some of that could have been staved off. >> i don't disagree. that is the position we took as they were not doing enough. so we are on the same page on that. >> to clarify for the c-span audience you're talking about the didn't to be enough to do what? police the loans, the practices or just make more loans in the markets? >> they didn't purchase enough loans from low and moderate-income communities and communities of color that would enhance the ability for those populations to get good quality safe and sound loans. they lived and 12 in durham middle and upper income lending and kept raising the mortgage

limit to the point where an affordable mortgage they need to securitized debt over 700,000? the was supported by people like barney frank and others. it's just to me it doesn't strike me as what we needed in a gun from a sponsored enterprise as killed in the mortgage market to do to get people 700 falls of dollar mortgages. >> also think that what we heard a lot of when we would approach the fms about the lack of penetration and burn underserved markets was it isn't our fault if the lenders we do business with aren't selling loans in these communities then we cannot purchase them and if the lenders we are doing business with don't sell loans in these communities based on our underwriting guidelines, and utilizing our products that we developed then we cannot purchase loans in those communities.

one of the biggest barriers was that fannie used an automated -- and fannie -- and prior to that they're undermining guidelines were prescriptive and very rigid but they also included barriers to fair lending. so when we would push for them to do things like consider nontraditional credit, there were sometimes met with a huge bureaucracy of just trying to matriculate through the huge bureaucracy to get new products and underwriting guidelines developed that would warrant or lending in underserved markets but i have to say that when we were able to get there and develop pilot programs that could be used and then the underserved markets they worked very well so when we were finally able to get the programs and products we needed dated

work well to the fact the problem was the curve of the developing those programs and products and then bringing them to market in a real way was very, very substantial and long lag time. >> why did -- why did fannie and freddie seek to increase the size of the loans they could make and why didn't they promote manual underwriting so you could help more lower-income and people of color get loans? >> profit? >> profit? okay. >> i think lisa in the last race and a point that wasn't raised in the earlier discussions and i want to make sure that is driven home what fannie and freddie said a lot of times is look the banks are not bringing us the prime and good product loans in the low and moderate-income neighborhoods and communities of color. what we are seeing is what the supply of and the market shifted

in that direction. i do think this is a great part of the unexplained and and discussed aspect of what occurred in the crisis. the banks abandoned a lot of these areas and low and moderate-income areas and they don't assume that, ownership or the ability of someone to pay on a mortgage is necessarily a higher risk in a low-income neighborhood than it is on a middle and upper income neighborhood in fact fair isaacson company, the fica scores maintains income is in negatively correlated in the home mortgage market performance meaning in come in and of itself as a factor. the lower then come the more likely it can be paid off and that is because there's a low-income person loses the job they can find another and come through all sorts of means that could meet the mortgage, but also for middle and upper income it's more complex and more money involved. there are other factors and that

black box and those credit scoring models lisa referred to a few minutes ago. but when the private-sector, the banks coming street banks pulled out of these dead birds and close the branches, what moved and was thus a prime and often predatory lenders as the service of choice and also basic banking services became pale lenders, pawnshops and check asher's so in the working poor neighborhoods of america we shifted the financial-services sector with as someone referred to earlier the shettle financial services sector. there is a shadow aspect to some of the shadow financial services sector that preyed upon people that really put people in positions they should not have been approved and approved them for loans with terms and conditions any reasonable person would not have done. >> we can broaden that to not just the l. am i markets but underserved, too. let's take a look at prince george county. of the highest in come county in

the united states in terms of african american wealth over 50% of mortgage loans in prince george county were subprime mortgages. and from my work in the field, all i started out as a fair lending advocate, on a free and the toledo fair housing center. when i was there we filed more fair lending lawsuits than any other fair housing or civil rights agency in the country and what we would see over and over and over again were lenders who were not willing to go into underserved markets even if we were talking about more affluent african-american and/or latino markets with their praia do the crime vanilla markets. in fact i can remember going through -- fees' to be to purchase and their estates or pace data in ohio which is similar to the core logic data

and we could look at every single address. it would provide the interest rate and from the finance year was for that particular mortgage. i would sit down with mainstream lenders and say look this person has a loan at itt, this loan has been official. 18%, 25%. go to that person and refinance them. there's your mortgage. they've refused to do that. but surprisingly, the blood when they adopted some prime lending divisions what we found was the same lenders whose prime entities wouldn't go into these neighborhoods and make pride loans the was somehow able to penetrate these communities with subprimal loans and said prime entities. but we also found and were able to document through a program we developed with fannie mae was an antipredatory lending remediation program where we

would take folks who had sought prime loans if we determined they were predatory, refinance them into a prime loan and the number one criteria for the participation in the program was at the time you got this of prime loaned you qualify for a prime loan and we had consumer after consumer after consumer who actually qualified for a prime loan and they got the loan with a sub prime entity many of those said prime entities were actually subsidiaries of companies that also had a prime lender operating in the larger geographical area. so what we have seen as john has said, prime entities and mainstream hollanders not willing to go in with their less risky products or underwriting models into the underserved neighborhoods to generate and originate mortgages but they would go in with a higher cost

product in order to generate mortgages in those areas. >> we have time to take questions or comments from the audience for the panelists. are there any questions or comments? >> while we are waiting for the question i do want to say something that lisa referenced to and that is we have a forum on homeownership and mortgage lending. the truth of the matter is the crisis we are and have little to do with home ownership. most of the loans we are talking about were refinancing loans. i have seen statistics that say less than 10% of the mortgages the were made are the loans that were made result in somebody actually getting a home. it was somebody getting a bigger home or refinancing or taking money out but it's really the industry doing this last vegas style of gambling with lending

as a way of making a lot of profit, not a way of creating increase homeownership so a lot of the great ideas from denmark and elsewhere sounds great but, you know, you are talking about getting people into homeownership. what we are talking about is a malfeasance and regulated industry there's a lot to get away with murder and hopefully we have a congress that has i have to think of a nice word to do this, has the fortitude to change the system so we return to ethics and law in our system of regulating financial service sectors. >> ralph, you have a question? >> a degette was in 1988 or 1978 we worked to get the alone passed -- [inaudible]

what is your view on the promise of the bank and failure of that bank and monitoring of the bank to provide the loans for housing but also to hit a low income development? [inaudible] >> i'm not familiar with the model you are talking about. i'm not familiar with that portfolio. but let me say this: i don't think we have to come up with new models to serve, serve as adequately underserved communities. i don't think we have to do that. i feel we have enough robust data you could take the data from bct fy sector who focuses on lending to the underserved markets and you can call that data and analyze it and help use it to buttress our mainstream

systems if you will. so i don't know that we have to keep coming up with new systems for new models or what have you. i think what we need to be doing is focusing on ways to move folks who are currently under represented or are from underserved markets moving them into the mainstream market. i do think also they are more protections in the mainstream market. certainly what we have seen as a result of the financial crisis today. >> [inaudible] -- toward low-income people is an old part. the point is the national cooperative bank which was supposedly a bank to deliberate funds for low-income as well as middle-income housing hasn't gotten the attention of your communities.

what they say over the years is they are not getting enough demand for the loans. >> my comment would be that there have been a non-factor, ralph. although you look in canada and see the cooperative banks and see a tremendous amount of activity working-class people really rely upon them. but i will take a corporate structure we have here in the united states, the credit unions. that's a cooperative structure. it's got members and that sort of thing. well the problem with that and again it has to do with the application of the law and regulatory oversight looking communities in color of low-income communities the credit unions say we didn't do very much of that malfeasance lending. they didn't do much lending in the minority areas to begin with. a disproportionately lagged banks serving working-class people which seems kind of crazy for an institution the was created on the basis of serving people of modest means and what are they doing now? i don't know if people realize they are on capitol hill right

now pushing to create a line of credit available to the credit union industry so forget the cooperative membership model. they are now trying to put themselves in the position of actually having i don't know whether it is access to the set when the war would expect the line of credit from the taxpayers, line of credit they can use to compete further with the banks without having an obligation like the banks to serve safely and soundly low-income communities and not even pay corporate taxes. that is an extra benefit the credit unions get. so i went off on a tangent but i think it's more relevant to the point that you're making. >> we have time for one more question there's any more questions from the audience or comments on the stand today and then charlie are you or ralph -- ralph, closing comments from ralph nader. i want to thank everybody and my last minute panelists here for their participation. again, the coalition that is working on a variety of reforms,

not specifically fannie and freddie the the entire industry to preserve and reform the financial system as americans for financial reform, our financial security of order. my website is and lisa is nationalfairhousing.org and john is ncrc.org. >> while ralph is coming up with me also, and i think all of us advocated with them to not allow the fms to use their purchases of the sub prime mortgage backed securities to meet the affordable housing goal and they chose not to listen. so i think that has to be another component of any assessment of the gses when folks working on the ground

give, advocate for different positions with the various regulators how those various positions are considered by the regulators. >> thank you. that is an important point. [applause] [inaudible conversations] >> thank the panel, which i think brought some of the discussion down to earth and thank you all for providing your own from of reference. everybody takes their own free of reference from experience and their knowledge and we have got to be very careful we don't become too sophisticated the abstract here in communicating to the public. i have often said that the housing issue generally has been depicted in such a boring way they haven't gotten the press they deserve for one of the basic prerequisites of a decent livelihood. it's not quite as exciting as

contaminated food for example. tom stanton and others talked about love tension the freddie and fannie corporations between shareholder value obligations on the one hand and the public commission on the other. i don't think that is the problem though. i don't think anybody in fannie and freddie is sorry about shareholders to begin with in this present state. but there is another tension between speculation and investment and the more complex and abstract the secondary mortgage market becomes the more it hooks into derivatives, the more it is out of sight, the more it is unregulated, the more it is nonresistant to speculation, more it becomes a speculative effort rather than an investment effort in terms of housing on the ground especially

for underserved people. the situation in housing in this country is pretty bad for a lot of people. there are millions of people who cannot afford housing and still have a homelessness problem. you have people who couldn't afford a home but they should be able to afford to rent and they can't afford to rent. look at the district of columbia for example. and so, we lacked in this conference to produce a eight into one person who knows more about how fannie and freddie have underserved low-income communities than anybody in the allied states and that person is john brown and he couldn't be here today and show you his maps and his data because of a longstanding family personal commitment. but i do want to recommend his findings for some of you to

digest because when we met years ago with frank raines he tried to totally deny what was undeniable, and that is the data in the maps demonstrate in a way hidden from most reporters fannie freddie were bearing away from serving low-income areas. as far as thus cynicism of regulation is concerned, regulation has been a farce. we know that especially with ofao and fannie and freddie to read it doesn't have to be a farce. this is like saying the police are not enforcing the law we against street criminals so let's forget about making them enforce the law we against street criminals and go to the scattered neighborhood watches. we know how to make regulation of work. we know how to simplify yet and how to quantify it and how to provided with adequate authority for enforcement and that should be the goal because tom stanton

wrote the first book on this morning about fannie and freddie and capital standards for a big part of his concert. if there's anything easier than enforcing capital standards i would like to know about them. this idea that people from sort of conservative persuasions, they use the undermining of regulatory systems by corporate lobbyists as a way to say don't even think about regulating, which of course they don't want us to think about. but there's no reason why we cannot establish these kind of regulatory patterns, and part of this is planning thus -- cra for the crisis. that is one of the most and irresponsible accusations.

the community reinvestment act worked very well quantitatively not as much as some of us wanted but very a very reliable repayment rates and mortgage payment rates, even citigroup entered into this effort and was not something that failed at all. it was overwhelmed by a whole fleer of reckless speculative couching endeavors. as far as the power of fannie freddie politically, simple. to prevent them from lobbying. just the way they are now while. if they are going to be back stopped by the government, they are going to be bailed out by the government, the government now has warrants to own almost 80% of it, no law. citigroup should not be allowed to lobby. the government has been a lot of taxpayer money directly and indirectly to the citigroup.

you prevent freeloaders and corporate welfare from lobbying because they are not part of the free enterprise system they are a part of the corporate welfare system. and that takes care of the jaime garlic's and that takes care of the multimillion-dollar lobbyists that are hired from capitol hill by fannie and freddie come from republican and democratic ranks, outrageous salaries in order to peddle influence, not meritorious arguments, sheer influence. the final point is how do we convey what's happening in this huge world of fannie and freddie to regular people? how do we d construct without making it an accurate? how do we lose to the coup use simple language for a need that

is decent housing facility for people and that is why i think we've gotten under way today. i'm very pleased c-span came today. it would be very easy simply to say this is too abstruse a topic for people who watch c-span. we must never underestimate people's interest once they are given a chance to understand something that affects them and their country in so many intimate and personal ways as housing does for neighborhoods and other expanded livelihood's. we invite all ideas and suggestions from the c-span audience, from the audience here to send them to info@csrl.org, that is info@csrl.org, and i

particularly applaud the people who came here to share their experiences and reflect the necessities of the american people. thank you very much. [applause] now we are all invited to lunch. thank you. [inaudible conversations]