new york. rework done in the ford was an initiative. i am supposed to. and i did not know that much about affordable housing when started. i was stunned when i started -- in know, creating a proportion of the developments. i was stunned when i looked at with the incomes of the folks that they were considering for affordable housing war. it was so much higher than my perception. this debate has become one key and, you know, a lot of this is nuts. my big question for the panel in the group is that we create more of the movement around affordable housing so that folks to have a bigger understanding of sort of the purpose of

affordable housing, who is actually serving, who we want it to be serving, and that think about that with regard to young people because we are future homebuyers. i think it probably relates to a lot of the different constituencies. and i think creating are rounded is ultimately will will give us beyond this sort of debate in the weeds above some of the technicalities and actually have the debate about how we can improve affordable housing go beyond where we are right now. >> and urban centers across the country they're is a move but jen affordable housing. i remember the catch phrase was the rate is too dim high. that is about affordable housing to be going back into dealing with older americans as well, the rental aspect is very important for older americans. many older americans have never

been homeowners. many sell their homes and then become renters and affordable rental this point to be -- is crucial, particularly to a lot of our constituents that the naacp. i do think there are people up there who know how important this issue is and what to mobilize on it. how do we connect and so will we are talking about affordable housing, fannie friday, that they can understand what is being discussed is relating to their day-to-day lives and make sure we get there input invoice. >> since the opec and jump on one. what are your expectations or incites. >> you need affordable housing in general. >> and more specifically the affordable us in goals. >> obviously things are changing i haven't seen the latest

incarnation. musher what incarnation of seen. in the legislation that is to afford a really does take the market access fund approach. you know, it says we want the raise this money to direct it to the purposes that we think are important. last i saw it was mostly that housing trust fund it. added us see these other things that you mentioned with regard to r&d and credit enhancement. i think those are great ideas. i wrote a paper where we came up with the proposal. in fact, those were the exact core uses that we have in our proposal. it's done r&d was very important the biggest credit enhancement. >> that was the perfect segue to what will be our second panel.

dismantling fannie and freddie first join me in thanking our expert panel. [applause] >> next a look at the government supported enterprises of fannie mae and freddie mac as congress debates legislation that would potentially limit their function. the panelists also discuss former congressman mel wants role as a director of the federal rousing finance agency. >> all right. two is ready for round two? we have a very talented panel comprised of representatives from major industries as well as community. the many of the folks on the podium for the second session on is dismantling fannie and freddie the right thing for consumers and the housing market as a whole? they are well known to you. so those of you are viewing the program at home or elsewhere of

work, i invite you to participate in the twitter verse by using hashed tech locked out. again, that is hashed that locked out. i am going to start with introductions from the far side of the podium. we are joined by bill emerson. many of you know bill. the chief executive officer of quicken lows which is the nation's largest online home loan under as well he is going to serve -- you currently serve as the vice chair of the mortgage bankers association. congratulations to endure a member of the financial-services round table housing policy council, a very active group in this case the we're talking about. then we are joined by a very, very well done gentleman, jim wells said. welcome, jim. he is the ceo and chairman. he has a very unique resonate.

i invite everyone to look at the full resonating a packet. he was referred by the "wall street journal" as a participant in the super bowl of corporate turnarounds with regard to american international group's successful restructuring. as well he has been involved in some of the nation's largest bankruptcy's. various roles in the private sector and the treasury department. next we have john taylor. john taylor is the president and ceo, friend, colleague, advocate three decades. is that fair? for many years frankly coming out of some of boston's affordable housing, low-income housing, living in those communities and now being one of the nation's most forceful voices for failed lending, affordable sustainable housing and for responsible lending in the nation. welcome, john. and then we will also, our

colleague who is closest to me. jim is extremely well known. acting many of you have read some of ginger search of the years. he is currently senior fellow with the center for american progress and a distinguished scholar at the opportunity agenda. he previously served as chief business officer at the national community reinvestment coalition and has published frequently on the issues that we will be talking about with regard to access to credit in communities of color and has also been at the fannie mae foundation where he had many roles, one of which was vice-president for housing research. and then last of want to introduce my good friend and colleague over the years, one of our nation's premier, premier authors and syndicated columnists, "washington post" writers group. ken will be moderating this panel. over the years he has covered a

host of issues with regard to financial reform appraisal, a settlement, and his articles written from the perspective of someone who can communicate about the residential marketplace, homeownership, issues challenging our economy that resonate with the broader public. delighted that can is able to moderate this panel. let me just say to those of you are concerned that we did not get all the questions, some of them will roll over into this panel. once again to if you would like to submit a question for the 15 minutes at the conclusion of the panel of staff will be circulating it submitted an for discussion. >> thanks you, david. you're very, very overly kind. i would like to begin is by picking of on the subject came up in the question and answer session that preceded this which gives to what can be done no. no, we look at earlier this week

we heard it stated the union the president say that in the absence of cooperation from congress on his achieving key goals he will look to the executive action. no, it seems to me that with the arrival of know what fha fake this is really a perfect situation to exert some executive action from the administration and get some things done. we have very influential people on this panel, and i would like to ask them to imagine you're sitting on this panel with milk. you may well. what would you that you recommend that he do in the first year and in the subsequent years? we begin with the sponsor here. >> the very first thing is i would make sure that he had a

very quick conversation with any of freddie about the level of credit scores that they now use to determine whether someone is eligible to securitized loan. as many people though the average credit score rose over the less your two a venture to say most americans should understand if that was the standard most americans, including we would not be in homeownership. so the first thing is, what happened to the broader scale that they used to use in terms of credit scores? obviously with the former head of the it -- agency that regulates fannie and freddie, he did not have a commitment. you're hoping that he will. the second thing he could do, it might be a surprise to some people, the creation of the

trust fund will but they already exist. they already exist. there a lot. mel watts has the capability to do something that his predecessor did not. that is to actually fully fund these periods of creating legislation, we can go out in front of something that already exists as the policy for stimulating affordable housing doesn't make any sense because we have the ability to do that surf. i would defer to my colleague. he has written extensively on this. >> is an excellent question and a very timely question. before saying what i would give a little context and to white. and the why is important because all of the major legislation right now that is proposed to revamp the housing system proposes to take away fannie mae and freddie mac. well, $5 trillion or of the institution is going to be a

heavy lift. so we know given the state of legislation right now we're not likely going to have the bill pass in both houses of congress, going to the president, getting signed, and even if a happen this year it would take years to implement a new system in which will literally closed fannie and freddie and replace them with a new system. so the imperative is to act now because tigress gores are combined with very high down payments of nearly 20%. that is not the market that we have had for the past more than three decades. we need to get back to lending to the typical american household. it just turns out that that is what a lot of people confused with affordable. we're talking about windy to the american public. the point is we can do it today. in addition to those things that john just mentioned, much broader access, few things i would add, with luck and a lot of the policies around the

service and behavior, lost mitigation. least of a lot of families in the foreclosure pipeline it could be assisted by the government sponsored enterprises. we need to maintain very strong support for the rental housing affordable rental housing market, not scale back as was proposed under the previous director. we need to do something about insuring that the taxpayers are protected. right now way and stand it -- and i have not been able to get a clear conclusion about this, they just simply go to the treasury. me to be back stopping is the american public so that we are not on the hook for losses going forward. a final thing is within that affordability context there is lot that can be done, but we need to be licking and how we can leverage this market that has shut out moderate income people. absolutely closing the store to the conventional market.

and not only go back to serving the traditional affordable market, but we also need to be looking in el we can leverage these lower home prices in many markets across the country to rebuild homeownership rather than having a complete focus and fixation on investor purchases of formerly owned or occupied housing because i believe that introduces market risk. >> our panelists, what would you say? what do you plan to say? >> well -- >> caramel will to do that. so i would tell you that no has already taken a good for step. you're talking about average credit score of 760. the market was going to put an increase. by simply stopping that and pausing now you have shifted the conversation. that's better for the overall market because if really going

to talk about lending in the space that we're talking about on this panel we have to start there. obviously -- >> there are a lot of people. >> a price adjustment. >> and guaranteed from fannie and freddie the raise the cost lenders and when consumers being able to make a mortgage. >> raising the cost. >> and the proposal is going to make it much more draconian than was in place today. as when the crisis took place, prices jester increase. for any credit score below 720 there is a significantly higher cost. thus you saw people going to fha obviously we have seen there is problem. so as i talk, first of all, thank you for doing that. it was a good first step. yes, and get folks argue that understand the house in process. think that's a great move that

bees to continue. to your point, what can be done a does not require legislation. there's a lot a conservative. then he did confirm director. he is tied to take action that might be a transitional regardless of what it might look like. a single securitization platform, making sure that whenever the have come to live there is liquidity available, there is a market that allows and on bank lender to trade a security because there is simply not enough bank balance sheets to cover the $10 trillion market place that we have. or what he can do, but i do think that the first step is get the right team its are really evaluating the situation. >> i tell him to tread very carefully because you have got -- i mean, he is a cancer over to entities.

the house of the senate. introduced in the senate the one that has passed the services committee, each of which. and so unless we want to turn the next -- the first part of his tenure into a donnybrook between of the senate and themselves, i think he has got to start a dialogue. both houses a run the future of these two entities. now we really one and then down? is that just the cheap seats? or are we really reforming these entities on the sensible transition path back to private owners to? and restructuring the government. think there has been -- it is amazing, but into the conservatorship we still have no

consensus on what the state is. i think that having a confirmed director may give the administration a chance to develop a proposal which five years in they have not developed with regard to where they want to move the housing finance system. fannie and freddie obviously play an enormous role in the housing finance system today. you know, the path of least resistance is to do nothing. they're producing and providing mortgage access. albeit, tighter credit scores, but they are providing the secondary market access. together they're providing 90 percent of the mortgage credit offered in america today. the profit from the system, as you point out is being swept into the general treasury to pay for other things. 20 million americans for the privilege of making deficit

reductions. it's crazy tax policy, crazy housing policy for the government to have. five years into this we need some leaders -- experienced guy. i have a great respect for him. think he has the chance to be the focal point of a discussion that has yet to be had, and honest discussion that is yet to be had about how we're going to move to a new future and whether we're really going to the quickest to damage giants return actually transform and restructure the. >> we both have perspectives of the financial market that are unique. i think what about the reduction in terms of modification. this is a huge issue. great controversy. will that be unrealistic. >> look, this is one of those

washington issues. you get a lot more -- you get a lot more partisanship around it. you know, a city, j.p. morgan, commercial banking industry's if it creates an of present value. the best return. they have done tons of them. you know, demarco plants and a flag and said we're not doing this. you know, i think he was wrong. think that fannie and freddie could easily have done a good chunk of that it would have been positive for taxpayers. but it illogically determine that that was no place you want to go, sticking it in the head of the administration, and that's fine. that's his as an unconfirmed director appointed by previous administration to put this of ministration in the eye, but i don't think it was a sensible decision.

surf. >> i think it's a political discussion. the end of the day you're right. made sense to do so. do i think that is public policy should be endorsed mac probably not, but at the end of the day and still think you think about this business perspective and see what is best for their management of the portfolio whether a bank balance sheet or frays balance sheet. ultimately is being funded by taxpayer. lester's like it was best. >> you could easily have created some the said among the options for modification this should be considered. whatever is a nice return to the lender in terms of modification, or the principal or structured or interest reduction, all of these they should have been on the table. for radiologic reasons he chose not to permit it. >> it's not over.

i mean we still have millions of people for who are either heading toward war are close to foreclosure or caribbean foreclosure, and is true that the private sector, the big banks working through the probe have done a number of modifications, much more so than the government sponsored enterprises. and as an organization that funds organizations to help middle-class and working-class americans stay in their homes, we have had a lot more cooperation from the banks that we have from fannie and freddie. so i think we just to know what to have a part of this. you're right, fannie and freddie stepped up the way a number of the banks to then began to allow the portfolios have modifications to a first off, the reputation would have been enhanced, but also it would have been a net positive for them to do that. more importantly and most importantly we would have had so

many millions more american households stabilize and reduce the number of foreclosures occurring throughout the country it is not over. so there are still opportunities to do that. i hope we see that. >> and that think it's important to add that fha phase numbers show that it was a net positive to a taxpayer. the government accountability of fish of that if you configure and for ways it can be greater savings. is not as if it is a political issue and again subsidies which we talked about earlier. it is a net benefit by the fha itself under its leader at that time. so it should be. >> absolutely. >> jim mentioned that this is a political question. this is a political attempt with a fairly political audience. fannie and freddie a political creatures. that would like to raise what is essentially a political question about someone. timeline released an urgency. so let me throw out a scenario.

let me hear your reactions to that. as someone standing off to the side not involved in these issues on capitol hill, and seems to me that number one the efforts in the senate then there is a bill covering from the democrats on the house side, there is virtually no chance of resolution. jim points out, you know, incredibly is been going on for five years. so it is an election-year fists. okay. let's assume as many people project that the election really doesn't change the mixture all that much. other words, the democrats in the senate. republicans may lose a couple of seats in the house he have into

2015. maybe we have so often this year, maybe someone has seen some light that ioc. absent that, check off 2015. 2016 as an election-year. so why change in your basic formula. projecting this out the say you might get some changes in the house and senate. certainly you will get a change in the white house for 2017. and assuming that we're going to have at least of five or seven year transition to any new system, you know, are we really looking questions that take us out to 2,202 to a 2,023. incredibly before you have an actual legal structural change. does anyone see any urgency given the fact of fannie and freddie, although we did hear to

the contrary from next seven earlier this week, and las vegas they heard a lot of money. so that takes up the pressure from psychologically had taken the back of the head some people on the hill for the urgency of change. a reasonable scenario or by missing something? >> the fact that they do learn also creates the pressure to do away with that says somebody else can turn that money. that is what this is all about. that is why this conversation is so poor. the predictors of whether something will happen this quarter or will happen for a few years, you have to look of a couple of realities. one is we already have a so-called bipartisan bill signed in the u.s. senate. you have a partisan bill sign on the house side. we know in your at the from the senate banking committee are going to propose the robo.

so that is getting closer to the top. then you hear in the form of my statement a comet that the administration supports the repeal of the affordable housing bill which without affordable housing, without a mission like that there is no point. so i think there is lot of impetus. what has been driving this, you'll remember this organization, the very big banks , organizing because they did not like the guarantee fee, the cost to do business, and they really love the kind of profitability they showed as institutions. why is it that we as a big investment bank, why are we making the profits to acquire repaying this private company that has government sponsorship? and that -- for the average american in need to understand,

this is a major game changing event that is going to occur. if any of freddie, if they're charters are pulled the affordable housing will disappear. this is something that is going to reflect -- affect every american in this country. you already heard from the invincible is about the difficulty of that population is having. that is the one the shores of the housing industry. they're new home buyers our existing home buyers to move out creating a system in which voters this affirmative obligation to make sure the working-class people, white, black or brown, yellow, native americans, they'll have access. but they can show they're willing to work hard, credit worthy, that they have access to is the way and upper middle income person would. that is what is a stake. you know, the children, the

future generations as i was talking about, the next 20 million new home buyers or something like 13 million of them will be people. we really going to address system that will continue to constrict and reduce? what will that mean for the american economy if we don't have a robust mortgage market to support the building of housing, the resale of housing, the refinements of housing and know the economics of surrounding healthy housing are. no one has done more for the system and fannie and freddie -- a work for fannie and freddie. i am not a consultant. but i can read history and see what they have done. at least one-third of americans today directly contribute the fact that they have a mortgage. probably she go back to generations before that two of most americans have some connection to the fact that we have these government sponsored

enterprises. yes, they make money. when did that become a bad thing? in no, it is amazing. but, you know, that is why we're messing with. we're messing with low was at one time the healthiest to mistrust home mortgage finance market in the country. we are about to take it. where are we going to take this and put it? regard to put it into the institutions that led us into the sub prime of this that fannie followed into. >> and drop. >> please. >> going back to his question, i think i am an optimist. so take this with a grain of salt, but i do think the bill, if it is introduced, will fix many of the flaws. i think they're taking very seriously the mission of looking

in bringing people in and say what is wrong with this and natalie fix it and create something that provides for a stable housing finance system in the future the protections against the sense of the past? and with all due respect to the mortgage market, we have just gone through the largest financial crisis and for generations. at the center was mortgage finance. more than doubled in seven years the aggregate indebtedness of the housing for the fourth half trillion at the turn of the century to 11 trillion in 2007. fannie and freddie had a part to play in the. no doubt wall street and a bigger part to play. and i am not here -- and i think we have to be careful to promote credit as the path to success in the united states. uncovers important. well to arrive from and covers important. straddling the population with debts that they can of service

is no path to a great future for our great country. so i think i am very nervous about making sure we get this right because for most americans the asset that is the primary source of their wealth is their home. most americans do not own securities. if they're lucky enough to have a pension. some houses are very important source of wealth. if we screw this housing finance reform of we're going to provoke another housing downturn. we have to be very careful as to how we do it to be what happens here is this. corker johnson introduced a bill. a serious dialogue around what the transition is out of what is no a totally dominant system. and if we're lucky the house will engage in any across the

across both houseses and whether they get to do in the lame duck and the administration engages around that bill, i think we can then have the possibility of real reform. so quickly i agree -- to me the urgency about johnson

-- because i don't think if we get something from them by the end of march, kiss 2014 goodbye you start to 15 and, you know, we have a philosophy at the company call they have to take the roast out of the oven. until there's something tsh they did a good job of setting a framework. you get something that you have a debate about it continues the way it does today. to your point, you know, if there isn't affordable housing. fannie and freddie are the function they afford provide affordable housing even if it doesn't exist. i'm not debating for it should or shouldn't. if they go away tomorrow. you have a small mortgage market; right? and so, you know, the fact they're making money great. back to the private sector? i don't know. one thing i fear is using that money to pay for things pay go to the government and payroll tax increases and things like that.

that's not good business either. have to figure out a solution to that. i agree with it you it's a complicated complex thing to figure out what it needs to look like. the technology, the processes that exists within the entity today needs to be harvested and figured out. reform is still is taking some of the stuff they're doing today. using that in the future keeping the liquidity piece in place. calling it something different i don't know if it that matters. another choice we can make here and changing the name is probably a good thing. at least for people in washington. i talk to people around the country. >> that's fine. but -- [laughter] which one would be fannie. [laughter] i'll leave that up to you to figure out. but, you know, this other thing on the table is simply, you know, don't fix with a is not broken. we actually did have a robust scuffle system of mortgage

securization. that fannie and fedy played huge role in why not simply impose them on thement. frankly, the issue of the jim raised earlier about running in to problems with extending credit to people not credit worthy and don't have the ability to pay. we fixed that. the best thing that happened to the mortgage companies in america and to the lenders in america was dodd-frank. we made it illegal to dot stuff they did before. so you to have an ability to pay. just in case there wasn't enough create a consumer protection finally the consumers have the protections here. you have a -- go in and investigate and find people who do bad things. so actually we cleaned up a lot. it doesn't mean people aren't creative and mortgage lenders and others are going to --

try to mess things up. the truth is it's not the same environment. and remember again they followed the free market. the free market free to abuse and fraud and all the other things. they followed them. they didn't lead it. after losing a trillion dollars. we're about to throw the baby out with the bath water along with the plumbing and tile the whole bit. let fix what was wrong with it. keep the system one -- i remember being in south africa and people talk about fannie and freddie a great problem. notwithstanding the problems they might have had. other government look at the model. we're about to destroy it and put it back in the private sector which played a major role in the sub prime distribution of loans and problem with e had in the past. why do we have create something new. a new industry rather than fix where we see the problem and make sure we have a robust strong system.

>> the reforms? >> i just called it something different. >> i want to get to questions and go to the point jim made. it's important. the further conversation. if it pretty much what most people say represent a reasonable bill, the fact that it isn't going anywhere. doesn't change nature of the house and the perspective such that when you go to conference you end up with the bill which after all the work you did to get affordability right and cannot be improved by going a house that has a pass act as the leading example or idea of what the housing finance system of the future would be. you come back with a bill less assessable than the current housing market which is mostly refinancing. t a big refinance bill. it's actually not funding

mortgage purchases for the american household or the american population. it goes back to the original question which is not just a matter of what to do. it's the urgency of getting it done. i agree with one thing jim said which is that -- [laughter] the idea gnat new direct watch should have with member of congress to figure out what are their real intention behind closed doors. the housing market is 15 to 18% of the u.s. economy. one of the reason we're not producing jobs. one of the reason home ownership market is struggling is because we don't have a strong economy. we don't have five or ten years to wait. we have two entities which we address them now we can make housing market work in the way we need while having the side bar that can perfect it even further. it's right now fix the system and then look if you want to improve it.

i largely agree with that. but i do -- >> hear me out a little bit. the people start to believe the truth. right. the american enterprise institute has promulgated the big lie they caused the financial crisis simplifying a complicated event in the history of the united states down to two villains. t wrong. it was never right.

you're also going have to recognize that fannie and freddie were broken. allowing private corporations to peddle the government guarantee to run the government sponsored hedge fund up to a trillion and a half dollar portfolio was also, you know, not acceptable. we can't do that as tax payers. we can't allow them to go shopping for the benefit of the shareholders. we have to fix that and make sure that this system is properly capitalized. we don't have two huge entity dominating 40 percent of the market which is where they were in you're before they went crazy. 25 basis point of capital with 4.5 trillion. >> let me move to another question i think is potentially

fairly important. jim, i would like to address this. all the proposal from the administration to what you heard gnat senate and the house talk about private capital being the basis for the upcoming solution. given the regulatory environment we have. i keep hearing people say want to get out of the mortgage business. it's -- a pain. some mod raise sized people are upset about the regulations. the question for you, jim, is there under today's regulatory environment sufficient private capital throughout that is willing to be the core of the new system and to what extent does the existence of that capital and the demand of that capital help shape the final

solution. >> yeah, look, this is a big market, and there are lot of people with capital on the sideline prepared to play. but the creation of a mortgage backed security requires the mortgage broker. the bank at the front end signing up all the way to the wall street giant who packaging and securetizing these loans. the big consequence of the crisis and the securitization is the private investor community lost complete faith in two of the three pillar on which the securitization market was built. the diversification which is a basic principle of structured finance actually worked.

but the underwriting was horrible. and the guarantee function that was provided by the rating agency, the assurance that this was a credit worthy instrument was horrible. you had two of the pillar in which the market was based. the gorped writers and the rating agencies completely both confidence that the investor community had. it's going take a long time for that to be rebuilt. you'll have people on the margins prepared. huge fund that can afford and credit funds who can afford to spend the time and dig in to the security. but today if you look at the market today the private label secure market is growing. they did $20 billion in a trillion and a half dollar business last year. so, you know, a little bit more than one and a half percent of all securitization in the

mortgage base was done by the private label market. that's reflective of the fact that the institutions have blown their own reputation with their investor community. t new institutions, your institution. there are a couple enough style finance companies who are slowly rebuilding revester confidence. it's going to take a long time for that there to be a realistic private market alternative to fannie and freddie at the government guarantee market. the real issue how do you transition out a in a government-run conservativeship to the point where we have capital backing $4 trillion with the risk the government has written to them.

we have standard set. they are providing it for 40 years. they are standard setters in the business. that is what is missing in the private label. investors have confidence in fannie and freddie. we have to build on that as a way to attract and keep private capital coming back to the business. >> that's an eloquent response. i believe -- private capital is need to know the rule. it's a little bit of rule around that. to that point outside of qm you need a private market to come back and play. for all the point jim talks about here, the private market isn't coming back to play in any nine qm space and, you know, when you talk about access to credit. qm is the box now. the safe harbor of qm is the

box. in the box is slightly tighter. to give you the 760 credit score. there's a lot of evaluation what it looks like. to me it's getting it right for everyone. you can do a 5% done. those things exist today. i think we have to get -- you don't have to worry about risk retention and you keep the stuff in place. but back to the private market piece if i don't know what the rules are, why would i play? john, i'm sure. >> i do have a thought. [laughter] private inesters don't trust the private market. they don't trust in anybody other than fannie and freddie. they have the best of the government behind them. and that's why they're the business. that's why i say dodd-frank is the best thing. the message the private investors and come back in the water. the rating agencies are not going to be able to give aaa

rating to 05% of the high cost loans made at the beginning of this 2001. fannie and freddie have simply to be trusted. what is iranic what is being proposed and never on the table fannie and freddie is being proposed getting rid of that. now we'll go from an implied guarantee we have for fannie and freddie and given an explicit guarantee to the private lenders that the private investors don't trust. we're going give an explicit guarantee and everybody who doesn't fit to the box go to fha is which is 100 percent taxpayer guarantee for the loans. it's while we reinventing the system to essentially make it hard for average working class american to be able to get a mortgage. it makes no sense to me. >> you're presuming an outcome, which i don't think --

i think we should wait and take deep breath. >> i've been breathing deep. [laughter] i think some of us have roads. i have proposed a transition plan out of the conservatorship where they survive and become the first of the private gawrn or it who plan the new system to ensure we have some private gawrn or its to plan the new system. but i totally agree with the notion that the government should be providing the guarantee in arms length for a fee building reserve fund. trying to protect taxpayers. i think that's clearly something that went wrong in the last period. i think the government is going to allow and take -- allow private capital to take the first law has to regulate the capital and make sure it has adequate capital to absorb the first. something they did not have. i think -- i don't think they're --

the broad spectrum. making sure that working class americans use it as a way to build wealth. >> okay. i think there are definitional problems in that. okay. what do you think it ought to be with the new system? >> we spent a lot of time debating it with each other and trying to influence the hill on this. and i think i agree with mark. the best approach to this is to -- are the funds. and to allow by analogy the highway trust fund. if you use the new securitization system whether private label or governments say you should be paying a fee to the frust fund and they should be allocated. >> this is the great misunderstanding 77 so many people involved in the debate? let me make it clear so people understand. the trust fund is a thing that

puts about $5 billion. it's explicitly for low-income moly rental housing. not to mention money for a bunch of research outfit as well as the community financial institutions to do different aspect. and for research people to do research or housing. that's what that's for. it's not under necessarily. what is proposed. what is proposed. we talk about pie in the sky. as opposed to okay right now we already have laws that say that has to happen. a trust fund -- it's supposed to be funded by fannie and freddie. the problem the conservative decided not to do that. number two the biggest contribution has nothing to do with those subsidized housing

that you talk about in trust fund. it's their obligation to serve all credit worth borrowers without a subsidy that amounts to -- that is what they left out. $500 billion worth of securitization even the course of the year. diminished the as low as he could in 2012. $276 billion with the securitization of affordable housing which including 600,000 rental units. mostly low-income. by the way, under the goal and regulations, those loans first up all the stuff it is primarily overwhelmingly to low-income people. but by regulation, the fannie

and freddie goals really -- the most important thing and nothing to do with the trust fund and fund. both of which we support and see funded but by regulation they have to go to people who don't need a subsidy but who happen to be a truck driver, a work in the bakery. or, you know, work for a newspaper and trying to get a mortgage. they're not making $250,000 a year. they're moderate income. what we do -- con vernalling and confusing the trust fund and the subsidy with what this market does. and this is what people have to understand. because that's what is at stake here. not having that affirmative obligation. it disappeared under the current proposal. as -- i talked about this a lot of people about it. i think that in the primary market it's cra it's a

straightforward thing. if you take it from the community you have to put it back. the duty to serve in the secondary market is more complicated. >> any other thought on that? >> i think one of the way if you comment on the investment portfolio and appropriate for the gs erk. you said government guarantee. i assume you meant the fact it was implicit guarantee. these are things that can be addressed right now. we don't need to wind -- institutions down fix those things. so the question i think we ought to be asking is what is it we cannot accomplish right now through administrative action. if he with accomplish everything through administrative action why are we sitting on the sideline waiting. i think that's the message to director watt as he takes over now. it doesn't mean you can't consider to perfect the system. what is it which i say you can't accomplish.

i'm not talking about earnings. rebuild the engine of opportunity that is created by the large housing sector and serving all population and building wealth and economic mobility. what part can't you get by leave leaving the current system in place and fixing it. that's the thing i think that missing from so much of the legislation. you hear the legislation that says question do that and that and wind them down inspect if term of the outcome and how it creates better performing house market you don't hear it. it goes to john's point about serving the broad market.

m the is consumptions put out there to detract and as a result what has to happen to fix the but, you know, put back in to operating condition. i think there are a lough thicks that can be done administratively. the conservative has broad power. but the fundamental -- the essence of tan any and freddie and here they got in 1938 and 40 years later it created than mid guaranteed. he cannot change that without congress. he continue change their -- he could dump the asset to the corporation and privatize them. but they both have the benefit -- guarantee. do you remember how much it was? >> 5 -- they have a right to borrow. they have a right to borrow $5 billion in the treasury department.

they have an expressed guaranteed. it's called fdic. >> i don't think the fdic failed the -- >> no. but this is no, no. i'm with you. i'm going it make your point for you. the was take it get the government out of housing but the banking system, a, doesn't have enough dpe pieces of spite -- depositive it to take their place. deposit -- they have gawrn deposit guarantee from the fdic which prevent run during the crisis.

i think we are make progress. i have six questions i'm going to share with the panelists for their thought and feedback. and actually i think they follow the conversation very nicely. the first question, as we're looking at new legislation, is it possible to develop a simple transparent, measurable and enforceable set of goals to with regard to affordable housing goal for whatever entity in existence. how do we impact on the future of population such as the latino population and enjoying home ownership? the third question, or sort of a

mix of a response and a question michael claimed the gse were profitable only because of the tax break and the bailout. isn't it the same true for the future of national bank would benefit from some of the proposals on the hill? are there any thoughts about that? number five, is there any political urgency possible as a result of the escalading interest environment for a homeowners across the country? is in a likelihood that we may see a bill because of this change in the economy right? 0 in all community and market across the united states. especially those impacted by foreclosure, recession, and the

absence of private capital. i'll start with -- okay. one of the things that we have to learn from our experience. if you look at what occurred over the last 2007 and 2009 private capital fled. the market crashed. the market collapsed, the banking system withdrew and start reducing lending to the mortgage market. and the only game in town. and they did exactly what they were signed to do which is to be counter providers of credit.

spirit of the private market which come and go. and you can see the impact on the real economy crashes and enthuse yufm for financials a sect that occurred in the fourth quarter of the -- dropped almost 10% in one quarter. we are luckied in the last financial crisis of our country in the '30s emergency powers were built in to the frntion dic, to the fed, and in to the fha. to allow them to step in and play the role of credit provider with the government's balance sheet to prevent a great recession from becoming a great depression. it would be horrible if in the reform we don't include those emergency powers for housing.

they had a lot of one-time gain. if they want it to be a sustainable recovery, we need expand access to housing to household across the income and across the credit worthy spectrum.

actually serve the american public policy. what is interesting you go back to the 1930 when the current modern housing finance system was structured. activity not structured for the wealthy. it was structured to make american society homeowners. and now we're in 2013, and it's only the wealthy you have access to the convention market. we need to be more aggressive about thinking through one of the appropriate measures to use such that the government backstop whether fannie or freddie or private institutions serve a public institution which is build home ownership across the income and racial spectrum in america.

nor i do think it should. i think it's a wrong reason to is fix the system. we have to think the right way to do it. i think the number of things that are occurring a brilliant --

i do think if there isn't a obligation to see a broader spectrum of people have access just the supply and demand there's going to be a less demand. the qm, you know, a box. add the 5% down payment on with a they decided not to do. the economy stagnant. i would be worried if i was in your industry about the demand that products. and how affordable it's going to be. on the other question, you mention i think that's a good point. i think it's one of the problem with fannie and freddie.

they have the goal and serving geographic area on income and special affordable goal that combines the two. it would be better if it was more transparent. there's some discussion where the goals were -- probably some padding but for the most part it really did go to low and moderate income people and underserve communities. i think we can do. there's no reason we can't be transparent. we rename the organization was it emmerson and tailor. [laughter] >> i know. i know. we see it's clear about who -- quantifiable. frankly i forget where we are. that was -- while you're looking. the utility.

okay. i have had case -- think about this and there are economies and securitization which suggest that it's a step back in the system invention by the corporate warner, johnson, the delay any carney bill introdoesed in the -- introduced in the house. you have a government gawrn or it called the federal mortgage insurance corporation and private does it make sense to have bunch of people competing for that first loss aren't they going to try credit standards down to try to make the capital go further? are we just isn't dpe ticks going to introduce ultimately

instability back to the system wouldn't we be better off saying okay the government that is going to try protect the taxpayers again the risk that allow the 30 year fixed rate mortgage survive. and have a private company regulated as a public utility with a fixed rate of return on the equity to provide pooling of loans from all over the country. maybe with affordability goals and regional and geographic diversification requirements. and setting standards of services the loans. rather than having the wild west of competition and the private business. we have a front end regulated

utility model for the guarantee. capital return on leverage levels are fixed because there are scale economy in this business. that will lead to fannie and freddie to entities doing this. first, i want to thank the panelists for letting us go. >> i was drawn that way. in any case, on behalf of ncrc, i appreciate all who came and for people listening. i would say that at least three take away from that stood out. both in the panel and other panels. one is that we don't break something that we don't fix properly. we don't want to muck up a system of mortgage finance and

end up with something that puts in a more precarious situation. there's no system that the whole system of housing finance matters whether it's about building wealth or really stimulating what did you say jim 18% of the economy. it's important we get right. one take away. the other take away is whatever we do we need to make sure we have a system that ensures all credit worthy workings class americans who have the ability to pay on a mortgage that they have access have a yat private market. and those that need help beyond that, being a fund funded like the trust fund the capital market and third point is that some of them can occur right now. and the encouragement is given the new appointment the approval

of the senate to be the director of the agency and run the conservatorship. he's in a position that do thing that have a immediate impact and the helpful impact. it's all about credit worthy borrowers being able to access mortgage product through the market. and fannie it's funny if you talk to people they think they are government agency. government sponsored. the shareholders that did well. they're private companies. and it's like the only example i love it of republicans spending so much time trying to do away with a company and complaining they made too much. where else do you hear? i appreciate the conversation and the contribution that -- and i hope we have advanced the understanding particularly for middle america what at stake here. this is one of the most single most important issues that get

talk lot in the town in washington, d.c., but not a lot out there. people feel the impact already. the difficulty in getting access to mortgages the cree instructions of the market. all of this is related to the conversation. we really do have to get it right so people who are willing to work out play by the rules pay the taxes have access to dept quality sustainable mortgages. thank you very much for your attention. thank you for all of your help, everybody. [applause] thank you.

there are fundamental problem in the basic law of the aca. that need to be cleaned up. and if we don't clean them up in the next year or so, there are going to be ramifications to that. they relate to eligibility and the implementation of the law. and they tie everybody's hands because we can't get it on moving forward. i think that's essential that needs -- that we need to get over this and move forward and fix the things that need to be fixed. the problem in the launch at federal level squared away a lot of adopters in the business community. it's not a good thing. the federal government has done a great job recovering and moving forward really well. we have to acknowledge there was some damage done in the context of the marketing and outreach. and marketing and outreach piece has to be addressed and redouble efforts in that area.

customer service is essential. it is real private sector kind of customer service we need provide. we're providing services to a range of people. you've got the medicaid population, you've got middle income and upper income individuals getting tax credits for buying as 100% of the cost. then you have small businesses. it's essential we look at the customer service pieces. the investment in marketing from government view of the word -- world that's a different thing than the way that the private sector looks at marketing. and investment in sales. i know, it's not always the best word, but the truth that is what is happening now. so we do need to rethink how we

look at and invest in those kinds of components. the small business for the future small business focus is essential. full employee choice for small business as we're doing in rhode island and many of the other -- my colleagues here and other states are moving forward. the way change is going to happen is not reducing the number of uninsured. and managing the looking at outcome. small business is essential in that component. we need to understand what they want and how to provide the kind of data and information that their employees need to make decisions. finally, this is the most important investment in health care that made in ownership years. i've been tat for 30. which is a way longer than i

ever thought i would be tat. this is it. if we don't take this opportunity to invest in looking at what the data and the outcomes are notion enrollment on cost, on quality, if we don't provide consumers with a tran parent silicon valley and businesses with a transparency of how insurance works, but also when they're making provider decisions. providers will finally have the tools if we do this right with the data providers will have the tools to push back and start redesigning more from the bottom up how payments need to be changed and practice medicine and work with consumers in the way that they want to.

if we can't stand up here in a couple of years and talk about the audiocassettes on worker productivity, health care, health care outcomes, and cost if we can't do that, coverage is only one piece. we need the data and an lit toik make sure they get the answers. you watch more at c-span.org/videolibrary. someone as i say who grew in the office. he was badly burned by the cuban bay of pigs. he listened to the the expert, cia, joint chief of staff, and

he said went to -- in fran. he did the trip in may june of '61. and the goal said you should surround yourself with the smartest possible people. listen to them. hear what they have to say. at the end of the day you have to make up your own life. he can't remember harry truman it stops here. after the bay of pigs he was determined to make up his own mind. hear what these experts had to say, weigh with a they were telling him but at end of the day he was going to make the judgment and he was the responsible party. you see that. you see that -- that was a abundantly clear when you listen to all of those and read the transcript of the tapes during the cuban missile crisis. he was his own man. he was the one making his own

mind. coming up next the state of the state addresses. now new mexico governor giving her annual state of the state address. she spoke before a joint session of the state legislature in santa fe at the capitol building known as the round house. [applause] [applause]

[applause] [cheering and applause] [cheering and applause] welcome, governor martinez. we are pleased to have you here.

[inaudible conversations] >> good afternoon. liewnlt governor, senatenor; se president, mr. speaker, democrats and republican leaders,est steamed members of new mexico legislature, honorable members of the judiciary, former new mexicogovt governors, triable governors,enm stnator; udall, representative distinguishedat guests husband, chuck franco; my step-son, carlo; my dear sister, lettie martinez; and, my fellow

new mexicans. it is an honor to join you for the annual state of the state address and open this legislative session, where i believe our focus must be on two of the most pressing issues - jobs and education. [ applause ] but first, let's turn our thoughts to the community of roswell. as we recall last week's tragic school shooting, let's pray for nathaniel, who's struggling with serious injuries, and for his parents, who are showing such strength. and when i saw kendal last week, after having been through such horror she was in great pain but couldn't wait to see her best friend, set to arrive at the

hospital any minute. the parents, teachers, and community members pulled together and turned to faith over fear. i have some very special guests with me today - john masterson, the soccer coach and social studies teacher, whom we have come to know as a true hero. when hundreds of kids needed someone's help, his courage was on display in that gymnasium, and his humility has been on display since. kevin hayes, a security guard, provided help and care to nathaniel despite having been injured himself in the shooting. no human being is gifted with the knowledge of why such tragedy occurs. but, we are thankful that in the face of it, people like both of you display the courage required

to help all of us get through. thank you both so very much. [ applause ] today, i am proud to report that the fiscal position of state government remains strong and steady. by working together over the past three years, not only did we close the largest structural deficit in state history, we are looking at our third straight year of budget surpluses.

[ applause ] we've doubled the size of our state savings account, and we did it all without raising taxes. [ applause ] republicans and democrats can be proud of our firm fiscal footing. it is a far cry from where we were just three years ago. we completely overhauled a near-bankrupt unemployment insurance system. we reformed our state pension funds, resolving a $12 billion dollar shortfall while ensuring that state workers, police officers, teachers, and others will have the retirement support they deserve. education spending now exceeds pre-recession levels, with more

accountability. not only have we not raised taxes on families and businesses, we have cut taxes 19 different times. less than one year ago, in a display of tremendous bipartisanship, we passed the most significant tax reform in a generation and sent the loudest message yet that new mexico is striving to be a business-friendly state. that message is critically important in a global economy. we all know that businesses have choices, and they will locate and grow where they are treated fairly. in 2011, ernst and young rated us third worst in our region for manufacturing. after our tax reforms, they came with another ranking just last

week. now, new mexico is the best in the west. but, more than words of praise, our reforms have helped create and protect jobs. look at the economic development along the border. by eliminating the tax on locomotive fuel early on, union pacific came to new mexico. then we eliminated the double and triple taxation of many goods and services. last session, we reduced the business tax rate to make us more competitive with our neighbors and to encourage manufacturing. southwest steel coil, from california, has added nearly 40 jobs in new mexico, citing these reforms. omega trucking, a woman and

minority-owned business, also added more jobs. that area developed because we first made our state competitive with texas, and attracted union pacific. then, last session, we made new mexico more competitive with our other neighbors. when we talk about our tax reforms, some only think of large corporations. don't get me wrong, we want those jobs too, but our tax reforms are critical across the board to businesses large and small. let me give you an example. sparkle maintenance is a janitorial business. it was started 50 years ago in new mexico around a kitchen table, the way so many small businesses start. today, it employs 400 workers. one of the owners, carlo lucero, recently approached secretary barela.

he praised the state's tax reforms because his customers - the companies he contracts with - have told him that our tax reforms have kept them in new mexico. i asked carlo to join us today, and a very special lady. carlo's mother, eleanor, co-founded the company with her husband around that kitchen table. i wanted to recognize them, so we all remember the impact our reforms have on local small businesses. congratulations on all that your family business has achieved. we're doing better fighting the

headwinds from washington, but i'm the first to say that we have a lot of work left to do. being able to compete is not a destination, it's a process. washington remains a mess. the federal government remains deeply in debt, forcing federal budget cuts. partisanship still rules the day, and the national economy is sluggish. we cannot bank on that changing, we cannot bank on that changing, not anytime soon. we can, and we should, fight to protect the important work done by our labs and bases, but we should fight equally hard for a more diverse economy. seize upon the uniqueness of our seize upon the uniqueness of our state, the diversity of our people, our resources, and our backgrounds, to grow the private sector in every corner of new mexico. diversity - it's what sets us apart from every other state in

the nation, and our economy should be no different. our charge this session is to build an economy as diverse as the state we are proud to call home. growing a diverse economy starts by helping small businesses, the mom-and-pop shops. that's why we created the office of business advocacy: to help small businesses cut through the .. red tape. it has now helped save or create over 2,000 new mexico jobs in all sorts of different industries and in towns large and small. we invested in the mainstreet program, helping 100 small businesses get off the ground, and putting over 500 new mexicans to work. we invested over $2 million around the state to help rural

industrial centers with lfrastructure costs. >> just click kellogg's big is set to small businesses. a bakery that started with the small capital grant. these small businesses may not save like a big deal but a matter to that community. because 64 percent of new jobs are created by small businesses. him leave us billows effortste p not wearing a pair democrat ideas or republican ideas

that is why i support democratic senate president's bill to create the of wind one-stop shop is a central location for small businesses to go for permits and other assistance. there is more help we can provide. companies large and small we must have access to a skilled workforce. that is why i am proposingte remake fed job-trainingr new incentive permanent city can better partner with physicists hiring newause workers. [applause] paying a large portion ofat theirur salaries, over the last year we have announced 10 new early college highith schools. by their nature they're designed to produce

employable workers. they graduate with a diploma and an associate's degree if they want to go to college there only two years away from a degree. colleges not for everyone of those who want to work instead, they are ready. so let's fund a second round of college high-school is that is what is supporting a diverse economy is all about [applause] starting a business come a creating jobs with successful economies to embrace new ideas to

encourage risk takers. technique -- we should be a haven for innovationse complete w with the best and the brightest come to bring products to the market. here is our proposed to do that. to increase the pipeline of innovation, a 7.$5 million to help universities attract the best professors and researchers in the world. the $2 billion so the labs can take the ground breaking projects to marketplace to send to the angel investment credit to get the capital they need to get off the ground and provide greater incentives for every new technology god has created here in new mexico. it will make a technology job leader.me t [applause]

in addition to helping start-ups now is the time to create new jobs with the health care industry. diverse jobs of all types of urban and rural areas. we can hire more workers to improve access to quality health care. a i was not a supporter of obamacare but under its mandate we had a choice whether to expel tuned medicate using federal funds. we chose to expand medicaid because it was the right thing for new mexico. [applause] but now we have a responsibility in duty to expand our primary care work force. today coming in the 32 of 33

counties, we don't have enough health care workers even before we attempt to add 205,000 more people to medicaid.and we're taking strong steps toutin create jobs in the health care industry by educating boarders is with the common statewide nursing curriculum. transfers seamlessly through every college or university and students can earn bachelor or nursing degrees. thank you to the nursing consortium. more nurses in rural areas cover you are the ones that help that happen to five.

[applause] also and initiatives to increase primary-care providers allover to mexico. will help to repay student loans particularly for those who serve the rule areas. this will create 720 new health care workers lists decade. dentist of the physicians andnt others that are toos th often underserved.ved. expedient telemedicine to connect rural area providers with patients with a physician or specialists in practitioners to cut the red tape to attract more nurse practitioners. under this plan and the nurse practitioner in the country who wants to come to new mexico will be licensed

andiv ready to provide quality health care in five days or last. [applause] uc building a health care work force is the uniqueness of our state finding the rightd kind of practitioners to be the diverse needs of each community. with a strong work force is the livelihood in of the lifeblood of our economy infrastructure serves as the foundation. sadly new mexico border infrastructure is in a state of crisis. as governor i have seen firsthand effects of the devastating drought water supply with a running dry inwe the of wildfires have floods destroying the watershed to threaten communities. we cannot control the

duration or intensity of theif drought we face but we can control over response to its if we invest with water infrastructure in el played that benefits each to nudity we will not only create jobs in the short run but alsoth set. the stage for long-term economicse growth.art, we have seen in it to work.ed s the border area is growing dramatically in part becauseom we invested with water infrastructure. we can serve more businesses now the industrial park is booming. building and repairing theev water infrastructure i had -- was never more important and everyone agrees on that. that is why i am asking we invest 60% of our capital dollars on critical bader

projects throughout mexico. these capital dollars are not my dollars. there the legislatures dollars.st these tax dollars belong to the people of new mexico and should be invested where they could help the most. and barter projects should be on the top of that last. [applause] i have been clear from day one had to significantly improve our economy in thehey long run is improvingn li education and ensuring our children could read at an early age and as they graduate from high school with the skills that they need to succeed in life. i have not been shy to educate it is now above pre-recession levels, the

highest in state history.ney my budget calls for 100 million more dollars of education. the money alone is not theemen answer.vel, we should expect a return on our education dollars. that should be student achievement. [applause] and our kids reading and a higher level of our students graduating and a higher rate should go directly to support struggling students come increasing parental involvement developing andbure rewarding successful teachers, and turning failing schools around. not simply by funneling all education dollars to the bureaucracy but and with making sure every child is

able to learn to read. redoubled funding for pre-k and i also propose another expansion this year. [applause] we have expanded to make it permanent with 11,000 struggling kids extra help over the summer. under my budget we would spend 15.$5 million on the tools our teachers need to law identify struggling readers early on to get them that help to bring them up to speed the interventions are increasing but the law that says we refuse to set our children up for failure in schools and of life. because every new mexico's

third grader who can't readco 3 but is passed anyway is four times more m likely to drop out.th that is not an opinion. it is a fact. those who drop out are more prone to end up on the wrong side of the law strugglingup f to find work and have a hard time providing for families. we should not set kids up for failure like that. they need help early on. kindergarten. first grade. second grade. we are giving them that help right now. if a child can read by the end of the third grade he is -- it is far more compassionate to give them the extra year of help to catch up to five. and

[applause] but rather than setting them up for limited opportunitiesal new mexicans know the right choice in both parties have embraced this before. let's not play games but finally promote to make sure children are prepared id every day mexico child can read by the end of the third grade. [applause][ giving money directed to the classroom means providing fiscal with textbooks everywhere i travel i hear under my bet jail we will increase funding for kids textbooks by $9 million.hers

[applause] forty-three% increase. a teachersgr also pulled the aside to talk about the importance of prayer -- parents being more involved in the student's education. i cannot agree or but a lot want to be perry partners but don't know how bad is why we have trained over 5,000 parents that evening workshops across the state called reader's raise the roof wary we teach parents how to teach their kids to read.e we encourage ourgi kids to take part of reading challenges all over the state to give every first grader a reading book of their own to take home to read with their family. because we need to encourage

parental involvement and why i proposed expansion of parent portals. websites where parents are able to monitor their child's homework in grades and attendance on a daily basis, improve parent teacher communication it is easier for mom to ask thedo y child do you have all work of ready know thetime answer. [laughter] or i hear you're having a hard time in math but the help it is important parents and understand what they're reading since my son was a senior in high school i saw all but a is next to his nearby looked forward to telling him how proud i was but then i look closer and realized what they really meant apparently they were

not lecher grades. [laughter] they were absences. [laughter] in this to say if we had a talk that day but not the first time that i had planned for but to beyond increasing parental involvement we're doing more to chew the and teachers. it is an honorable profession. next to their parents theout adult children what they see in my far teachers. if they can't get the best of their students from the get them ready to improvepay; them to get ready to breed successfully that is what wein want tg o support our teachers with additional pay, reward and recognize teachers and it isac time we raise the minimum salary for starting

teachers by 10%. [applause] we should support our teachers advancement opportunities. we should support our teachers byri providing help in training. in the past three years we have trained over 6,000der teachers and school leaders offering academies for teachers at service schools. under my budget we expand that trading and i am also pledging $8.5 million to improve how we educate students who are aspiring to be teachers at colleges in universities so they're even better prepared to enter the classroom. [applause]

we should support our teachers providing with their wrote evaluations help them to identify areas where they can improve and finally recognize and honor their successes. our previous system was not a real evaluation at all. 99 percent were free to get the same level meets competency. it was called a broken system. even before we made improvements, up one albuquerque school has already taken a similar approach factor in students' progress into the evaluation process. sure it was controversial at first but it worked. i am pleased to welcome the principle and to thef teachers. here is what gerry said of

the teacherho evaluation system, at first it was hard. but i love the fact i am re-evaluated now. i can wear it as a badge ofho honor to sayol about, i it accomplished it. these evaluations help teachers improve and ames's a blue-ribbon school today. katy sizzle but not have happened without these reforms and today they are expecting near 100 percent graduation rate. thank you for all that you do. [cheers and applause]

[applause]owed we invest in reform when we set a high bar in to see what is possible across the state third grade readers showed modest improvement but with those districts by bending their breeding reforms, using preteen coaches and other interventions the third graders such test scores increase by more than twice as much that shows the reading reforms are workingcrea and last year results of the graduation rate to rise 63% up that 70 percent daysxico significant increase. think of what that meansrlie more than 1,300 hispanic students receiving diplomas is in new mexico that void. has been dropouts one year earlier moving from 42nd in the nation up at 31st.

debate to 2015 more native. american students getting diplomas moving us fromto 307th in the 2 nation up at 29th. 59 additional african-american students taking us from 40 effect at 26. more than 660 additional english-language lerner's taking us from 28 up at 50 than almost 1,300 more low income students receiving diplomas who would have been dropouts one year earlier taking us nearly last up at 39th. [applause] each new diploma is not just one more piece of paper but a ticket to to leave mored em successful life. raising the bar for students, teachers and schools.

high time we acknowledge and embrace bad education. am i satisfied with small increases of third grade reading or graduation rate that still shows three at 10 high school students failing to receive a diploma? absolutely not.pr no where near satisfied but it shows the importance of the progress we can make when we choose to change. we choose to reform, choose to invest in helping struggling students read and when we better prepare our high school students for college or the work force. let's continue to choose reform over the status quo. [applause] when companies look toco expand to new mexico there

are numerous other factors they consider like the my quality of life. looking at public safety for example, over my 28 yeari ev career i have seen times when the mexico has chosen to lead in this area. the most difficult case i ever prosecuted default the death of the young woman whose brutal murder led to. do dna collection laws be enacted throughout the country. arms by the amazing strength of herof parents, new mexico chose to be a national leader of this effort. in 2011 we strengthened her la with this dna collection for of felony a rest and what was an incredibly important moment for our state, the united states supreme court upheld the

constitutionality of dna collection this past june. [applause]fa i have heard you talk about how hard the last eight years have been, harder than you ever have expected in the journey require this step of faith in you took that step in your work has saved the lives of young men and women all over the country and saved other mothers and fathers and sisters and brothers from feeling of loss that i do you felt because i was with you when you lost katy. the katy would be so proud of you a and the states of new mexico is proud of you as well.ou thank you for all you do. [applause]

there is so much additional work to be done to protect from harm we put together a child abuse working group with the child abuse laws. now it is time to richer congress changes. one example is a child is enticed over the internet for sex is a felony if a child is abused intentionally and killed at the age of 11 years 364 days

the killer is life in prison but one day old are the killer can be out in about 15 years for committing theac very same crime.rent there are other changes we need to make requiring oversight of facilities for children are placed in residential care to ensure parents a tent counseling after allegations. and also to join eight other states to pass laws that all children receive a to proper education on how to recognize, of floyd, and report abuse. arming them with informationlly that could pennant -- potentially save their lives. but perhaps the most important clarification we should make rebates to who is responsible for reporting child abuse. as a career prosecutor

specializing in child abuse cases, it has always been well understood that anyone who's sees a child being abused must report it or face criminal penalties. in fact, not only did i prosecute baby pianists' killers but also rollcall grandmother as well.i they knew what was happening but they saw it but did nothing about it.repo to put this requirement not only of professionals like social workers but debris and then never interactive '50s people. she was too young to be aas school inid a for -- never taken to the doctor. just five months old self who would see her and used other than her family?, if i am highly disappointed by the recent position saying our law is not crystal clear on this subject.

if it was not before it isy an time to leave no doubt. [applause] we must enact legislation to make it clear that child abuse must be reported by anyone who knows or suspects it is taking place. . . ers are being sentenced for other crimes. and any person who gives their car to someone they know does not have a license because of a dwi conviction should face real punishment.