what-if scenario. i think at the moment we have generally got a sense of calmness about shirley they will cut some kind of deal this time. i think the idea that was raised before of well what about using some kind of the circuit break or where it's not just the canon is not just kick down the road for another year or two but something good comes out of this, that seems to be the prevailing consensus for the whole discussion here this morning and everybody agrees the system can be approved. maybe they need to take it off-line and get advice from the policy center in the gao and others is something that looks like a more robust proposal. >> last year the way the markets respond was the money that we were going to quote payback or the debt that we were going to payback at the end of the month. those securities fell in price

and longer-term debt moved the opposite way. now the actual risk is quite the opposite. you are going to get your money back at the end of september, no question about that. whether you will be repaid within the confetti years from now is what the issue is. and you know again, i think gradually the markets are going to have to readjust to that approach. >> it's my unpleasant task to bring the proceedings to a close here this morning. dare i say we are indebted to you and sudeep and the panelists first of all for sudeep's thoughtful questions and responses and for all of you hanging in there. on behalf of jason and myself bill hoagland we thank you for sticking in with us both the audience here and the audience

viewing particularly on our early morning after the super bowl. .. [inaudible conversations]

[inaudible conversations] >> a quick reminder if you missed any of today's event you can watch it anytime in the c-span video library. go to c-span.org. we have been asking for your thoughts on raising the debt ceiling. here are a couple of your comments from facebook.

>> what ceiling? this guy is a limit with these people. you can continue the conversation online. you can use #cspanchat. congress is back today. bito suspension bills will be on the table. also this week, a bill that eases federal restrictions on hunters and fishermen. in the meantime the senate will gavel in at 2 p.m. eastern. they will consider the five your farm bill that passed in the house last week. a vote to limit debate is expected at 5:30 p.m. if they get the 60 votes needed, it could happen tomorrow. you can see the house live on c-span, the senate live right here on c-span2. the winter olympics will kick off this week in sochi, russia. live today we will bring you a

discussion with america's relationship with russia with some of the security threats to the games. the panelist will cover the antigovernment protests in ukraine. that will be live on c-span2 getting underway at about 12:30 p.m. eastern. >> consumers will win in the end in that it allows isps to contend to innovate, continue to invest billions in the network and bring new services and new pricing business models to consumers. so consumers will be the main beneficiary. spent the big corporations won out in this decision together once with a with the most amount of market power, a tremendous amount of influence in washington, d.c. to try to shape policy to go that direction. consumers will are going to be the losers in this deal and i think that's why so many of them are speaking up and asking the fcc to move forward with a

really clear path to protect them. >> the impact of the court not to tell the ruling tonight on "the communicators" at eight eastern on c-span2. >> i was in a car wreck. i wrote about it extensively in my book. and the whole time i was in hospital, not injured really. i had a cut on the lake and a broken ankle, and i was praying that the other person in the car would be okay. and the other person in the car was one of my best friends, which i didn't know. i didn't really recognize that at the site of the crash. everything because i prayed over and over and over for him to be okay and then he wasn't, you know, i thought nobody listened. god was not listing. my prayer was an answer. i went through really a very long time of not believing, and not believing that prayers could

be answered. and he did take me a long time and a lot of growing up to come back to faith. >> first lady laura bush tonight at nine eastern, live on c-span and c-span3. also on c-span rated and c-span.org. watch our recent interview with mrs. osha of the george w. bush presidential center at dallas at 10:30 p.m. >> a federal panel on sexual assaults in military voted last week to maintain the chain of command in dealing with assault case. this was a preliminary decision of the panel which is made up of four congressional picked members and five chosen by the pentagon. the military estimates in 2012 there were 26,000 cases of unwanted sexual assault. >> i would like to start by saying thank you for allowing me the opportunity to address this panel, and discuss military

sexual trauma, for i will not be silent anymore. i am an army veteran, the wife of a retired marine lieutenant colonel. i am the granddaughter of a decorated soldier. i am a military sexual, survivor. i am the author of silence no more, a recount of my sexual assault as well as the story of others who lost their lives at the hands of military sexual trauma. i'm also a former law enforcement sexual assault investigator. i have a bachelor of science in criminal justice. i am here both as a victim and as an advocate. in 1982, captain ted morris was stationed at virginia and was

passed with conducting a survey of military women on that post. his task was determined how female soldiers were adopting to the military, where they had been treated -- were they being treated as equals. since he felt this was a task better suited for women, he felt women would open up better to another woman. the assigned for female soldiers to perform the survey. captain maurice was so enraged and mortified by the atrocities that were reported back to him, he took it upon himself to write the first zero-tolerance policy. i have personally been in contact with captain morris were i received this information. i would like to go from there.

keep in mind that was 1982. 1986, i was 18 by three months. i completed basic training, which no one can say they enjoy, but i will say it took me from a civilian to a soldier. i had two of the best gross margins you could ever say, and no one likes drill sergeant. i did not at the time. if they tell you they do, they are lying. those gentlemen taught us what honor, courage, loyalty was about. i loved the military. i came from a broken home, an abusive home. i found a place i belong. until i reached for justice, virginia. i was on the installation not even one week when we were at

our supply and issued our dear. my platoons drill sergeant -- sir, sergeant, went inside to see where we're at in order. while he was gone i was called out of formation by a male drill sergeant. any of you have been in the military know, it's bad enough to be called out by her own drill sergeant or sergeant, much less one you do not even know. all you can think of is, what have i done? your whole mind, your heart races, you are terrified. and as i run over to this drill sergeant and stand at attention, i was rather shocked when he asked me where i was from. couldn't fathom. i replied, texas. his comment was, that's what i thought. i heard you talking, and i love

that southern accent. my sergeant came back outside and yelled for me return information, which i did. we went in and was issued our equipment. i never gave it another thought of being called out, until four days later while i was laying in my blog reading a letter from my husband who is also a soldier in houston training, a female enlisted came in with a note that told me i was to report to the first sergeant's office. again, all you can think of is care -- is terror. i had no idea while i was called there. the fear instilled in you from day one. i reported -- i reported to the office. there was no one in the outer

office. if you've been in the military, it's kind of like a ceo. you have your secretary said up there and your office is in the back. there was no one there. as i walked in i was told to enter. i walk in, and the first sergeant is sitting there. and it's a man who called me out of formation that day. he had just replaced our former first sergeant who is being held over on rape charges. i was told to report for special duty later that night at 9:00. we would be wearing pt gear, and i was dismissed. i went back to my room, finished the letter to my husband and reported for duty. when i arrived there, it was actually a room that was two doors down from my dorm room. i knocked on it. there was no answer.

i knocked again. no answer. i tried the door handle, opened it, and there was a dark room. i reached in to turn a light on and was grabbed by my arm and pulled into that room. i was pushed against a brick wall. as i was being told, he had not stopped thinking about me since he heard me talk the first day. it was then i realized who was in that room with me. and it was in that room during a thunderstorm i was raped for the first time. and i say the first time because i was under his command for another seven weeks. i was threatened that he would ruin my husband and my military career. we come from poor families. we are the first of both of our families to even graduate high

school. this was our opportunity to go to college, to change our lives, to be better. i was threatened that if i say anything, my husband and i would never serve at the same base. and the ultimate threat, was he would hold me over and recycle me, which would put me under his command for another eight weeks. you see, even with all of the threats, i did speak out. i told my husband. his advice was to keep quiet, because it was a few weeks out of the rest of our lives. i called an uncle who is a master sergeant serving in korea, who advised me that i wanted to stay in the military, that i would keep quiet and go to my next base. so i kept quiet, and i was an exemplary soldier.

i served into my husband was killed by a drunk driver. i was six months pregnant attitude and a half year-old, and got out. i have raised my children. i've gotten a college degree, but i have never spoke of those rates until 1990. i went to the head of the women's department at the houston va, because i was having depression, nightmares. i can't even begin to describe the things. i was informed there were no programs to help me. she recommended i go to aa meetings. i do not drink. i did not drink. but that was the help that was offered, aa meetings. i did not speak again until september 2012, when i was sitting in my room with a gun to my head. i couldn't take the pain

anymore. my husband cannot walk up behind me and hug me, without giving a warning because i startle. he is currently a contractor in afghanistan. when he's gone i sleep with a loaded gun on the pillow next to me. i spent three years in my home. i could not leave. i had a teenage son who became my chauffeur when my husband was gone. this child spent his young adult days driving back and forth to doctors appointments, psychiatrists, did the grocery shopping because i couldn't be out in public. so you see, an for the panel ist to before me a few minutes ago, i would like to say this, there is one major fact that is being

overlooked. from the very day you enter the military, submission is drilled into you. you are told you do not challenge ranking ncos or officers. there was no one in my chain of command that i knew, nor felt, comfortable enough to tell what happened to me. had i had someone, anyone at the time that i could've gone to, i wouldn't have been silent for 26 years. i have grown children that i am trying to build bonds with that should've been done when they were children, but because of this disassociation, i was not able to give them the nurturing love that they deserved. i'm a 46 year old woman who is learning what it means to be compassionate with my children. my children were raised with what was drilled into me.

put your big girl panties on, get up and move on. my children frequently referred to me as the ice queen because i don't show emotions. i don't show love. i don't show hate. i, i'm just me. the panel before me sat here and said that the chain of command is equipped to deal with this. i say it's not. had i told my platoon sergeant, he would've had to report it to the chain of command, to my first sergeant, my rapist. how good i feel secure in reporting it -- how could i feel secure in reporting it, keep in mind the threat and intimidati

intimidation? how could i have received fair and just investigation when my chain of command included my rapist? i'd like to move on in 1996, aberdeen proving grounds that after the scandal broke, retired colonel david morse was edited by "people" magazine in which the study that was conducted in 1982 was discussed. the zero-tolerance policy. he had written 14 years earlier. it is now 2014, 32 years after that policy was written and we are still given lip service to zero-tolerance, and the commands ability to control and reduce the alarming rate of military sexual assault. clearly, zero-tolerance has not

and is not effective. the military is not just about its leaders. is not just about the command. it needs to focus and care as much about the lower enlisted and officers. it was suggested by the gentleman on the and -- i didn't catch his name, i'm sorry -- that we give the chain of command another chance. i say 32 years, actually if you look at it, much longer than that, with enough of a chance. if we give them another five years, if we do that, at the current rate of 26,000 sexual assaults that was reported in 2012, we are allowing a minimum of another 130,000 soldiers to

be potentially assaulted while the command attempts to prove it can be effective in what it has failed at for the last 50 years. that shows us the majority report did not even reach the higher command. out of fear of intimidation, retaliation, humiliation, and potentially death as in the cases of the two women, the two women i talk about in my book. these are the reasons i support senator gillibrand and the military justice improvement act, for removing the convening authority. the zero-tolerance is not a new phrase. it's not a new policy. it's been around at least 32 years.

it has not worked. it will not work. i do not think that the commanders deserve another 130,000 victims so that they can prove they can do something that they have not managed you in the last 34 years. thank you for your time. >> i want to just say it's very important that you came here today and that we were able to hear what happened to you. and i appreciate that it couldn't have been easy for you. >> thank you very much. >> next, ms. jenny lee, also from arkansas.

>> it's a pleasure to me to be with you here today, in one way. because i get a chance to no longer be silent. i knew when i was a little girl, taking care of my mom, just after she'd broken her back, that i wanted to be a registered nurse. i spent my school career going towards that goal of being a registered nurse. my senior year in high school, our country was attacked overseas. libya bombed a popular g.i. bar, hang out, in frankfurt, germany.

president reagan responded swiftly, and with the least amount of casualties possible, and taught me that i wanted to be a soldier, too. so that i could combine to dreams into one. i could enlist, become a nurse, and also serve and make a career out of it. those dreams started to swiftly be taken away from me. my second week in basic training, i had gotten sick from all of the immunizations, and my

drill sergeant, who was often under the influence of our call more than he was sober -- influence of alcohol, said i had isolated because my fellow recruits said that i was keeping them awake with my coughing. and in the middle of the night, i could feel a hand touch my head, as if feeling for fever. and that first, i thought, hey, it's my dad checking on me, you know? then backhand move down to my breasts. and then he continued down the rest of my body. as i tried to fight him, he took

his forearms and placed it over the top of my shoulders, my chest and my throat so i couldn't scream out. he told me if i quit fighting, i wouldn't be hurt. i kept fighting for a while. and i realized he had far more strength than i did. when he was done, he told me to go clean up. and put on other clothes. and report back to my bunk. the next morning, i have bruises

on my neck, my arms, my chest, on the inside of my legs, and my knees. i remember his threat. he told me if i dared to say anything, that i would end up like the girl in the cycle before us. i would be dead. seven weeks later, i thought i was pregnant. i didn't know yet that is elected he makes a woman's mistral cycle stop -- menstrual

cycle stop. the whole time had also been suffering with a real bad urinary tract infection that started from that night. but i was scared to do anything. my gut told me to just deal with it. i had called my mom and i had told her about what happened. my mom told me if you don't talk about it, it didn't happen. my best friend, when i called her, she just listened to me

cry. but when i thought i was pregnant, i had to find out. so i requested to go to sick call. they treated me for a uti, but they said i wasn't pregnant and explain to me why. that night, the drill sergeant, drunk again, came after me, you and me from the bottom bunk -- yanked me from the bottom bunk. by the collars of my btus.

he threw me against the wall, the brick wall destroying my shoulder. my female drill sergeant heard the noise, ran upstairs, saw me pinned against the wall and her only reaction was oh, shit, and walked back downward, back down the stairs. i was then summoned to the office and told that if i even dared to report either incident, that it would be their word against mine. and that there would be more punishment to come.

the next morning, i didn't know how badly my shoulder had been injured. i tried to do pt that morning, and my shoulder was completely out of joint with the first push-up. they personally escorted me to sick call and told him i had dislocated my shoulder doing grass drills. and that is what i was told would be my story. i managed to get out of basics.

but continue to have problems with the shoulder. i had also had bruises on my hips from where he had thrown me to the ground after the drill sergeant showed up. and i thought they were just bruises. my parents reiterated to me that the only way to survive this was to act as if it didn't happen.

and not to ever speak of it again. but i didn't want to be that person. because if he did to the girl in the cycle before me, who else was he going to do it to? because he did it to me. so at one of my orthopedic appointments, i tried to tell this doctor, i did tell the doctor the real reason behind a shoulder injury. he didn't document not one part of the story, but he did refer me to social work services for counseling. i was never allowed to go.

at that point i just wanted to get to my next duty station, which was going to be germany. when i got to germany, no one knew what had happened to me. until one day i was working on the base post office by myself, and i was looking out the windows, just daydreaming, a patron walked in and also took were five words and i knew it was him.

i picked up everything i could to throw at him. first thing was a tape dispenser. next thing was a stapler. the whole time i was screaming for anyone to come. instead of being a happy-go-lucky person that i had been the first year and a half in germany, i changed. i cried at the drop of a dime. or it could've been a lot -- a

look. my xo finally got me to talk about, and i told her what happened. she, of course, did what she thought she needed to do. which was to take it to top for sergeant, and to our captain. not long after that i was told that i was going to be medically discharged because of my shoulder. my shoulder kept dislocating,

but the injury was more complex because the collarbone itself had also been completely torn out of both sockets. so every time i would try to run, do you pt, push-ups, the collarbone would go on my airway and it would crush the airway. they had to go in and remove an inch of it. it was my firing shoulder. so they said if i couldn't fire a weapon, i couldn't be a soldier. so i thought one more time, i'm going to try to tell what really

happened so that something can be done. so when the medical review papers started coming in, i filled out the form where i requested to appear in front of the medical review board, and specifically asked for a woman to be on the board. so that i could tell them what happened to me. within a month, my discharge papers were there. mysteriously, a telephonic form showed up in my file saying that

i agreed not to go and testify in front of the medical review board. they just wanted me out. everything about the military i loved, going up hills didn't bother me at fort jackson, north carolina. running 12 miles didn't bother me. the long nights, cold nights, wet nights, none of that bothered me. because when they came in, i thought i was going to be part of this team.

a family with brothers and sisters at arms that would have my back. and i would have there's. that i would take a bullet for, and they would take a bullet for me. and i believed that all the way through my chain of command. i have spent the last 20 years trying to get my disability through the va for ptsd. even though it wasn't as severe

as it is today, i still have the nightmares and i lost four marriages because of it. when the shoulder injury got so bad that i could no longer be a registered nurse, it was like eating raped over again. -- it was like being raped all over again. now both of my dreams are gone. and i became a shell.

to the gentleman -- gentlemen that were sitting at the table before us, i want to tell them that every blind eye they developed, and every death eater they turned -- death eater they turned, they raped me as much as the drill sergeant did that night. to me, being silent isn't enough anymore.

in president reagan's words, they counted on the to be passive. they counted wrong. you raped me. and it's time to change. the military has had their time. thank you. >> thank you very much, ms. lee. thank you very much.

appreciated hearing from you. >> some of the things that i want you all to take into consideration -- >> sorry, time is up. >> just a few statistics. all you can see that i'm someone's daughter. but just for a moment, think that i am your son. because there is many a man out there being raped and brutalized as there are women. but we have spoken more about women throughout this entire process than we have that mean. -- than we have been in.

and that needs to be addressed, too. there needs to be tougher penalties, and mandatory prison, sentencing. windy duke it out, they need to be required to be on sexual assault prevention registries. and maybe, just maybe, last year, two police officers wouldn't have lost their lives because the chief warrant officer was given a choice to either resign his commission after raping a fellow officer, and enlistee, or face court

martial. he resigned. and he did it again in the civilian world. and now there are two officers dead, lives without husbands, and children without their father. because we gave him a choice. neither way was what happened to me or how that happened is right.

and that's why the chain of command has got to be taken out of it. as a sexual assault nurse examiner volunteer, that needs to be a part of the process for every victim, male and female. they know the protocol. commanders don't know the protocols. they don't know how to take pictures, tc caters in the cervix -- to see tears in the cervix, or to call him for evidence -- to comb for evidence or to look under fingernails for scrapings.

that can prove the case. commanders aren't trained. they are trained to get us ready, trooper ready, to go to war. not to go to court. >> thank you again, ms. lee, very much. is there any further -- >> we had a request from a mister can college. i don't know if he is been able to make it today. >> mr. collins? spinning and he did say he might

not be able to make it and it doesn't look like he did. and our final public comment is from ms. sarah zac. from arlington. >> good afternoon, your honor. my name is sarah zac. thank you for the opportunity to address assistance response panel today. i'm a retired navy commander and a graduate student on leave of absence from university of southern california school of social work. i'm not a stakeholder and i'm not looking for employment. i am not a victim of sexual assault, and i'm not an expert in any of the professional fields that are currently addressing this problem. i am an independent, self supported concerned citizen who has come to the d.c. area to learn about the military sexual assault problem and what is being done to fix it. first i would like to offer my thanks to the panel for all the

work that has been done to find a solution to this problem. i can't imagine all the time and energy that has gone into it from your part. i certainly have an idea of how it has been for these witnesses. given that the purpose of this panel is to make recommendations on how to improve the current system, i join with others who are eagerly anticipating the public release of the results of your investigation. personally, i hope your report will include recommendations for two or three alternatives to the current system of investigation and prosecution, and i hope that one of them will give senators gillibrand and mccaskill a basis for collaborating on a single bill that will improve the military sexual assault problem be acceptable to the department of defense and get strong bipartisan support in congress. as i stated earlier, i have a

perspective on this issue that i believe is unique. so in closing, i request your permission to offer a couple of personal thoughts. i agree with those who believe the commander of the accused should remain part of the prosecution of an alleged sexual assault offender. i also agree with those who believe the commander of the accused may be too biased to fairly adjudicate cases involving sexual assault. with due respects to sexual assault victims and senator gillibrand, removing the commander of the accused from the process is not the only way to eliminate the perceived bias. as with many things in the military, training may be part of the answer and i know that is being addressed by the department of defense sexual assault prevention and reporting office. unfortunately, the statistics that are used to support military sexual assault prevention and reporting training pose a credibility problem. the consistency with which the

statisticstatistic s are being kept throughout the department of defense is an issue of concern. and lack of understanding about the source and collection of the data also contributes to the general his belief that military sexual problems is a problem at all. so although the dod annual report on sexual assault for fiscal year 12 presents data that you have in front of you, it's a pie chart that indicates the percentages of rape, sexual assault, aggravated sexual content, abusive social contract, non-consensual sodomy, and others, i would propose that when the chart is presented in front of, in some training to commanders, they will see the pie chart, ma but instead of seeing rape they was he the victim asked for it. instead of seeing sexual assault, they will read too much

alcohol involved. instead of reading aggravated sexual contact, they will think all my god, another he said/she said problem. instead of abusive sexual contact, they are going to be thinking that they can is lying. and as far as non-consensual sodomy is concerned, they will probably think, my sailor, airman, soldier, marine is not a sex offender. and for the other category, it may be something as trivial as the accused was just joking around. after three decades of empty threats of zero-tolerance, it seems to have taken hours in the congressional hot seat for the leaders of the military services to finally get that there is a serious sexual assault problem in the military. i hope they're able to overcome

challenges such as doubt of the statistics and get the rest of the troops on board with the new program in a timely manner. again, thank you for the privilege of speaking with you today. >> thank you very much, ms. zac. that completes the public comments. did you want to take a five minute break? >> we're going to try to reconfigure the seating up here so we're going to take a five minute break and then we will come back to continue the process. thanks. [inaudible conversations] spent a federal panel on sexual assault imagery voted last week to maintain the chain of command indeed with assault cases. you can see this entire hearing on sexual assault at c-span.org. here's what the head of congress today, the house we gaveling in at noon eastern for general speeches. just over half hour from the. they will debate legislative business at 2 p.m. eastern. lawmakers will consider to suspension of including one that will require colleges to give veterans in-state tuition rates regardless of whether the other

legislation later this week, the bill is in a restriction on hunters and fishermen. the senate will gavel h-net to be can. they will debate the five your farm bill. a vote to limit debate is expected at 5:30 p.m. if he gets the needed 60 votes a vote on final passage could happen tomorrow. you can see the house live on c-span and the senate live right here on c-span2. the winter olympics kick off this week in sochi, russia. live today will bring a discussion on america's relationship with russia with a look at some of the security threats for the winter games. officials will take part in effect at the center for national interest, panelists will also cover the antigovernment protests in ukraine. that's live on c-span2 get it will start at 12:20 p.m. eastern. be sure to join us tonight for our next first lady's influence and image on the life of laura bush. tonight starting at nine eastern live on c-span and c-span3, also on c-span radio.

we are asking you, should first lady's work outside the white house? here's what some of you have to say. on facebook, if she chooses to work or someone willing to pay her, go for it. but don't ask taxpayers to fund or subsidize it. no, she should not. i would call it double dipping if she or he gets paid outside of white house duties. first lady is a job. they don't get paid although it is a full-time job. but if you to add up the perks they are rewarded, nicely, they should not be allowed to work in the private sector because of the risks of corruption. you can wade in with your thoughts on facebook.com/cspan. >> consumers will win in the end and that it allows isps to continue to innovate, to invest in the networks and bring new services and new pricing is as models to consumers. consumers will be the main

beneficiary. >> the big corporations one out in his decision to their in his decision together once with a tremendous amount of market power, tremendous amount of influence in washington, d.c. to try to shape policy to go there direction. consumers will are going to be the losers in this deal and i think that's why so many of them are speaking up and asking the fcc to move forward with a really clear path to protect them. >> the impact of the courts net neutrality ruling tonight on "the communicators" at eight eastern on c-span2. >> a discussion on the future of home mortgage finance, a panel of industry analysts examine how proposed changes to the current system can and should be accessible ownership to credit with the applicants including lower and middle income families and communities of color. to discuss the issue from the standpoint of getting quality and have economy is infected homeownership over the past two years t.

>> all right, who is ready for round two? well, we have a very, very talented panel, comprised of representatives from major industry as well as community. i think many of the folks on the podium for the second session is dismantling fannie and freddie the right thing for consumers and the housing market as a whole, they are well known to you.

>> he is the ceo and chairman of millstein and company. he has a very unique resumé, and i'd invite everyone to look at your packets. he was referred to by "the wall street journal" as, quote, a participant in the super bowl of corporate turn arounds with

regard to american international groups' successful restructuring. as well, he's been involved with some of the nation's largest bankruptcies in various roles both in the private sector and the treasury department cans. next we have john taylor. john taylor is the president and ceo, a friend, a colleague, an advocate. john, three decades, is that fair? >> not quite. >> not quite, okay. [laughter] for many years. coming from, frankly, coming out of some of boston's affordable housing, low income housing history, living in those communities and now being one of the nation's most forceful voices for sustainable housing and for responsible lending in the nation. welcome, john. and then we're also with here with our colleague jim carr who's closest to me. jim is extremely well known. i think many of you have read some of jim's research over 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 with the national community reinvestment coalition and is published frequently on issues that we'll be talking about with regard to access to credit and communities of color. and the past, also, has been at the fannie mae foundation where he had many roles, one of which was vice president for housing research at fannie may. and then last i want to introduce my good friend and colleague over the years, one of our nation's premier, premier authors and syndicated column with "the washington post" writers' group, kenneth hardny. ken is going to be moderating this panel. and over the years he has covered a host of issues with regard to financial reform, appraisal, mortgage settlement. and often his articles written from the perspective of someone

who can really communicate with average americans about the residential marketplace, about home ownership, about issues challenging our economy, resonate with the broader public. and so we're really delighted that ken is able to moderate this panel. and let me just say to those of you who were concerned that we didn't get to all of the questions, some of them will roll over into this panel. and once again, if you'd like to submit a question for the 15 minutes at the conclusion of the panel, our staff will be circulating and submitting them for discussion. ken? >> thank you, david. you are very, very kind. overly kind. i'd like to begin this by picking up on a subject that came up in the question and answer session that preceded this. ask that gets to -- and that gets to what can be done now. now, we look at earlier this week we heard in the state of the union the president say that in the absence of cooperation from congress on his achieving key goals, he will look to

executive action. now, it seems to me that with the arrival of mel watt at fhfa, this is really a perfect situation to exert some executive action from the administration and get some things done. now, we have very influential people on this panel, and i'd like to ask them to imagine you are sitting on this panel with mel. you probably know mel. you may well have his ear. what would you tell mel that a you recommend -- that you recommend that he do in the first year and in the subsequent year? let me begin with the sponsor here, with john. >> i think the very first thing is i would make sure that he had a very quick conversation with fannie and freddie about the level of credit scores that they now use to determine whether someone's eligible for them to securitize a loan. as many people know, they've --

their average credit score rose over the last year to about 760, and i'd venture to say most americans should understand if that was the standard for most americans going into home ownership, most americans -- including we whites -- would not be in home ownership. so the first thing is why, what happened to that broader scale that they used to use in terms of credit scores. and, obviously, with the former head of the agency that regulates fannie and freddie, he did not have a commitment to that space. we're hoping, obviously, that mel watt will. i think the second thing he could do, and i think this is an important thing, is it might be a vise to some people having -- a surprise to some people having listened to the last panel which is calling for the creation of a capital magnet fund, but they already exist. they already exist. they're law. and mel watt has the capability to do something that his

predecessor, ed demarco, didn't do, and that is to actually fully fund these things. so creating legislation so we can go out and fund something that already exists as the policy for stimulating affordable housing doesn't make any sensement because we actually have the ability to do that. so that's two big things. and i would defer to my colleague, jim carr, because he's written extensively on this. >> sure. so it's an excellent question, and i think it's a very timely question. before saying what i would suggest he do, i would give a little context into why he needs to do it. and the why is really important. because all of the major legislation proposed right now that's proposed to revamp the housing system proposes to take away fannie mae and freddie mac. well, there are 5 trillion worth of institution -- $5 trillion worth of institution is going to be a heavy lift. and so we know given the state of legislation right now, we're not likely going to have a bill that's passing both houses of congress, going to the president, getting signed.

and even if it happened this year, it would take years to implement a new system in which we literally close fannie and freddie and replace them with a new system. and so the imperative is to act now. was high credit score -- because high credit scores are combined with very high down payments of nearly 20%. and so that is not the market that we've had for the past more than three decades. and so we need to get back to lending to the typical american household, and it just turns out that that's what a lot of people confuse with affordable. we're talking about lending to the american publicment and the point -- public. and the point is, we can do it today. so in addition to those things that john just mentioned, much broader access, a few things i would add is i would look at a lot of the policies around the service or behavior around loss mitigation. we still have a lot of families in the foreclosure pipeline who could be assisted by the government-sponsored enterprises. they could be assisted.

we need to maintain very strong support for the, for the rental housing, affordable rental housing market, not scale back as was proposed under the previous director. and we need to do something about insuring that the taxpayers are protected from tush losses. and is -- future losses. and right now the way i understand it, and i haven't been able to get a clear, you know, conclusion about this, is that all the dollars just simply go to the treasury. so we need to be backstopping against the american public so that, in fact, they're not on the hook for the losses going forward. and then a final thing i'd say is within that affordability context, and we can come back to it, there's a lot that can be done there. we need to be really looking at how we can leverage this market that has shut out moderate income people, it has closed its door. the conventional market is all but closed to people of color, and not only go back to serving the traditional affordable loan market, but we also need to be looking at how we can leverage these lower home prices in many

markets across the country to rebuild home ownership rather than having a complete focus and fixation on investor purchases of formerly-owned or occupied housing, because i believe that introduces a market risk as well. >> love to hear from each of our other panelists. bill with, what would you say to mel? or what do you plan to say to mel? [laughter] >> i actually haven't talked to mel yet. >> >> okay. >> i'm hoping to do that. so i would tell you that mel's already taken a good first step. so you're talking about average credit scores at 760, right? ed dimarco was going to put in an increase of g fees, right? by simply stopping that and pausing that, you've shifted the conversation back to the pricing word todayed which i think is better for the overall market today. if you're really going to talk about lending in the space that we're talking about on this panel, you have to start there. obviously, i think mel -- >> just to be clear because we're using acronyms and stuff like that, there's a lot of

people, particularly -- >> sure. >> right. and guarantee fees from the fannie and freddie that raise the cost to lenders of -- and consumers -- of being able to make a mortgage. >> which raises the cost to the consumer, right? and the proposal is going to make it much more controlled than what is in place today. so when you look at llpas, when the crisis took place, they increased, and for any credit score below 720, there was a significantly higher cost for that loan with fannie and freddie. thus, you saw people going to fha, right? obviously, we've seen the problems in what's taken place with the fund. so as i talk to mel, first of all, thank you for doing that. that was a good first step. he's going to put a team in the place that understand the housing process, and i think that's a great move, and he needs to continue to do that. but, you know, to your point, ken, what can be done that's not, that doesn't require legislation, i think there's a lot that can be done. ed dimarco was not a confirmed director.

mel is a confirmed director, so he can start to take action that might be transitional steps regardless of what the end state might look like for fannie and freddie, whether that be a common securitization platform. making sure that whatever the outcome comes from the transition, there'sly liquidity available. there's a market that allows a nonbank lender to trade a security. because, you know, there's simply not enough bank balance sheet to cover the $10 trillion marketplace that we have. and i think there's some things he's done. there's more that he can do, but i do think that, you know, the first step is get the right team and start really evaluating the situation. >> jim? >> so i'd tell him to tread very carefully, because you've got, i mean, he is a conservator over two entities who there's a bill pending in the house, there's a bill pending in the senate -- sort of -- [laughter] introduced in the senate, but one that's passed the house

financial services committee, each of which call for the liquidation of the two entities under his control. and so unless we want to turn the next -- the first part of his tenure into a donny brook between the house and the senate and himself, i think he's got to start a dialogue on, with both houses, on what's the future of these two entities. are we really winding them down? is that, or is that just chest beating for, you know, the cheap seats? and are we really, or are we really reforming these entities on a sensible transition path back to private ownership and restructuring the government guarantee? i think there's been a lot, i mean, it's amazing to me. they're five year into the conservatorships, we still have no consensus on what the end state is. and i think that having a confirmed director may give the

administration a chance, actually, to develop a proposal which five years in they haven't developed. with regard to what they, where they want to move the housing finance system. fannie and freddie, obviously, play an enormous role in the housing finance system today, and, you know, the path of least resistance is to do nothing because they're producing, they are providing mortgage access, albeit at tighter credit scores and a narrower credit box overall, but they are providing secondary market access. and together with ginny, they're providing 90% of the mortgage credit being offered in america today. the profits from that system, as you point out, are all being swept into the general treasury to pay for other things. so we're taxing 28 million americans for the privilege of making deficit reduction. it's crazy tax policy, it's crazy housing policy for the government to have this dominant a footprint. and five years into this we need some leadership. so i think he could, you know,

he's an experienced guy, he knows the house. he's an -- i have great respect for him, and i think he has the chance, actually, to be the focal point of a constitution that has yet to be had, an honest discussion that has yet to be had about how we're going to move to a new future and whether we're really going to liquidate these two dominant giants or actually try and transform them and restructure them. >> you both have perspectives of the financial market that are unique. i think at least on this panel. what about debt reductions in terms of modifications? this is a huge issue for dimarco for great controversy. would that be on your list for mel? >> look, this is -- that's one of those washington issues that, you know, you get a lot more. you get a lot more partisanship around it. you know, citibank, jpmorgan, the commercial banking industry

does modifications and principal reductions all the time if it's, if it creates a net present value. the best return to the lender to do so. and they've tone tons of them. -- they've done tons of them. and dimarco planted a flag and said we're not doing this. you know, i think it was wrong. i think that fannie and freddie could easily have done a good chunk of that, and it would have proven to be the net present value -- it would have been positive for taxpayers. but idealogically, he determined that that was no place he wanted to go sticking it in the eye of the administration, and that's fine. i mean, that's his prerogative as an unconfirmed director appointed by a previous administration to poke this administration in the eye. but i don't think it was a sensible decision, and i think we made much more of it than it really was worth. >> bill? >> i mean, i think it's a political discussion, right? at the end of the day, you're right. private entities have done what they've done from the

hadification perspective because it made sense to do so. do i think as public policy that, you know, that should be endorsed? probably not. but at the end of the day, i still think you think about this from a business perspective and say what is best for the management of the portfolio whether that's a personal, a bank's balance sheet or whether that's fannie or freddie's balance sheet. what's best, because the balance sheet is ultimately being funded by the taxpayer. >> right, and just to follow up, we could easily have created a standard that said among the modifications, these should be considered, and whatever the is the highest return to the lender whether it's principal or stretch out or interest reduction, that should -- all of these things should have been on the table. but for ideological reasons, he chose not to permit principal reduction. >> john? >> but it's not over, right? i mean, we still have millions of people who are either heading towards or close to foreclosure or could be in foreclosure, and it's true that the private

sector, the big banks working through the hamp program, have done a number of modifications, much more so than the government-sponsored enterprises, fannie and freddie. and as an organization that actually funds a hundred organizations to help middle class and working class americans stay in their homes, we've had a lot more cooperation from the banks than we have from fannie and freddie for the reason you say, jim. i think ed demarco decided we just didn't want to have a part of this. and i think you're right, had fannie and freddie stepped up a way a number of the banks did and began to allow their portfolios to have modifications, first off, part of the reputation for them would have been enhanced. but also it would have been a net positive for them to do that. ask more importantly and most importantly, we would have helped so many millions more american households to stabilize and to reduce the number of foreclosures that are occurring throughout the country now. it's not over. so there's still opportunity to do that, and i hope we see that.

>> and i think it's important just to add that fhfa's own numbers show that it was a net positive to the tax awriters of -- taxpayers of a billion dollars. so it's not as if it's just a political issue and, again, subsidies -- which we talked about earlier. it's actually a net benefit as measured by the fhfa itself under its leader at that time, dimarco. >> so it should be on the list -- >> absolutely. >> okay. jim mentioned that this was a political discussion. well, this is a political town. this is a fairly political audience. fannie and freddie are political creatures, so i'd like to the raise what is essentially a political question about timeline and timeline relates to urgency. so let me throw out a scenario, and let me hear your reactions to that. as someone standing off to the side not involves in these, in these issues on capitol hill, it

seems to me that, number one, although there will be efforts in the senate and apparently there's a bill coming from the democrats on the house side that there is virtually no chance of any real resolution of this problem that jim points out, you know, incredibly has been going on for five years. so it's an election year, the parties are very far apart, obviously. okay. let's assume as many people project that the election really doesn't change the mixture all that much. in other words, maybe, you know, the democrats lose a little bit in the senate, republicans may lose a couple of seats in the house, may gain -- but basically you have democratic control on the senate side and republican control on the house. so you have a continuation into 2015. maybe we have some optimists here, maybe someone sees some light that i don't see, but absent that check off 2015.

2016 is an election year. so no change in the, you know, in the basic formula there. i mean, projecting this out let's say you might get some changes in the house and senate. certainly, you'll get a change in the white house for 2017. and assuming that we're going to have at least a five to seven-year transition period to any new system. you know, aren't we really looking at, you know, questions that take us out to 2022, 2023 incredibly before you have a, you know, actual legal, structural change? i mean, does anyone see any urgency given the fact that fannie and freddie -- although we did hear something somewhat to the contrary from mike stegman earlier this week in las vegas -- they earn a lot of money. and so that takes off the

pressure from psychologically, i think, in the back of the head of some people on the hill for the urgency of change. does anyone see, i mean, is this a reasonable scenario, or am i missing some flames that are out there? >> but it's the fact that they do earn a lot of money also creates the pressure to do away with them so that somebody else can earn that money. >> uh-huh. >> and that's what this is all about. and that's why this conversation so important. predicters of whether something's going to happen this quarter or it's not going to happen for a few years, you've got to look at a couple of realities here. we already have a so-called bipartisan bill filed in the senate, a partisan bill filed on the house side. we now though and hear that the leadership from the senate banking committee, crapo and johnson, are going to propose their own bill. and that's leadership. it's getting closer to the top. and then you hear in the form of mike stegman a comment that the

administration supports the repeal of affordable housing goals. without the mission like that for fannie and freddie, there is no point to having those gses, in my opinion. so i think there's a lot of impetus. and and i think, look, what's been driving? you all remember this organization calls fm watch, the very big banks out there organizing because they didn't like these guarantee fees, they didn't like the costs of doing business fannie and freddie, and they really loved the kind of profitability they showed as institutions and why is it that we as the big banks, big investment banks, why aren't we allowing that profit and allowing that to inour to our benefit? why are we paying this private company that has government sponsorship? that's what the fight is. but for america, average americans need to understand, and zandi was right about this. this is a major game-changing event that's going to occur in the united states if fannie and freddie, if their charters are pulled, the affordable housing

goals disappear. this is something that's going to affect every american in this country, the value of their homes, their access to mortgages. you already heard from aaron from the young invincibles about the difficulty that that population is having, and that's the one that shores up the housing industry. they're the new home buyers that allow the existing home buyers to move up because they can sell their homes. creating a system in which there isn't this affirmative obligation to make sure that a working class people -- white, black, brown, yellow, native americans -- that they all have access, that they can show they're willing to work hard, that they can, that they're creditworthy, that they have access just the way an upper middle income person would have access. if we -- that's what's at stake here. you know, the children, the future generations, you know, phil bracken is always talking about of the next 20 million new home buyers, something like 13 million of them are going to be people of color.

are we really going to have a system that's going to continue to constrict and reduce? and what's that going to mean for the american economy if we don't have a robust mortgage market to support the refinance of housing and all the economics that surround a healthy housing environment? >> yeah. >> fannie, no one has done more for that system than fannie and freddie. look, i don't have any stock this fannie and freddie, you know? i don't work for fannie and freddie. i'm not a consultant for fannie and freddie, but i can read history. i can see what they've done over the years. and they're at least a third of the americans today directly contribute fact that they have a mortgage to something that was securitized by fannie and freddie. and probably if you go back, again, to generations before that, it's probably most americans, the majority of americans have some connection to the fact that we have these government-sponsored enterprises. yes, they make money. god, when did that become a bad thing for these republicans, you know? [laughter] it's amazing. but, you know, that's what we're messing with. we're messing with what was at

one time the healthiest, strongest home mortgage finance market in the country. we're about to take it. now, where are we going to take this business and put it? we're going to put it into the institutions that led us into the subprime abyss that fannie followed into. fannie didn't lead and freddie didn't lead. >> can i -- >> yeah, please. >> while you're -- >> yeah, please, stop me. [laughter] >> going back to ken's question, i think i'm an optimist, so take this with a grain of salt. but i do think the johnson-crapo bill if it actually is introduced will fix many of the flaws of the corker-warner bill. i think they've taken very seriously the mission of looking at corker-warner and bringing a whole bunch of people in and saying what's wrong with this, and how do we fix it, and how do we create something that provides for a stable housing finance system in the future that protects us against the sins of the past? and i think with all due respect

to the mortgage market, we have just gone through the largest financial crisis in four generations. its center was in mortgage finance. we more than doubled in seven years the aggregate indebtedness on the housing stock of the united states from 4.5 trillion at the turn of the century to 11 trillion in 2007, and fannie and freddie had a part to play in that. no doubt wall street had a bigger part to play in that. and, you know, i'm not here -- and i think we have to be careful -- to promote credit as the path to a success in the united states. income is important. wealth derived from income is important. straddling the population with debts they cannot service is to path to a great future for a great country. so i think we -- i'm 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 except through their pension systems. if they have, are lucky enough to have a pension. so houses are a very important source of wealth. and if we screw this housing finance reform up, we're going to provoke another housing downturn. so we have to be very careful as to how we do it. so i think what happens here is this. i think crapo-johnson introduce a bill, and i think then there is a serious dialogue about what the transition is out of what is now a totally dominant system totally dominated by the government. and if we're lucky, the house will engage in a across-the-chambers dialogue. >> you are optimistic. >> about this. >> no, was the path act's going nowhere. i mean, that's just chest beating, and they know it. the house leadership hasn't even brought it to the floor for a vote. they've brought 40 repeals of obamacare to the vote, but they haven't brought the path act

because there are no votes for it on the floor. it's an ideological statement, it's not a practical piece of legislation. >> yeah. >> so i do think there are, there is a desire to get beyond the conservatorships which on the current path is going to be at least til 2022 before this is over. because whatever the transition is, is going to take a very long time. but we can't finish it until we start it, and i think the crapo-johnson bill will form the basis for a bipartisan conversation across both houses. and whether they get to do it in the lame duck session in 2014 or it's a 2015 vote, i think if mellen gauges, if n -- mel engages and the administration engages around that bill, i think we can then have possibility of real reform. >> so quickly, i agree. to me, there's urgency about johnson-crapo because i think if you don't get something from them -- >> i agree. >> -- by the end of march, kiss

'14 good-bye, you're starting into '15. and, you know, we have a philosophy at our company called you have to take the roast out of the oven. and corker-warner did a good job setting a framework, but until you get something out there you can have a debate about, it's just going to continue the way it does today. to your point, john, i don't care if there's fannie and freddie, face it, fannie and freddie still or the function they perform still provides affordable housing even if the goal doesn't exist. i'm not debating whether it should or shouldn't, but if they go away tomorrow, there's just not enough -- you can't -- you're going to have a very small mortgage market, right? and so, you know, the fact that they're making money, great. is it really to get it back into the private sector? i don't know. the one thing that i fear is that using that money to pay for things, you know, pay for it's going to the government whether it's payroll tax increases or things like that, that's not good business east. so we've got -- either. so we've got to figure out a solution to that. it's a complicated, complex

thing to try to figure out what this new system needs to look like, the technology, the process that exists within these entities today needs to be harvested and figured out. if fannie and freddie don't exist in their current format, reform still is taking some of the stuff they're using today, keeping the liquidity piece of this in place, calling it something different i don't know if that really matters much. >> let me put something on table that's another choice we can make here. and changing the name is probably ad good thing, at least for people in washington. i talk to people around the country, and i -- >> i think we should call it taylor and millstein. >> that's fine. that works for me. [laughter] which one would be fannie -- >> i'll leave that up for you guys to figure out. [laughter] >> but, you know, just this, the other thing on the table is simply, you know, don't fix what is not broken. we actually did have a very robust, successful system of mortgage securitization that fannie and freddie played a huge role in. they weren't adequately capitalized, there wasn't enough

transparency, there were a number of things that should occur. but actually proposing for these new entities, why not simply impose those on them? and, frankly, the issue of that jim raised earlier about running into problems with extending credit to people who are not creditworthy and don't have an ability to pay, we fixed that. that's the law. best thing to ever happen to the mortgage companies in america and the lenders this america was dodd-frank. we made it illegal to do the stuff that they did before. you have to have an ability to pay. and we actually, just in case there wasn't enough, we created the consumer finance protection bureau where you have a sheriff, people with badges who can go in, investigate and find people who do bad things. so, actually, we cleaned up a lot. that doesn't mean people aren't creative and mortgage lenders and others aren't going to do things to try to, you know, mess things up. but the truth is, it's not the same environment.

and remember again, fannie and freddie followed the free market. the free market that was free to abuse and fraud and all the other things they did. they followed them. they didn't lead that. after losing a trillion dollars worth of market share. so we're about to throw the baby out with the bath water along with the plumbing, the tub, the tile, the whole bit. [laughter] and i'm saying let's fix what was wrong with fannie and freddie, keep our system that was once -- i remember being in south africa and people talking about fannie and freddie and talking about what a great system that was notwithstanding the problems we think we may have had. and we're about to destroy it and put it back in the private sector which played a major role in the kind of subprime distribution of loans and robs that we -- problems that we had in the past. why do we have to create something new, a new industry rather than fix where we see the problems and make sure we still have a robust, strong system of -- >> so you're advocating reform. it's just a different form of reform. >> call it something different. >> i want to get to ken's

original question about the time frame and just go to a point that jim made, because i think it's really important, but it needs further conversation. so it may be true that we get a johnson-crapo, and even if it's sort of pretty much what most people say represents a reasonable bill, the fact that path isn't going anywhere doesn't change the nature of the house and its perspective such that when you go to conference, you're going to end up with a bill which, after all the work you did to get affordability right in johnson-crapo, cannot be improved by going to a house that has a alt act as sort of their -- a path act as sort of their leading example or idea of a housing finance system of the future would be. so you end up with a compromise in which you come back with a compromise bill that is less accessible than the current housing market which, by the way, the conventional market is mostly refinancing. so it's a big refinance bill because it's actually not funding mortgage purchases for the american household, for the american population. so it dose back to the original -- it goes back to the

original question which is it's not just a matter of what to do, it's the urgency of getting it done. and i do agree with one thing that jim said -- >> just one thing. [laughter] >> -- which is the idea that the new director, watt, should have -- with members of congress finish to figure out what are their real intentions behind closed doors. the housing market is 15-18% of the u.s. economy. one of the reasons we're not producing the jobs, one of the reasons the home ownership market is struggling is because we don't have a strong economy. we really don't have five or ten years to wait and flip our thumbs when, in fact, we have two entities which if we address them right now, we can make the housing market work in the way we need it to work while still having these sidebar conversations about legislation that could perfect it even further. but it's not a matter of either/or. it's a right now fix the system and then look if you want to improve it. but at least people are not out of the market while we're waiting to improve. >> yeah. look, i'm largely agree with that.

but i do -- we're not going to come up with a legislative solution unless we have a consensus on what went wrong both with those two institution asks with this huge credit -- and with this huge credit boom. just hear me out a little wit. a little bit. karl rove taught us all that if you repeat a lie often enough, people start to believe it's the truth. [laughter] the american enterprise institute has propagated the big lie that fannie and freddie caused the financial crisis, simplifying a very complicated event in the history of the united states down to two villains. it's wrong. it was never right, and we've got to get over it. i mean, unfortunately for the house and the senate, they've got to get over the big lie. and we're going to have to -- but for the affordable housing universe, and i'm in the lion's den here, you're also going to have to recognize that fannie and fred key were broken --

freddie were broken. that allowing private corporations to peddle a government guarantee to run a government-sponsored hedge fund up to, you know, a trillion and a half dollar portfolio was also, you know, not acceptable. we can't do that as taxpayers. we can't allow private companies to go shopping for the benefit of their shareholders. so we have to fix that, and we have to make sure that this system is properly capitalized, that we don't have two huge entities dominating 40% of the market which is where they were in '04 before they went crazy wandering around with 25 basis points of capital with $4.5 trillion worth of risk. >> we could beat this to death for a couple of hours. [laughter] let he move on to another -- me move on to another question that i think is potentially fairly important. and, jim, i'd like you to address all the proposals from

the administration to what you hear in the senate and the house, talk about private capital being the basis for the upcoming solution. given the regulatory environment that we now have, i keep on hearing about people saying i want to get out of the mortgage business, it's such a pain. now, you know, it's not bill's size companies that are doing this, but, you know, some moderate-sized people are upset about regulations dodd-frank has brought in. so the question for you, jim, is, is there under today's regulatory environment sufficient private capital out there that is willing to be the core of this new system s and to what extent does that, the existence of of that capital and the demands of that capital help shape the final solution? >> yeah. so, look, this is a, this is a

big market, and there are lots of people with capital on the sidelines prepared to play. but the creation of a mortgage-backed security requires, it's manufactured along a long manufacturing line. you know this well. from the guy who's a mortgage broker or bank at the front end that's signing a consumer up for a loan all the way through to the wall street giants who are packaging and securitizing these loans. the big consequence of the crisis and the complete collapse of the private label securitization market is that the private investor community has lost complete faith in at least two of three pillars on which the securitization, the private label securitization market was built. pooling diversification which is a basic principle of structured finance actually worked. but the underwriting was horrible, and the, and the

guarantee function that was provided by the rating agencies, the assurance that this was a creditworthy instrument also was horrible. so you had two of the fundamental pillars on which this market was based -- the underwriters and the rate agencies -- completely blow the confidence that the investor community had with them. and it's going to take a long time for that to be rebuilt. you'll have people on the margins prepared, you know, hedge funds who can afford and credit funds who can afford to really spend the time and dig in to the securities, but today, i mean, if you look at markets today, while the private label securitization market is growing, they did their, they did $20 billion in a trillion-and-a-half dollar business last year. so, you know, sort of of a little bit more than 1.5% of all securitizations in the mortgage space were done by the private label market. and that's reflective of the

fact that the institutional, the institutions that compose private market really have blown their own reputations with the investor community. and it new institution, your institution redwood trust, there are a couple of new-styled finance companies who are slowly rebuilding investor confidence. but it's going to take a long time for there to be a realistic private market alternative to fannie and freddie and a government guaranteed market. and so the real issue, to me, is sort of how do you transition out of a system where we have no capital backing two institutions in a government-run conservatorship to a point where we actually have capital backing $4.5 to $5 trillion with the risk the government has written through them. and we have standards that are set, and fannie and freddie have provided this for 40 years.

they have been standard setters in the securitization business. you know, and that is what is missing in the private label securitization business, the standards that investors have confidence in. investors have confidence in fannie and freddie's standards, so we have to build on that as a way to attract and keep capital, private capital coming back into this business. >> bill? >> you know, i mean, that's an eloquent response, and i agree. i mean, private capital -- outside -- the one thing i would say to add on top of that is private capital needs to know what the rules are, right? but to that point, outside of qm you're going to need a private market to come back and play. so for all the points that jim talks about here, that private market isn't coming back to play in any non-qm space. so, you know, when you talk about access to credit, right? qm is the box now. the safe harbor of qm is now the box, and that box is slightly tighter than the box that exists to give you the 760 credit

score. to me, it's getting the credit box right for everyone, right? i mean, you can do a 3.5% down fha loan. those things do exist today. i think we've got to get qm equaling qrm so you don't have to worry about risk retention, and you keep all that stuff in place. but back to the private market piece, if i don't know what the rules are, why would i come and play? >> john, i'm sure you have a thought. >> i do have a thought. [laughter] so private investors don't trust the private market. they don't trust think about other than fannie and freddie because fannie and freddie has the backstop of the government behind them -- >> certainly true. >> and that's why they're all the business. that's why i keep saying dodd-frank was the best thing because it's really a message to private investors, it's safe to come back in the water. the rating agencies are not going to be able to give aaa rating to 80% of the high cost loans that were made at the beginning of this, of 2000 and

on. you know, fannie and freddie have, are, you know, they're simply, they're still to be trusted. and what's ironic is what's being proposed -- and it never seems to be on the table to keep fannie and freddie -- what's being proposed is let's get rid of hem, and now we'll go from an implied guarantee and give an explicit guarantee to the private market, the private lenders that the private investors still don't trust, but we're going to give an explicit guarantee. and anybody who doesn't fit into that box is going to go to fha which is now 100% taxpayer guaranteed for those loans. and it's -- why are we reinventing the system to essentially make it harder for average working class americans to be able to get a mortgage? it makes no sense to me. >> but i, you're presuming an outcome which congress -- i think we all should wait, take a deep breath -- >> i've been breathing deep. [laughter]

>> -- what johnson and crapo produce. because i do think some of us have proposed, i have proposed a transition plan out of the conservatorships where fannie and freddy actually do survive, and they become the first of the private guarantors who play in the new system so as to insure we actually have some private guarantors to play in the new system. but i totally agree with the notion that the government should be providing the guarantee at arm's length for a pee be, build -- for a fee, building a reserve fund trying to protect taxpayers against loss. i think that's clearly something that went wrong in the last period. i also think the government if it's going to allow and take, allow private capital to take the first loss, it has to regulate that capital and make sure it has adequate capital to absorb the first loss, something that fannie and freddie did not have. so i think there, i don't think they're going to -- >> what about an obligation to serve the broad spectrum of, you know, making sure that working class americans who do use it as

a way to build wealth, what about that? >> okay. so i'm -- i think there are definitional problems in that, okay? >> but do you think that that ought to be with the new system? >> yeah. look, mark zandi and i have spent a lot of time debating this with each other and trying to influence the hill on this. and i think, i agree with mark. i think the best approach to this is to, are the funds. and to allow by analogy to the highway trust fund, if you're going to use the new securitization system whether private label or government space, you should be paying a fee into a trust fund, and those trust funds should be allocated out to the 50 states housing -- >> this is the great misunderstanding of so many people involved in this debate. let me make clear so people understand, all right? the trust fund is a fee-based thing that puts at hacks as you heard zandi, and he's probably right, about $5 million.

>> that's right. >> okay. so it is explicitly for low and very low income mostly rental housing, as well as the community development football institutions to do -- financial institutions to do different aspects and for research people to do research on housing. that's what that's for. >> that's under hara, not under necessarily where this bill is going. >> well, it's what's been proposed. what's been proposed so far, i mean, we can talk about, you know, pie in the sky, i'm talking about what's being proposed. as opposed to, okay, right now we already have laws that say that has to happen. a trust fund and a capital maintenance fund. and it's supposed to be funded by fannie and freddie. the problem is the conservator decided not to do that. so we didn't need a law to do that now, number one. number two, the biggest contribution that fannie and freddie makes has nothing to do with those subsidized housings that you talk about in the trust fund and the capital maintenance fund. it's their obligation to serve all creditworthy borrowers

without a subsidy that amounts to -- this is what zandi left out -- $500 billion worth of securitizations during the course of the year. even under dimarco who diminished the goals as low as he could, they gave in 2012 $267 billion with the securitizations of affordable housing goals which, including 600,000 rental units, mostly low income. >> yeah. >> and by the way, under the goals and under the regulations, those subprime lows, first off, all the bottom bnc stuff, ineligible to be counted under affordable housing. the alt-a is primarily, overwhelmingly going to low income people. so it's not even really that that's serving the population we're most concerned with. but by regulation the fannie and freddie goals really -- the most important thing and nothing to do with the trust fund and the

maintenance fund, both of which we support and want to 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 or work in bakery or, you know, work for a newspaper. and they're trying to get a mortgage. they're not making $250,000 a year. they're moderate income. fannie and freddie has to serve them, and that's what they did, and that's what they do. and what we're doing is we're converging and confusing a trust fund and a subsidy with what this market does. and this is what people have got to understand, because that's what's at stake here. not having that affirmative obligation. because that disappears under the current proposals. >> yeah. so i, i think that duty to serve is, as i said, i mean, i've thought a little bit about, talked to a lot of people about it, and i think definitely -- in the primary market it's pretty on, cra is a straightforward thing. but i think the duty to serve in the secondary market is much

more complicated to define. >> any other thoughts on that? >> yeah. i think one of the ways if you -- jim's comments on the profitable investment portfolio, inappropriate for the gses, things like you said there, government guarantee, i'm assuming you meant the fact that it was an implicit guarantee. these are all things that can be addressed right now. so we don't need to wind the two institutions town to fix those things. so the question i think we ought to be asking is what is it we cannot accomplish right now through administrative actions, and if we can accomplish everything through administrative action, why are we sitting on the sideline waiting? and that is, i think, the message to director watt as he takes other now. it doesn't mean you can't consider the to perfect the system. but what is it, and when i say what you can accomplish, i'm not talking about earnings for firms. i'm talking about outcome, public policy outcome for the american public meaning build

home ownership, revamp the effectiveness and efficiency of the housing market, rebuild sort of that engine of opportunity that's created by that large housing sector and serving all populations and building wealth and economic mobility. what part of that can't you get by leaving the current system in place and fixing it? and that's the thing, i think, that's missing from so much of the legislation. because you hear a lot of legislation that says we can do this, we can do that, we can wind them down, but in terms of the outcome and how it creates a better performing housing market, you just don't hear it. and it goes to john's point about serving the broad market. a 5% down payment to a borrower with a 675 credit score is not a subsidized mortgage. it's called a typical american household mortgage. and it's just since this great recession and to your point, jim, and i think it's great that you put it on the table, the myths and misconceptions that have been put out will to just detract us from what actually

caused the crisis and as a result what has to happen to fix, you know, put us back into operating condition. >> yeah. i mean, look, i think there are lots of things that can be done administratively. the conservator has very broad powers under hara. but the fundamental, the essence of fannie and freddie and here under the government charter that fanny got in 1938 and freddie got 40 years later, it created that implied guarantee, and he cannot change that without congress. he cannot change their charter. he could, he could dump the assets into a delaware corporation and privatize them, but they, but they won't have the benefit -- >> do you remember how much it was? >> five billion. >> we'll leave this discussion at point. you can see it in its entirety at our web site, c-span.org. live now to the center for the national interest for a discussion on america's relationship with russia as the winter olympic games will kick off this week in sochi, russia.

>> will be quite limited. let me say that we were able to bring people who from my standpoint are all outstanding experts, people whose reputations for knowledge and objectivity, and they will, i'm sure, will see the data they present not only some with different fields, but some with different viewpoints. we will start with tom graham who is now managing director at the kissinger associates, but tom also used to be a torn service officer -- a foreign service officer and was in the bush white house national security counsel as senior director. tom, at that time it was called russian your -- eurasia, right? >> no, it was called just russia. >> we never say just. [laughter] >> i stand corrected.

bruce coleman, director of the center for security studies at georgetown university, and he's a prominent government consultant, public consultant on terrorism which, obviously, is a major topic we're discussing. recently appointed director of the cannon institute and rightly so expert on russia, and he spent two months recently in the ukraine, came back in june. and last but not least, my colleague, paul sanders, executive director of the center for the national interest. he was at the state department also during the george w. bush administration. he was a senior adviser dealing with democracy and global issues. now, we have a very prominent group of people here, a lot of knowledge, a lot of talent, so i

apologize for not introducing everyone, but i will introduce two seem from who i think we will be eager to hear if they will be so moved. ambassador of the russian federation, sergei -- [inaudible] thank you so much for being with us. the special assistant to the president and senior director for russia. not just russia, but also central asia. thank you so much for joining us. again, because we have so little time and so much to discuss, i have asked my colleagues to limit their presentations to no more than ten minutes. tom? >> thank you very much, dmitri. thank you for that introduction. dmitri asked me to give an overview of u.s./russian relations, and i have to admit that i hesitate to do that in the presence of the ambassador and celestement i think the two of them will tell you that the relationship is fine. at least that's what they'll tell you in public. and i think it's fine

particularly if you ignore key issues that are on the global agenda today. the bilateral presidential commission remains in business, it's actively coordinating work on a range of issues from military to military contacts, counterterrorism cooperation to trade promotion and people-to-people exchanges. all very good work, all very necessary work, ask much of -- and much of it going quite well at this moment. now, if you look at the key global issues, i would argue that the picture is rather more mixed. on syria and iran, the two countries are working together quite actively over the past, over the past several weeks, and we rook forward to that -- look forward to that in the future as well. but the problem is that at this point at least we have opposing views of what the desired outcomes are in both the syrian conflict and how we would deal with the iranian issue.

on ukraine, which matt is going to talk about in greater detail, we're engaged in what i would call a sharp political competition. just look at the speeches by secretary kerry, minister lavrov, the european representatives in munich over the past weekend. now, there's one thing that moscow and washington agree on, and that is if their side wins, it's a win/win situation. but if it turns out that its side loses, we're in a zero sum competition, and the other side is going to blame either washington or moscow for being the one that is pursuing the zero sum competitionment -- competition. on the positive side, we both continue to imelement the new s.t.a.r.t -- implement the new s.t.a.r.t. but at the same time, russia has rejected any further discussions of steep reductions in nuclear weapons. we still taste this yawning gap over missile -- face this yawning gap over missile defense. and just recently the united states has leaked information

that russia has violated the inf treaty. and finally on sochi, now, if you read the press in the united states, what we're focused on is corruption, the terrorist threat and russia's homophobic policies at home. everyone says that we want these olympics to be a success, but the impression created in much of the american press is that we all want these olympics -- we don't want these olympics to go too well for president putin and what we see as an authoritarian regime. and then finally, and here i'm sure that the ambassador and celeste will disagree with me, but looking at this from the outside, i would say it's quite clear that the two presidents don't particularly like one another. and that's not a problem, because that doesn't lie at the foundation of relations between any two countries. but it is a problem, i think, that the two presidents don't convey a sufficient amount of respect for each other and they

don't see a particular need to talk to one another on a regular basis about a range of issues. so it's quite clear that today we're on the downside of this cycle of great expectations and profound disappointment that has marked u.s./russia relations since the breakup of the soviet union a generation ago. now, some people say we don't need to worry about this because the up cycle will eventually come around. it's an inevitable part of the process in u.s./russian relations. but to me, this time it feels different. it feels different because the downturn has come earlier in obama's second term than it did in either bush's or clinton's. it feels different, i would argue, because there are no prominent constituencies in either country that are actively and visibly working to improve the relationship at this point. in fact, what you sense is this

lack of energy and enthusiasm in the relationship as the we're all resigned -- as if we're all resigned to the fact that we're going to face a difficult period this relations or some time. now, it is quite clear that this relationship is no longer a priority for either country. the united states is focused on the middle east now. we talk about a pivot to asia. of we've got two big trade pacts that are being negotiated in the atlantic region and the pacific region. russia's focused on europe and asia. and while the other country is a factor in the relations and in these issues for each of the other cups, it's not the -- countries, it's not the main one this any of the cases. so the energy is gone, the enthusiasm is gone, and there's no agreed, new agenda for this relationship. no sense on how we're going to move this relationship forward

over the next several years. .. is at this point. and then finally, is someone