late to your own event okay? i don't condone this kind of behavior, and i think later on in the day i will be tarred and feathered outside of the building here in the center of washington d.c. all right, brief introduction. this is the first time that the center for strategic and in his studies has actually published a report about an olympic games. this is done by our former visiting scholar brin analyst of asians of caucasian affairs and security issues come islam, extremism, et cetera, et cetera. and it's got a really cool cover i think. terrific report, for my money the best thing you can read about some of the challenges and issues around these games. so that's one unique aspect about these games. never before has a winter olympic games been held in a

subtropical climate but the fact that the subtropical climate happens to be in the country that actually occupies the most territory in the arctic region is rather an almost as we'll. never before has olympic games been held in the region in such close proximity to a conflict zone. never before, although more about this conflict zone never before has olympic games been held na conflict, in such close proximity to conflict zone in which was, in fact the site effectively to civil wars in the country that is holding the games. one of which effectively russia lost in the mid 1990s with chechnya and one of which was one, the zone in the northern caucasus they are referring to where my esteemed colleagues will talk at greater length

about the challenges you know, when mr. putin went down to guatemala city in 2007 it was a period of relative relative quiet since i would say in the area. chechnya have been somewhat stabilized, and the frequency of violence in the other republics, the northern caucasus had not begun to escalate perhaps to the degree that it did shortly thereafter. nevertheless it was a very very risky decision i think for the international olympic committee to do so. never before more on the conflict zone, never before has olympic games been held in even closer proximity to a country which the host country fought a war with after the olympic committee awarded russia the games. referring of course to the

russian georgian war. sochi, if anyone, depend on where you are in sochi is 10, 15 kilometers away from the region of georgia which the russian federation acknowledges independent after the august 2008 war. another pretty unique aspect about these games. never before in my lifetime my lifetime, i was born february 13, 1959, be clear about this never before in my lifetime has olympic games been so politically controversial and so identified with the leader of the host country. that, of course being vladimir putin. so no, we're not going to talk today about -- well let me just

say one more thing. because we are in washington, d.c. i don't think ever before has a sports icon from washington, d.c. been so close is associated with the foreign host, the leader of the country vladimir putin of these games are obviously i'm talking about alexander ovechkin, the russian hockey team and is a friend of putin. very close friend i believe. so an interesting aspect of the washington, d.c. angle. so i've already said too much because we have a really terrific set of panelists. in which i will give brief introduction for all of them in the order in which they speak. the first speaker will be jeffrey mankoff, to my left as

the deputy director and fellow here at csis of the russia and eurasia program. speaking after jeff will be orden on analysts and advisory board member of the geostrategic forecasting corporation and gordon has been a visiting fellow here at csis. and i would point to in particular a report that he wrote on getting the caucasus emirate right and he is one of the world's leading authorities on the extremist groups terrorist groups individuals who are, in fact, threatening these games. gordon has a new book coming out very shortly. gordon, the title of the book is -- yes. global jihadism in russia's north caucasus and beyond. you know, it would've been good

for your publishers to think of it more about targeting have this book out before the games. but so be it. he will be speaking next, focusing on that topic. jeff is going to focus more i think on really in the russian angle, but these games mean for russia, what they mean for putin. and that angle. and i'm very very pleased and happy to welcome from the carnegie endowment for international peace, tom de waal who is senior associate their, and one of the world's leading authorities on the caucasus more broadly. and tom also has a reasonably new book out that's -- okay sorry, c-span. why isn't the name of your newest book easier to find?

give us the title spent actually i just did a new version of mine over. spent a new version of your old book. you've got to work on the marketing a little bit about that. >> of course you all have to read it. [inaudible] an updated version. >> okay. still, i didn't hear the title but, okay. sorry. all right, and then finally batting cleanup for very, very good reasons is our colleague here at csis in the transnational threats program, senior advisor juan zarate and juan will be talking i think more about kind of a broader terrorist threat and it's in particular how the u.s. is looking at this. he will be speaking from his direct experience in serving in the bush administration with

responsibilities for monitoring and dealing with these kinds of threats. so thank you very much for being here this morning, and let me turn the floor over to jeff. >> thank you. thanks to all of you for coming out this morning. i'm going to talk all of it about the decision to build and fix in sochi the role of putin and the significance of the games for putin and for the russians political elite more broadly. as andy alluded to, the decision told the olympics in sochi was an exporter one. this is one of the few cities in russia but doesn't actually have a serious got to know climate. it's incredible that they are worried there may not be snow at ski resorts and are stockpiling it. so given all that, given the proximity to the conflict zone given the weather challenges why on earth would you hold the olympics in sochi? and here i think it comes back in a lot of ways to the

personality of vladimir putin into the russian political elite more broadly. sochi has been a kind of summer capital for the russian elite going back at least to the soviet period. this was a resort town where a lot of the elite, they would take their families in the summer to go to the beach is where putin and a number of his close associates also own property. and as far as the proximity to the caucasus, i think there's an important note here as well. you have to remember that the instability that we see just down the road from sochi today was very different from how the region looked in 2007 when the games were awarded. at that point the second war in chechnya had largely ground to a close and the wider insurgency across the north caucasus hadn't really taken off yet. so it was a moment when it looked like this area was being stabilize when the worst of the excesses of the previous decade had finally come to an end.

and so for that reason i think there is an important element of trying to use the olympics as a way of showing the stability have returned to this region and more broadly, using it as an avenue for economic development that within like a foundation for more durable version of stability to break out across the wider region. now, of course russia and the caucasus in 2007 i think look a lot better than they do today. in a lot of ways the sochi games looked kind of like a soviet era not only project but also something on this idea of megalomania, that we often associate with soviet infrastructure -- infrastructure projects like the red rose or the dams the reversal of rivers that were being contemplated at one point for sudbury. this is a very top gun operation. it was an opportunity to channel back some of the money in destruction of new venues. it was an opportunity for large

amounts of that money to then be siphoned off. at the same time though because so much emphasis is being placed on this, because so much of the proceeds of putin and the broader elite is tied up in it there's been a lot of attention to what's going on inside so she. and actually the picture has been not a particularly pretty one. ..

vladimir putin said russia would spend $12 billion on running, preparing for these olympics. that would make them the most expensive winter games in history. the actual figure it looks like is going to be above $50 billion, somewhere around $51 billion disclosed by the anti correction of volume which has been batted around. that is not surprising because of the lack of interest the need to build up new venues to build transportation corridors to put the things in place you are going to need for the olympics. but at the same time a third of that money was out writesstolen. the story of the construction of the road between sochi, a very

short road, the cost of building it was estimated to be $8.7 billion. one journalist pointed out you could pay the entire road in caviar. most of the funding for this are coming from public coffers in one way or another. the government keeps emphasizing a lot of this is private, some of the oligarchs i being asked out of their own pockets to pay for different kinds of olympic venues different construction projects and that is true but at the same time this investment is being underwritten by loan guarantees from public banks which means ultimately at the end of the day it will be the taxpayers who are on the hook. few if any of these projects look like they are going to make money. at the same time olympic construction has been a huge

boom for organized crime resulting in kickbacks, shake downs, the whole litany of activities that one would expect from the russian underworld. given all of this, the heightened attention to security challenges, the fact that russia faces a whole host of broader difficulties that have been spreading over the last couple years it is not surprising there doesn't seem to be a lot of enthusiasm inside russia or out for the olympics. we had a speaker a week ago who is a leading russian opposition politician and we were discussing this and he said he remembered the contrast, pointing out the contrast between attitudes in russia today and attitudes in moscow in 1980 when the summer games were being held in the soviet union for the first time. in 1980 there was the probable cents there was a sense of pride

hosting the olympics, and a sense of defiance, there is much more apathy, people are aware of the corruption, aware that none of this will benefit them once the olympics question the expenditures on and they are worried about security. it seems according to the most recent estimates that only 70% of the tickets have been sold for most of the olympic events which given a week out from the opening ceremonies is a pretty extraordinary vote of no-confidence. at the same time, holding the olympics in russia in sochi has put russia and vladimir putin the global media spotlight at a time when the country is facing a number of challenges and the global spotlight has emphasized where russia seems to be going

off track. a lot of problems accumulating in that country. there is a lot of global mia attention on russia's gay-rights challenges and i don't think it is surprising that the u.s. delegation is headed by billie jean king. with you haven't seen a look at the uniforms the german team participating in the olympics, rainbow flags. it has become an opportunity for the outside world which is increasingly frustrated with vladimir putin's russia to make a point about all of the things they are struggling with. i think the government recognized some of the problems and the run-up to the olympics try to take some limited steps to address what they expected would be the most salient forces so russia's most prominent political person was released shortly before the olympics. the punk band close the riots was released and in part this seems to be an effort on the

part of the authorities to put things in a good lag before the global media, to change the narrative ahead of the olympics but i don't think they have succeeded. if you look at the list of who is not going to the opening ceremonies among international leaders i think that does say a lot about how the rest of the world views these games and views current political developments in russia. president obama is not going, vice president joe biden is not going, angela merkel is not going, shinto at the end tei pin ping are going. shaping the narrative for international audience, hard to say that so far at least the olympics have been a success and if there's a problem with one of the venues that failed, a terrorist attack that narrative will get more negative but at the end is important to remember who the main audience is.

it is important for vladimir putin to emphasize that russia is back, can hold an event on the scale of these games but the most important audience is domestic. how this plays in russia is in a lot of ways more important and so far we haven't seen an upsurge in enthusiasm. of the russian team does well and win gold medals and if the olympics got off without a hitch once the games are over after the closing ceremonies happen, we will evaluate them and right now it is a questionable proposition to think these olympics will function in the way vladimir putin and the russian police intended them to function when he went to guatemala city in 2007 and was given a right to host the olympics here. >> thank you very much, very comprehensive, might also note in the bond is not going though i don't think that is a

political statement. it reminds me of estimating what the soviet military budget was and i don't think we will ever find out. >> picking up where jeff left off this is potentially a very important turning point in post soviet russian history depending on the outcome of the games. we are very likely to see if we see some kind of catastrophic terrorist attack, complete reversal of what has been left of what i consider to have been a thaw under president medvedyev and a sharp turn to more hardline policies under vladimir putin. very important moment. turning to a more hard-line would be based on a major

attack a hard turn clamping down and rolling back of democracy in russia. to the threat, 7 months ago a paper for the jewish forecasting corp. and the sochi threat i outlined six features i thought were important. first, i am talking about potential perpetrators in the caucasus, the mujahedin, potential tactics and targets. first is suicide bombings run by the north caucuses which could be either dakhastani converts to islam which they specialize in recruiting for suicide bombings. attacks perpetrated by foreign groups, independently or in

league with the caucuses in the mujahedin, possible chemical attack involving groups from the caucasus who returned from syria and may have chemical weapons and two attempts inside russia that appear to be focused on perhaps targeting chemical weapons. suicide bombings run by caucuses dhuman maro and the brigade that he revised in 2009 and there have been since the formation of the caucuses 154 suicide bombings carried out since october of 2007, nine per year. and finally, next to last, attacks possibly involving chena chenadegi or ethnic turks given

the location of the olympics and the massacre that occurred in the late nineteenth century, there is an interest in the mood had been to participate so there is a wing in the caucus, might want to take apart, and it may take sochi, it would not take a major attack in moscow or coordinated attacks in each of the villas on major attack or event would be enough to spoil the olympics. so let me let each of those briefly in more detail. the dakhanistan threat using

dakhanistani suicide bombers or ethnic russian suicide bombers. is largely comes from a group led by aby mohammed, a pakistan viliat and shake mohammad boren sumanov and head of the central sector, abu tahir qadari and there are two key sub sectors. and turns out to have been the place where according to the national anti-terrorist committee reported yesterday that the two suicide bombers who attacked on december 29th and december thirtyth were from -- were suleman magadedov.

has several hundred and one of those is an ethnic russian gemot gemot. previous reports about a group called volusia had been --mujaha --mujahadeen the pakistan viliot used suicide bombings in february of 2011 in dagestan a colleague of theirs was apprehended by russian forces but not before he detonated and blew off his hand and was a would-be suicide bomber. the august 12th assassination of the most popular sheik in pakistan was carried out by an ethnic russian convert and her

handler was ethnic russian move ahead dean dmitri sahkharov in october. he was killed a week after that attack. and the emir of that group, when a deterrent in boca grande there were reports that the perpetrator was pablo pachokin an ethnic russian convert who was part of this russian jemot and there were several others. on january 19th there was a videotape on the dagestan web site, two mujahadin claiming to be from the answar al sureman group, one of those names,

corresponds with national anti-terrorist committee's claim of suleyman magomedov having taken -- okay, so this means that the -- the ethnic russians are still out there and may still be heard from. in fact the dagestan has been publishing all sorts of reasons material encouraging russians to rise up and talking about the ethnic russian. one of the key factors of the am amswar al sunna has done a lot

of attention, the day before there was a text announcement of the emir of this group who threaten the chemical weapons attack and to the order was on the table to be signed and russian troops had withdrawn and there would be an attack up to and including chemical attacks. a direct quote. the other potential is the potential of a foreign group joining in league with the caucuses, and an italian with the possibility of chemical weapons attack hundreds of caucuses and mujahadin and would be replacements to cover the attrition that occurs among mujahadin fighting in syria. some could have gotten their hands upon other chemical

weapons, and reports of people trying to come into turkey with certain elements. and there was a journalist who claimed the cia was reporting in spring to the obama administration the rebels had chemical weapons, and there was a possibility the rebels do have weapons. there are two groups of mujahadin in syria, one is fighting under -- and the otherj otherjaich snwar is, the military leader of the northern front of the islamic state in syria. and in fact he is now a high-ranking figure. the possibility that al qaeda

and to get chemical weapons into north caucasus for attack on sochi excluded. in terms of the chaqasi threat, how much time do i have? the network of the caucusus, sub network what we call the -- partially chaqasi populated groups have a direct interest in taking part. this network is much weaker than the dagestani network as is the chechen network but it is the second most powerful network and it is possible they would assign several mujahadin to make part, with the caveat that in february of 2011 they carried out a practice run for an attack on sochi, carried out an attack on the ski resort district multi

pronged attack involving destroying ski lift, truck bomb in front of a hotel killing four tourists from moscow and several other small-scale attacks on police virtually simultaneously within 48 hours. most of them within a 24-hour period. and alarm raised in connection with the foreign element is on january 13th for the russian national anti-terrorism committee claimed they had arrested five terrorists were part of, quote, and international terrorist organization in the capital of chaqasi. i would not expect the chaqasi operation to be led. one detail on the foreign element and the possibility of a chemical attack is a fought what --fatwa was issued and it was

requested by d 0 b k b. kay, from the web site sharia committee of one of the leading jihad operators in the world he is in prison and his sharia committee are working and issued fatwa in which they justified the suicide bombings and called for more especially against sochi and asked a group inside russia to make conflict with the caucus -- with the caucusus and cooperating carrying out any attacks. the fact that they put videos on their web site was a signal they had contacted the caucusus. finally in terms of operations other than attacking sochi i want to talk -- time is up. we can do that in questions.

belmar could be running of the four suicide bombers, three from dagestan and he is very close to the mujahadin and may be running that female suicide bomber. in terms of tactics there is little likelihood they would pick a target outside sochi attacked moscow or a major attack in malchick, i expect there will be multiple teams, the dagestani mujahadin, the epic russian mujahadin perhaps the chaqasi group being deployed simultaneously and so much the better if one or two get through or just one that is just the way the cookie crumbles. i am not optimistic about -- at

a minimum we will see a major uptick in jihad operation during the games, i think they're holding back resources. whether we will see a catastrophic attack, and clear. the caucusus are good at using various tactics, determined and resourceful and innovative. we are going to have to be ready for almost anything. >> that is a very sobering presentation but it is the reality. one of the other unique aspects of these games, we have not mentioned the leader of the caucusus emirates' whether that he is dead or alive, he directly threatened the games back in july, effectively calling for those that are in his network or those and/or those that support

the ideology and goals he is supporting to effectively take off the handcuffs civilians are fair game everybody is fair game. my own personal view about doku umarov is it doesn't matter whether he is dead or alive for the sochi games themselves because unlike the most infamous and effective terrorist from the north caucusus who was killed in 2006 finally, he was hands-on in carrying out operations. doku umarov not so much certainly for the future of the caucusus after the sochi games, whether he is dead or alive. at any rate, thanks very much. it was terrific. tom, the floor is yours.

>> thank you for the invitation. it is great to be here. my only regret is sergei is in moscow. he has written a great report. two presentations from my colleagues to take us back to july of 2007, a reminder that that was a point in which when the games were awarded to sochi this was the moment in which vladimir putin looked on these games with great ambition that this would be a turning point for north caucusus. he probably envisioned this would be the moment the world came back to the north caucusus discovered that the caucusus were not as bad as the media portrayed it to be. this would be a kind of vladimir putin managed event of

multiculturalism and it would be a kind of local event in which his vision was vindicated. unfortunately as we know, that is not what it turned out to be breaking out a year later. in a georgia he would have predicted in july of 2007 when the games were given to sochi that a year later russia would be recognizing -- this wave of enthusiasm has fallen, last year, there was a bit more enthusiasm with the election of a new government in a georgia departure -- that this could be an opportunity. i remember the georgian foreign minister saying to me just about

a month after it they came into office maybe i am being idealistic but i would like to get in my car and drive and attend the sochi games, it might be in great. that also proved to be an illusion the georgian olympic games will be going to sochi but no politicians. they decided not to do that which is the right decision. there is an opinion poll that 66% of georgians approve of the decision to go to the games and 17% oppose it but it is clearly not going to be a kind of event of great coming together and reconciliation. and the ambition for this game was that it would be a way to leverage these games to be put on the map.

suddenly there would be if not a delegation that somehow they would be inserted some out into the games and that hasn't happened. vladimir putin's ambition was scaled way down to the point where the ambition is to get through these games unscathed and for people to talk about skiing and skating rather than terrorism which is what we all want to see but clearly the fact the we are here today still talking about terrorism and security threats a week before the games shows where the reality is. in that regard vladimir putin has shed some of his more ambitious goals for the caucusus and focused on caucusus lockdown so the georgians are welcome to come but this is not a time -- other than the things already going on in georgia/russia

relations with trade. the out side being left out of the picture is this a huge security event around sochi, no longer able to cross the border. the rest of the north caucusus vehicles are no longer allowed to come into sochi and there is this a 11 kilometer security zone south of the so river. which is basically an extra security threats. this is being portrayed in the media inaccurately as a moving of the border. the georgian foreign ministry complained naturally they would. this is not any territory georgia has controlled for 20

years in soviet time. the abkhaz are being restricted. a friend who i corresponded about this with said we can make it across the border as pedestrians but we can't drive across. this is really going to be the lockdown games and the objective clearly is that there is going to be note terrorist incidents within the greater sochi area and no spectators or athletes suffer and maybe they will pull that off. as borden was saying that increases the risk of being in a different part ofgordon was saying that increases the risk of being in a different part of russia during the games. i think this has been a bit overblown. the previous georgian government tried to instrumental lies the chaqasi to pass a resolution

recognizing a genocide but that was treated with some skepticism by lot of sarkhasians as part -- they are many different ethnic groups, and the ones who were from the sochi area, indigenous people before the russians arrived, people who really no longer are on the ground, maybe a few thousand shops, 3,000 or 4,000 but most of those if they are anywhere their descendants living in turkey or gordon all they really wanted was to be acknowledged that they existed, that they are indigenous people from this kerri and by

coincidence or black coincidence the 150th anniversary of the massacre and deportation in 1864 happened on this precise spot where the games are being held. little more sensitivity from the russian government would have gone along way. unfortunately the russian government, vladimir coo and are not famed for this kind of sensitivity towards ethnic minorities. sergei reminds us in 2010 they went to the vancouver olympics sending out the wrong signal given that the cossacks associated with the destruction of the native peoples. i don't anticipate, wouldn't anticipate any kind of effort by sarkhasian to disrupt the games. if there is -- these are

islamists not sarkhasian nationalists. we have seen islamists targeting people with a national agenda in places like bulgaria in the north caucusus we have seen a few fascinations of academics who have been trying to portray non islamist identity for the sarkhasians. just to finally a few extra words about the north caucusus. i should also mention another reason abkhazia is problematic which no one has mentioned so i should mention september 9th the russian vice consul in abkhazia was assassinated, the main suspect is a chechen who was wounded in georgia. that is a different subplot.

that is a reason for the russians to regard abkhazia as a problem and a threat to these games rather than as an opportunity. a couple words about north caucusus. gordon and i would agree we have differences of perspective of problems in the north caucusus he knows the details-left over chechen war lord who didn't have to be killed when basically the chechen insurgency was finally defeated in the yearly 2,000s. he successfully read branded himself as a kind of islamist leader but it is not clear to me, they have a good web site

and branding and the russian interest to kind of pay attention to the caucusus but to me looking at it from a difference, who doesn't study it day-by-day, looks like an umbrella organization in which the individual operatives have a very loose if any association, if you are pakistani islamist i think doku umarov is a leftover it chechen nationalists warlord who doesn't feel much affinity, we don't have a map here but we should also remember the north caucusus is very long, pakistan which is obviously the most hostile and dangerous part of it is a long way from sochi.

and what happens in dagestan has no relationship to what happened in sochi itself. what is happening in dagestan i think looks to be very unfortunate. it looks to be vladimir putin again having a very short-term response to the games, lots of reports of rounding up marginal young men, the kind of young men who could be sitting at home doing nothing or if they are rounded up and abused by the police could be going over to the militants, and i think the new head of dagestan was trying to control those people back into the fold but because of the tactical response to the sochi games, people being rounded up that makes the problem worse. just to some up this is not going to be unfortunately a

moment of great caucusus reconciliation between georgians and russians it is going to be at best games where there will be heavy security presence, where there is going to be all these raises done with many with net costs being trained by russian security personnel and the best we can hope for is to get through without any major incidents. >> thank you for the comprehensive perspective, bringing in a broader look at the caucusus and the political and security challenges and threats regarding anniversaries, to at the closing ceremonies on feb. 23th will be the 70st

anniversary of stalin's deportation of the chechens not a particularly happy anniversary to take place during the games and the fact that it takes place on the final day of the games, i don't know who was planning the timing of that. let me turn now to my great colleague and friend one zarate. in many of the things i was negligent about in my introduction this morning, juan is the author of a recently published book entitled treasuries war:the unleashing of a new era of financial warfare. the floor is yours. >> thank you. an honor to be part of this panel. the advantage of being last is i can ride the intellectual blake of the big brains in my wake and

also commend you the report and congratulate sergei for a digestible compendium of the analysis but also great source of data points as you look through the document great research and great revelations of interesting points. what i thought i would do as opposed to rehash what the real experts have to say on this is to give you a sense how the u.s. may be perceiving this and is proceeding the threats from the games. i had the advantage of being in the government during several olympics and the beijing olympics to coordinate u.s. security and potential response to threats. it is fair to say not from an alarmist standpoint but an objective standpoint given everything we heard and

everything we know that these are the most dangerous olympic games since 9/11 given both a threat environment and given all of the opportunities various groups gordon laid out have in terms of this game. let me lay out how the u.s. might view this and why i suggested the most dangerous context of the olympic games since 9/11. in the first instance the u.s. used the terrorist threat as serious, that is defined by the intent of the groups that could threaten the games, the capability of those groups and the opportunity. let me go through that simply and quickly because that is how the intelligence community and the policy community thinks about and categorizes threats and in this context makes very clear why it is that the u.s. is

concerned with threats. first you have the declared intent of groups to disrupt the olympics. it is clear, from the senior most readership of the various groups, the caucusus emirates in particular, doku umarov significant and important the july of 2013 statement is not just a call for attacks from the games and massive disruption but the lifting of the moratorium on attacks on civilian targets which is in essence a call to arms and an opening of the targets around the sochi olympics and not just the venues but also the transportation hubs and other venues that are potentially vulnerable and the site of soft targets. in terms of capabilities we have obviously seen over the last decade the ability of a variety of groups to hit not just in the

caucusus but in the russian heartland with not just efficiency but great devastation. we saw this in boca grande --bul --bulgagrad and the description in the report is you have these groups that are not only motivated and have the intent but have practiced the capabilities and mastered a variety of vectors to attack. that is to say these are groups that don't just specify these the groups that can plan a variety of ways to attack secured site and unsecured sites. you have seen this with singular suicide bombers, coordinated attacks, truck bombs and bus bombs and the use of multiple militants in targeted assaults and you have seen their willingness and ability over the

course of the last decade to attack all sorts of venues that are vulnerable, transportation hubs, metro attacks and the rail line attacks you have seen a tax on schools, security police stations, hospitals, so these are groups that not only have the intent demonstrated capability to attack from a variety of factors and are well practiced in many ways in how to do this. finally the opportunity obviously as jeffrey laid out, the olympics is a center stage for world attention, you have the media there, all of the world watching and hopefully watching for the right reasons, success on the slopes and the eyes, terrorists understand not just the significance of the

games but the significance of the games to vladimir putin and the personalization of the game in some ways presents a red flag, and attractiveness for these groups to demonstrate their ability to attack and embarrass vladimir putin and the russians in a very important way. i take you back to the july 2013 statement from doku umarov that not only called for attacks on the sochi games and lifted the moratorium on attacking civilian targets but called for a new face in the law work for liberation in the caucuses and the establishment of the emirates and what is most interesting to me from the point of view for the broader threat, variety of terrorist groups not just from the caucusus but central asian groups like iau or returning fighters from the

syrian conflict of foreign fighters that flow in is the attack and this may be a moment of convergence, not just the rejuvenation of the fight and accelerated terrorist campaign from some of these groups under the banner of the caucuses -- caucusus and rex but rejuvenation of the global jihadis narrative about attacks against russia as the near and far enemy in the global jihadis narrative and by that i mean not only has chechnya and dagestan always been part of the global jihadis narrative as seen most recently in ayman al zwaawahiri 's speech about the noble fighters, and the backing of what is viewed as the global jihad groups as the backing of the

slaughter of sunni muslims has really put itself back into the heart of the global jihad the narrative as a key potential target forced to hit and that may not manifest itself in sochi but it certainly will manifest itself in the future and that is an important point. in the mind ofs likely of the group's operating at a caucus -- caucusus this is a moment to embarrass the russians but also an opportunity for the global jihad the narrative to take advantage of sochi and take advantage of a moment of real generation. the environment itself presents opportunities so it is not just the potential to attack in sochi, to launch attacks or provide logistical support, the report lays out a recent

instance of terrorist cashs captured, weaponry and supplies in abkhazia. the environment itself provide opportunity logistically. ..

and citizens who are visiting. two other key points of concern for the u.s. government that have i think accelerated over the last couple of weeks. one is the continued lack of visibility into what the russians are seeing in the doing in terms of the actual terrorist threats or threat they are falling into the disruptions that are under way. there's no question the russians are following threats. we have seen reports of the black widows that may have been overblown but there are concerns about particular terrorist operatives and threats, and it's clear as well that the russian forces have been engaged in counterterrorism and counter insurgency operations knocking down doors engaged in firefights and particular to be as involved as possible. and the reported death is still

unclear if that is accurate as andy indicated but the lack of visibility concerns the u.s. government, because that creates a blind spot for the potential threats to the u.s. interest at the site. though i would say there's been nothing at least publicly that suggests there are the direct threats at the u.s. athletes but they are a part of the environment, and the concern over this is manifested in symbol signals. you have seen for example of the advisory for the u.s. athletes not to wear identifying including outside of secure then use. that is a concern the u.s. government has that there may be vulnerable. utter is a concern about contingency planning. every country that goes through security planning are now that the olympics wants to demonstrate not only they can put on a successful game but they want to demonstrate their security services are professional, they can do it on

their own terms and this is many planes of nationalist pride. so often you won't get as much visibility as you want regardless of the allied. even in london it was and sort of complete and open visibility. every country manages security at an even talk like this on their own terms, but i do think there is an important set of concerns about how the u.s. government might plan for worst-case scenarios for example how one thinks about a potential eve activation -- evacuation. nothing to suggest that is going to happen that you have to plan for the worst. and i would say bringing into this the u.s. political environment interestingly enough the post-benghazi world there's the question whether the government is proceeding that ret appropriately repositioning

assets the right way and planning for again, worst-case scenario has been much of the criticism in the post-benghazi review. and so that's a way of thinking about u.s. concerns. let me not be labour this but let me just reference three broad points that i think are important to note. one is a matter of scheduling. this may be helpful to you and your publisher, but keep in mind we have not just the olympic games in february but we have the c3 in march so we have a two month window of potential vulnerability in sochi. but i would say is the terrorist groups likely don't mind too much if their attack planning moves into march and they are able to effectuate the rather significant attack that may not

be when nbc has 24/coverage but the paralymics is quite widespread. you remember how that was in the london context how popular it was, you can imagine again the terrorists if they do not have an opening opportunity that's right in february, thinking that the opportunities might a rise in march, so keep in mind this is a larger window than one would imagine. second, this is actually a moment of great opportunity of cooperation between the u.s. and russia. it's always a moment of potential cooperation around multinational security events where information sharing cooperation can be enhanced and you have seen this in the u.s. government trying to push this with the offering of more fbi agents and security personnel from the state diplomatic security on the ground, the

offering of four technology from the department of defense and offer of more coordination and turns of planning on the ground. it is not clear to me if the russians are taking fuller advantage of this, and they aren't but it's important to note that this is a moment of opportunity in the relationship between the u.s. and russia because there is a coincidence of interest in having a safe and successful games and ensuring that the terrorists do not succeed in disrupting them. finally, just to reiterate the point, and it's an unfortunate reality that the perception of insecurity in many ways does perhaps not just as much damage materially, but psychologically. it to the extent this is the game's to be locked down because of security or where any time a terrorist group says boo and the russians run or the u.s. security officials have to

respond, that unfortunately is a success for these groups come and again, keeping in mind that sochi may not be the end of the story for these groups in many ways for the groups and the caucuses and the global jihadi networks. this may be the beginning of a chapter and viewing it that way is a way of viewing the threat differently and explains why as i said at the start, this may be the most dangerous olympic games we have seen since 9/11. >> that was an insightful presentation. i would like to make a couple of comments. one that builds directly on the points that you made in the last one. to me this sochi games, looking at the protagonists, the

terrorist groups not only russian-based juan intimated, the image of the american narrative high noon at the corale or the sort of ultimate for the terrorists i would suggest this target, and not necessarily in sochi itself but throughout the russian federation the efforts to spoil the games some house of this is the holy grail of juicy targets for the russian based terrorists groups. and just to amplify on the very insightful remarks that jeffrey made, for vladimir putin, his

political career, he emerged virtually from aware when he was named prime minister in 1999. his political career is a national political figure in russia skyrocketed on the perceived success in the beginning of the second chechnya or after they made the incursions' in pakistan after the fall of 1999. putin has said on many occasions that he sees himself actually having a special role, almost a messy role for him to stabilize the caucusus, so why all of the world's attention is on this region anything that would further tarnished that narrative of his i think is very significant.

and i think the point that gordon was making is that this could be a very significant inflection point for mr. putin himself because he has so much riding on the success on these games. one point and this is at csis, we believe in appropriately referencing the source of insight. as a point i want to make that jeff made a couple weeks ago at a press conference that well, okay, we know that these are locked down games and putin has guaranteed security. of course nobody can guarantee the security of anything in reality, but i think the real point is that any security system is only as strong as its weakest link and in this case

the deep corruption of russia including security forces police and others is a real problem. it's been a real problem that's facilitated successful terrorist attacks in the past, and possibly successful terrorist attacks in the future. finally, i have an inquiry from foreign affairs in the week is their something that hasn't really been covered about the sochi games and that led me to think with all of the trees that have been filled and commentary about the sochi games my question was okay this is my title, you can't use it. what if you had an olympics and nobody came? jeff mentioned the attendance

issue and there's 70% of the tickets have been sold, which of course may or may not be true. whatever amount of tickets had actually been sold or those tickets really going to be used? obviously the interest of the international community in attending the games has been dramatically reduced. i think there have been serious reservations on the part of many russians citizens themselves. now, when i raised this in our session with the opposition figure that jeff kringen for vladimir here on monday he said that isn't going to be a problem because look the russian authorities are very effective in busing people in for the rallies or e elections to vote

chicago style many times and the like. nevertheless though, i think there should be some concern about -- it would look rather embarrassing if international cameras are on the stand and it doesn't appear that -- movie attendance is really a problem. and just tied to that, let's not forget the possibility of well people of course talked about the lgbt community making some kind of a demonstration or a whole set of possible actors that have reasons for making some kind of using the podium of the games to use a demonstration in some way, shape or form. but the one thing that struck me, i was recalling the ultimate fighting competition that was held at the olympics stadium in doors, large venue in moscow a couple years ago and put in --

putin. a russian did someone and he used that to make some russian remarks to the crowd of thousands and he was booed and hissed very very embarrassing. so something of that nature could transpire also. and like all of my colleagues of course we hope that none of these threats and challenges that we have outlined here in our opening remarks will come to transpire, but i will be watching these games with a special-interest. and let me also -- i want to acknowledge sergei for the work that he has done and i'm sorry he's not able to be with us today. i also want to take the opportunity to thank the carnegie corporation of new york that supported the fellowship of

sergei here and also the publication of the report. so let me now open up the floor to questions and comments. if i may i would like to turn over to an old friend here who has arrived in washington in of late summer of last year. that is the esteemed ambassador to georgia. >> for the others, please identify yourself briefly for us. >> thank you distinguished panel georgia holds a unique angle on russia generally.

as the new government which came to power months ago and decided to review its policy towards russia to slightly improve the relationship with russia to mitigate the risks what has happened. and they've decided to change the policies of the old government and during the games not to boycott them. so very small but still. and also the georgian government offered the russian government cooperation on security. so far we haven't received any response from russia but nonetheless, we indicated to signal to them that we are in favor of the conduct of the games because if anything bad happens it is in nobody's interest except for those doing

that. especially for georgia who is the closest to the foreign country that enables the site, immediate neighbors of the games, and as we all know the russians especially the government who fails to prevent from happening this undesirable thing to try to find scapegoats elsewhere. sometimes, many times russia would by doing so would point at georgia, and georgia once these games to go peacefully. i would agree with andy. i don't remember any olympic games, summer or winter games we were not talking about which of

the national teams would get how many medals. this time we talk about whether or not they will be peaceful so this is the first-ever instance we are very much concerned about the safety of the games. and i gather from this panel the possibility of a terrorist attack is there and is quite likely. so my question would be to the panel in case anything of this kind happens in russia, what this would mean for putin and their representation of russia as a safe place to hold this kind of event because down the road we also -- and we have the world cup games.

what kind of implication this kind of an undesirable event have? paralymics. >> paralymics, ambassador. but me express my hope that georgia brings home some gold. what we also know that we are over time to moderate and showing of late the panel is prepared to be here until 10:45 and obviously you have not been held hostage. let me turn now to jeff and juan to make a brief comment to the investor's question. >> the point that the ambassador made to the folks of the olympics on the security rather than the medal count is right and quite striking. there have been terrorist attacks in olympics in the past.

in munich in 1992 and most notably in atlanta in '96. what was different about those is that in the aftermath of them had nobody used them to call into question the legitimacy of the political system, the country holding the olympics. because so much of the russian government's and putin's procedure is tied up in these olympics. it sends a very negative signal internationally and also within the country that could have i think long-running political fallout. you mentioned also the g20 and the world cup. i think regardless if there is a successful attack on the olympics or not complications that we have already seen that run up to the games i'm sure is treating heartburn in the headquarters when they think about having to do an event that is even larger than the olympics spread across the entire country if you have security challenges

with regard to single venues, imagine that now multiplied by multiple times across the country for all the different places you could be holding the world cup. so i think it is to be a problem that we could see come up again and again as russia continues to hold these international events in the years to come. a cynic would depend on the nature of the event of course and so the scope what matter. and i think also the reaction on how the russians responded. whether or not the what is viewed as competent and helpful because i think it's, as jeffrey , atlanta happened but the games didn't collapse or the sense that the u.s. was in the appropriate venue for the future major international event. what a be the type of scope and

real vulnerability is that really do colin to material questions russia's ability to hold these kind of defense. and i think we are all hoping and praying that things go very well. but if something were to happen that would happen immediately. >> line with the bbc and i wonder if you can tell me what you think the most serious number one threat and also with the u.s. is doing about that. >> in terms of likelihood probably suicide bombings, but i wouldn't think the threat to undertake a chemical attack. that could have been psychological terror. that may have been the purpose. on the other hand, who knows. >> with respect to the u.s. and what they do the u.s. intelligence community and law enforcement try to understand any particular threat other than

the broader environment which they understand very well but the particular threat which is why the question of disability -- visible but he becomes important. they are trying to alter any cooperation and the u.s. is preparing contingency plans, so that is what you do in an environment like this. but at the end of the day coming you are be holding on the host governments willing to cooperate, and their effectiveness in preparing for the event and any eventuality. >> just a brief comment. i want to highlight of the syria aspect in the chemical weapons issue as gordon has talked about. if you go back to assad's decision to give up his chemical weapons, which undoubtedly in my mind, he was basically given an ultimatum by mr. putin and the

russians that either you do this or we will no longer be able to support you in any way shape or form. we can talk about that more. i think the question is to which actually assad and the syrian forces were and are able to control an have effective control over their chemical weapons arsenal which was disbursed in 40 plus places around the country. that has worried me for a long time. let's go to this side. yes. >> alisa with eir magazine. after the bombings at the end of september, the russian foreign ministry issued a statement that said that these attacks were very much like what's happened in the united states and libya and syria and they went as far as to say all of these attacks were coming from the same quarters. second saying this is -- these

are -- this is a global issue. it didn't just happen and volgograd. what better than hosting a in a place close to chechnya and these different conflicts, but they are being held there. and my question is to further underscore the issue of global terrorism and not just the attack on sochi if you remember in the summer at the height of the syrian crisis crest from saudi arabia held a meeting with putin and said if you don't back off your support of assad we cannot guarantee they will not attack sochi and he said we've finance them. so, for the united states to have all of this discussion about security and the corruption of putin for the united states to continue to call saudi arabia and ally i think is just a little bit

hypocritical. so my question -- my direct question is how we raise the level of collaboration between the united states and russia and have a conversation about the saudis and other terrorism because if something happens in sochi, that isn't russia's problem, that's our problem as well. thanks. >> i am not sure that saudi arabia said that. there is no stenogram of that meeting so i have my doubts. i think that was put out by a iranian source. the other thing to keep in mind i think is when discussing you can pretty much leaves out the word chechnya. this is now the worldwide cooperation, and the dagestanis are leading the charge since

2010. that doesn't mean it's irrelevant. i agree with what was said earlier but we don't have time to go into that. the third point is it is part of a global jihadis movement. it's not an affiliate of al qaeda but that doesn't mean it doesn't share the goals and the ideologies. i will just leave it there. a cynic it's certainly a strategic opportunity for russia to reinforce its message with respect to what's happening in syria, so there is no question that is the potential here and in some ways as i said earlier it is a moment of potential cooperation but in the u.s. and russia, whether it is on who we is fueling this and what is behind it etc. but there is a narrative ideological command to a certain extent, connectivity between what happens in the caucasus and what happens in syria because that is how the group's view it and for me this

is an interesting moment of understanding sochi and what's happened in the caucuses and -- caucusus and syria becomes the resurrection of the al qaeda driven moment from the sunni violent. that doesn't mean that assad should stay. we have to policy goals in syria and not just one. >> two quick comments on this. one, let's remember the boston marathon bombing the tsarnaev brothers. this was an intelligence failure that took place on the united states territory. but also highlighted a two things. one, it was a failure in the u.s. russian collaboration security cooperation. number three i think it emphasized to the united states intelligence community and the

security community and the importance of tracking the caucusus as a seedbed for the global terrorism. next question comment. we are running out of time. you had your hand up earlier. >> i am a professor at george mason and george washington on terrorism and the question, you kind of stole my thunder and it's also patriot's day which is when the marathon bombing was for us too. but with all of this talk concerning the terrorist attacks and potential terrorist attacks and the e-mail that was sent out to the kennedys and -- committees haven't the terrorists pretty much already won by suppressing the attendance were the popularity's of the olympics coming into the

question i have is when do they lose all the international prestige because of this and he put his name on this olympics and how does that translate internationally to the prestige and the credibility when it comes to some of these other events and negotiating power on the united states like with snowden or chinese or whatever on the international realm. >> great question. the other point in the previous question is the united states have wanted to cross with russians that they have not been very enthusiastic about it. that is an issue. where is the red line for mr. putin, jeff? >> i don't know. i don't know if we can say if x then y. we are going to have to wait and see what happens.

the games can surpass expectations and go off without any terrorist attacks occurring and they could do very well. i want to emphasize again, that because so much of the audience that putin is focusing on the performance of the athletes is going to matter in terms of how they are perceived in the narrative that he is -- putin is trying to get across to his own constituency. on the international perspective, i don't know. i would be curious to hear juan's thoughts on this. we already know that this is a problem for russia and there hasn't been as much cooperation as we would have liked on the counterterrorism issue, but there are still all of these other areas and whether it is syria or iran or china or anything else. where we are kind of condemned to work together and i think that's not going to change regardless of what does or doesn't happen at the olympics.

>> [inaudible] >> this may be very easy but sad question and that is on the global showcase which is the olympics based on the personification of the olympics and as the panel has so well described. has any panelist imagined a terrorist group not making an attempt how that could be thwarted in its early stages but can anyone imagine that they would ignore this opportunity? >> we will start with juan. >> they haven't ignored the opportunity and they will take advantage. the one thing to keep in mind with these types of groups is they will take a vintage of the opportunity and they will strike when they are ready. and so, they have been thinking about this for a while and this

is why i raised the march window because it may not be that it comes at the second week of february. it may be down the road. >> concluding remarks, please. >> are they going to take the opportunity against itself targets hundreds of thousands of miles? >> on the previous question, i think that they are already trying to take the tax on going. the timing may be different. on the previous question they are going for something bigger. unless the stadiums are completely empty, then they can say that's a victory. but they are going for something bigger. they are very much like umar and the dagestanis and give a big

bang so to speak not to use a pun but i think that's what you're going for. >> i would agree with the previous commentators. this is a golden opportunity for the insurgents to make a point to the media as well as everybody in russia that is focusing on what happens in sochi. they've already made an attempt both successful and unsuccessful and i would be completely -- they are continuing to make the preparation, yes i think those attempts will continue. >> my answer is yes, of course. i would conclude by saying that we have emphasized what mr. putin has riding on these games more in the negatives but if there isn't a successful terrorist attack in some way she bore for me even though there's already been significant kind of disturbance because of what's happened and what has been said

then this would be looked at as some sort of defeat for those that have announced that these games are a target and having said that that threat isn't going to go away anytime soon because unfortunately, the sources that are generating those that are inspired to make these kind of the attacks isn't going away anytime soon. let me thank juan, gordon jeff for attending in your excellent questions. may we not have a reason to have a press conference or a meeting at csis during or after the

they're very effective in helping communities health care

centers, grocery stores, small businesses in some cases charter schools. so energy efficient commercial real estate development, all within underserved communities in urban centers and rural areas. i think the mission and the idea is quite compelling. the problem with the cdfi model is it's very difficult to scale. we are small. we do work in philadelphia baltimore, new jersey, washington, d.c. on a very limited scale and it's very difficult for us to scale and gain, have impact because we're just not big. that's a problem with the cdfi model to this point. we need creative people thinking about how to make the model work better and more effectively i think in theory it's an interesting idea because it

marries public resources and benefit with private capital private capital directly the investment, so probably will be more effective and efficient. it's quite interesting but we need to figure how to scale it up, that's the problem. >> i was going to say that actually touches on a third question which is what can you do now. one of the things you can do right now is fund the housing trust fund and the capital magnet fund. 33 senators asked to do just that upon him actually assume his new position. i think we can get those funds to those programs like the capital magnet fund and cdfi right now, and oblique that's exactly what he will do. >> this panel looks at the future of the government reported finance agencies, fannie mae and freddie mac, and the legislation to eliminate

their roles in the process. this is just over one hour. >> who's 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 on its dismantling fanning and freddie the right thing for consumers and the housing market as a whole. they are well known to you. for those of you who are giving the program at home and elsewhere, at work invite you to participate in the twitterverse by using hashtag lockedout. i'm going to start with introductions from the far side from me of the podium. we are joined by bill emerson. many of you know bill. is the chief executive officer

of quicken loans which is the nations largest online home loan lender, as well is going -- eagerly serves as vice chair of the mortgage bankers association, congratulations, and jury member of the financial services roundtable housing policy council, a very active group in the space that we are talking about. then we're joined by a very, very well-known gentlemen, jim millstein. welcome, jim. he is the ceo chairman of millstein & co. he has a very gene cretz me and i invited one to look at his full resume in the packet. he was referred to by "the wall street journal" as quote participant in the super bowl of corporate turnaround with regard to american international groups, successful restructuring. as well he's been involved in some the nation's largest bankruptcies both in the private

sector and the treasury department. next we have john taylor. john taylor is the president and ceo, a friend, golly, an advocate. john, three decades? >> not quite. >> okay. for many years 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 failed lending affordable sustainable housing and for responsible lending in the nation. welcome, john. then we are also with your our colleague jim carr whose closest to me. jim is extremely well-known and i think many of you have read some of his research over the years. he is currently senior fellow with the center for american progress and is a distinguished scholar at the opportunity agenda. he previously served as chief business officer with the national community reinvestment

coalition and has published record on issues that we'll 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 at fannie mae. and the last i want to introduce my good friend and colleague over the years, one of our nation's premier premier authors and a syndicated column with the "washington post" writers group ken harney. he will be moderating this panel. over the years he has covered a host of issues with regard to financial reform, appraiser, mortgage settlement and often his articles written from the perspective of someone who can really communicate with average americans about the residential marketplace, homeownership, issues challenging our economy that resonate with the broader public. we are delighted that ken is

able to moderate this panel. let me just say to those of you who were concerned 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. i'd like to begin this by picking up on a subject that came up in the question and answer session that preceded this, and that gets to do what can be done now. we look at earlier this week we heard in the state of the union, the president say that in the absence of cooperation of congress on his achieving key goals, he will look to the executive action. now it seems to me that with the arrival of mel watt at fhfa this is 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 are sitting on this panel with mel. what would you tell him that you recommend that you do in the first year and in the subsequent years lex 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 is eligible to securitize alone. as many people know the average credit score rose over last year to about 760. most americans should understand if that was the standard for

most americans going into homeownership, as americans including whites would not be in homeownership. so the first thing is what happened to that broader scale that the used use in terms of credit scores? obviously with the former head of the agency that regulates fannie and freddie he did not have a commitment. we are hoping that mel watt well. i think the second thing he could do and they think this is an important thing, it might be a surprise to some people having listened to the last panel which is calling for the creation of a fund to great the trust fund but they already exist. they already exist. they are will. mel watt has the capability do something that his predecessor ed demarco did not do that is to actually fully funded these things. so creating legislation, we can go and find something that already exists as the policy for

stimulating affordable housing doesn't make any sense because we have the ability to do that. that's two big things. i would defer to my colleague jim carr, because he has written extensively on this. >> it's an excellent question and i think every time a question. before saying what i would suggest he do i would give a little context as to why he needs to do. the why is important because all of the major legislation right now that's proposed to revamp the housing system proposes to take away fannie mae and freddie mac. $5 trillion worth of institution is going to be a heavy lift. we know given the state of legislation right now we are not likely going to have a bill that is passed in both houses of congress going to the president getting signed to even if it happened this year it would take years to implement a new system in which we literally closed fannie and freddie and replaced them with a new system. so the imperative is to act now

because high credit scores are combined with very high down payments of nearly 20%. so that is not the market that we've had for the past more than three decades. so we need to get back to linking to the typical american household, and it just turns out that, a lot of people confuse with affordable. we're talking about linking to the american public. the point is we can do it today. 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 a hater around lost medication to we still have a lot of families in the for closure pipeline who 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. and we need to do something

about ensuring that the taxpayers are protected from future losses. right now the way i understand and they haven't been able to get a clear conclusion about this is that all the dogs simply go to the treasury. we need to be backstopping against the american public so that they are not on the hook for losses going forward. a final thing is within that affordability context, we can come back to it, there's a lot that can be done but we need to be really looking at how we can leverage this market that it has shut out moderate income people. it has closed its doors to conventional market. not only go back to serving the traditional affordable 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 homeownership rather than sort of having a complete focus and fixation on investor purchases of formally owned housing because i believe that

introduces the market risk as well. >> bill, what would you say to mel? what do you plan to say to mel? [laughter] spent i haven't talked to mel yet. open to do that. i would say he has already taken a first step. you're talking the average credit scores of 760. ed demarco is going to put in increase in. by simply stopping it and pausing that you get to this conversation back to keeping it where it is today which i think is better for the overall market. today. you have to talk about linking in the space that we're talking about on this panel, you have to start there. obviously, i think -- >> the are a lot of acronyms and stuff. >> and guaranteed fees from the fannie and freddie that raise the cost to lenders and consumers of being able to make

a mortgage spent which raises the cost. >> and the proposal is going to make it much more draconian than what is in place today. when you think about when the crisis took place, prices increased in for any credit score below 722 is a significant higher cost. you saw people go to fha. we've seen the problems with fha taken place with a fund so as i talk to mel first of all, thank you for doing that. i think you some good folks around them already that understand the housing process. i think that's a great move and he continues to do that. to your point, thank you what can be done that does not require registration, i think there's a lot to be done. mel is taken from director so he can set the action that can be a transitional step regardless of what the in statement look like for fannie and freddie. making sure that whatever the

outcome comes from the transition, there's liquidity available, a market that allows non-bank lender to trade a security because there's simply not enough bank balance sheets to cover the $10 trillion marketplace that we have. i think some things he's done, there's more he can do what i do think that the first of his get the right team to evaluate the situation. >> so, i would tell him to tread very carefully. because you got -- i mean he is a conservator over two entities who, there's a bill pending in the house and the senate sort of. introduced in the senate, but one that is passed the services committee. unless you want to turn the next the first part of his tenure into a donnybrook between

the house and the senate and himself, i think he's got to start a dialogue with both houses on was the future of these two entities. are we really wanted him down? -- winding them down. or a week reform is interviewed on a sensible transition path back to private ownership. and restructuring the government guarantee. i think there's been a lot -- it's amazing five years ended conservatorship, we still of no consensus on what the end state is. and i think having a confirmed director may give the administration a chance to develop a proposal which five years and, they have been developed, with regard to where they want to move the housing

finance system. fannie and freddie play an enormous role in the housing finance system today. you know the path of least resistance is to do nothing because they are producing, they are providing mortgage access, albeit tighter credit scores, but they are providing the secondary market access. and together with gene their providing 90% of the mortgage credit in often in america today. the profit from the system as you point out all being swept into the general treasury to pay for other things. 20 million americans for the privilege of making deficit reduction. it's crazy tax policy, crazy housing policy for the government to have this footprint. five years into this we need some leadership. so i think he could come he is an experienced guy. i have great respect for him and i think he has a chance to be the focal point of the discussion that is yet to be

had, and honest discussion that is yet to be had about how were going to move to a new future and whether we're really going to liquidate these two dominant giants and transfer them and restructure them. >> you both have perspectives of the financial markets that are unique. i think a lease on this panel what about debt reduction in terms of modification? this is a huge issue for demarco, great conversation. would that be on your list for mel? >> look, this is one of those washington issues, you know you get a lot more -- you get a lot more partisanship around it citibank jpmorgan commercial banking industry does modifications and principal reduction's all the time if it creates a net present value, if it's the best return for the lender to do so. they have done tons of them.

demarco planted a flag and said we're not doing this. you know i think he was wrong. i think that fannie and freddie could easily have done a good chunk of that and it would've proven to be a net present value positive. it would've been positive for taxpayers but ideologically he determined that was no place he wanted to go. sticking it in the eye of the administration, and that's fine. his prerogative as an unconfirmed director appointed by previous administration to poke this administration any odd but i don't think it was a sensible decision to i think we made much more of it than it really was worth. >> i think it's a political discussion. at the end of the day, you're right, private entities have done what they did because it made sense to does the. do i think as public policy that should be endorsed? probably not but at the end of the day i still think from a business perspective and to what

is best for the management of the portfolio, whether that's a personal, a bank balance sheet or fannie and freddie's balance sheet. ed haldeman is being funded by the taxpayer. let's look at what is best. >> you could easily have created a standard that said among the options for modification they should be considered and whatever is the highest return to the lender in terms of a loan modification principle or interest reduction, all of these things should been on the table. but for ideological reasons he chose not to do so. >> it's not over. we still have millions of people who are either heading toward or very foreclosed -- or close to foreclosure or could be in for closure. and it's true the private sector, the big banks working through the hamp program have done a number of modifications. much more so than the government fannie and freddie. as an organization that funds

100 organizations to help middle-class and working-class americans stay in their homes you would've had a lot more cooperation from banks and we have from fannie and freddie. for the reason you say. i think at the market decide we just didn't want to have a part of this. you're right, had fannie and freddie stepped up the way a number of the banks did and begin to allow their portfolios of modifications, first off the reputation for them would've been enhanced but also it would've been a net positive for them to do that. were important and most importantly, we would have helped so many millions more americans to stabilize and reduce the number of foreclosures that are occurring throughout the country now. it's not over. there's still opportunity to do that and i hope we see that. >> i think it's important to add that their own numbers show it was a net positive to the taxpayer of a billion dollars.

it could be even greater savings. it's not as if it's just a political issue, and again subsidies which we talked about earlier. it's a net benefit as measured by the fhfa itself under its leader at that time, demarco. so it should be on the list. >> absolutely. >> jim mentioned -- this is a political question. this is a political town, this is a fairly political audience. fannie and freddie our political creatures so i would like to raise what is essentially a political question about the timeline, and timeline relates to urgency. let me throw out a scenario, and let me hear your reactions to that. as someone standing off to the side not involved in these issues on capitol hill it seems to me that number one although there will be efforts in the senate and apparently there is a bill coming from the democrats on the house side, that there is virtually no chance of any real

resolution of this problem as jim points out incredibly has been going on for five years. so it's an election year the parties are very far apart obviously. let's assume as many people project that the election really doesn't change the mixture all that much. the democrats lose a little bit in the senate, republicans may lose a couple seats in the house, but basically of democratic control on the senate side and republican control on the house. so you have a continuation into 2015. maybe we have some optimists, maybe someone has seen some like that i don't see. after that check off 2015. 2016 is an election year. change in the basic formula,

projecting this out let's say you might get some changes in the house and senate. certainly you get a change in the white house for 2017. and this and that will going have at least a five or seven year transition period to any new system, are we really looking at questions that take us out to 2022, 2023, incredible, before you have an actual legal structural change? does anyone see any urgency given the fact that fannie and freddie, although we did hear some people, some in to the contrary earlier this week in las vegas, they earn a lot of money and so that takes off the pressure from psychological i think in the back of had some people on the hill for the urgency of change. does anyone see -- is this a recent scenario or am i missing

some claims that are out there? >> the fact that they do earn a lot of money also great pressure to do away with them so that somebody else can earn that money. that's what this is all about. that's why this conversation is so important. the predictors of whether something will happen this quarter are not happen for a few years, and you've got to look at a couple of realities. one is we already have a so called bipartisan bill found in u.s.-centric with a partisan bill on the house side. we now know and we heard that the leadership from the senate banking committee krehbiel and johnson from are going to propose their own bill. that's getting closer to the top. and then you here in the form of michael stegman a comment the administration without afford housing, without the mission like that for fannie and freddie there is no point in having this gses, in my opinion.

so i think there's a lot a consistent look and what's been driving this can tell remember this organization called fm watch, the very big bank organizing because they didn't like the scanty fees, they didn't like the cost of doing business with fannie and freddie and they really -- and why isn't that we as a big investment bank, why aren't we making a profit and a lot of that to our benefit? why are we paying this private company that has government sponsorship? for the average american, need to understand this is a major game changing event that's going to occur in the united states. if fannie and freddie, if they are charged to pull the of for housing goals disappear, this is something that is going to affect every american in this country, the value of their homes, access to mortgages. we already heard from aaron from

young invincibles about the difficulty that population is having. that's the one that shores up the housing industry. they are the new homebuyers ethics allow the existing homebuyers to move up. creating a system in which the is obligation make sure that working-class people, white-black, brown, yellow native americans, they all have access if they can show that they're willing to work hard, that they are credit would become that they have access just the way it up or middle income person would have access. that's what is at stake here. the children, the future generation, always talking about the next 20 million new homebuyers or something like 30 million of them will be people of color. are we really couldn't have a system that's going to 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 refinancing of housing and all the economics of surround a healthy housing environment? no one has done more for that system than fannie and freddie. look, i don't have any -- 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 have done over the years. they are at least a third of the america's today directly contribute to the fact that have a mortgage and probably if you go back before the, the majority of 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 for republicans? it's amazing. but, you know, that's what we are messing with. we are messing with what was at one time the healthiest, strongest, home mortgage finance market in the country. we are about to take a. where are we going to take this

business and put it? we are going to put into the institutions that led us into the subprime of this that fannie followed into. and he didn't and freddie didn't lead on that. >> can i interrupt? >> please, stop me. last night. >> going back to ken's question i think i'm an optimist also so take this with a grain of salt but i think the johnson-crapo bill if it is introduced will fix many of the flaws of the other bill. i think they've taken research laid the mission of looking at warner and bring people in and sing what's wrong with this and how do we fix it and had two great something that provides for a stable housing finance system in the future that protects us against the things of the past? with all due respect to the mortgage market we have just gone through the largest financial crisis in for generations. at the center was mortgage finance. we more than doubled in seven

years the aggregate indebtedness on the housing from for and have turned at the turn-of-the-century to 11,000 in 2007. and fannie and freddie have a part to play in that. no doubt wall street had a bigger part to play in that. and i think we have to be careful to promote credit as the path to success in the united states. income is important. wealth derived from -- straddling a population with debts that they cannot service is no path to a great future for a 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 the wealth is their home. most americans do not own securities except in the pension system. if they are lucky enough to have a penchant.

so houses are 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. i think what happened here is this. i think there is a series of dialog around what the transition is out of what is now a totally dominant system. totally dominate by the government. and if are lucky, the house will engage in and across the chamber dialogue about this. >> the house leadership hasn't brought it to the floor for a vote. they have brought 40 repeals of the obamacare but there are no votes for it on for for it on the floor. it's an ideological statement. it's not a practical piece of legislation. so i do think there is a desire to get beyond the

conservatorships, which on the current path is going to be at least until 2022 before this is over because whatever the transition is, it's going to take a very long time. but we can't finish it until we started editing the crapo-johnson bill will form the basis of a bipartisan conversation across both houses. and whether they get to do it in the lame-duck session in 2014 or into 2015 vote i think it can one engage them if fhfa engaged and administration engages around that bill i think we can then have the possibility of real reform. >> i agree. teenagers are just the about crapo-johnson because i think if you don't get something from them by the end of march, just 14 goodbye. starting 215 and we have a philosophy and a company called he have to take the rust out of the oven. until there's something -- until

you get something out you can have a debate about it's going to continue the way it does today. to your point, when you say if there aren't affordable housing goals, i don't care if it's fannie and freddie, face it, fannie and freddie the function they perform still provide affordable housing even if the goalposts existed i'm not debating whether it should or shouldn't but if they go away tomorrow, there's just not enough, you have a very small mortgage market. and so the fact they're making money, great. the one thing i fear is using that money to pay for things a to go into the government whether payroll tax increase of things like that that's not good business either. we've got to figure out a solution. i agree with you that this is a complicated, complex thing to try to get with his knees to look like. that technology, the process that exists in these entities today needs to be harvested and figured out. if fannie and freddie -- reform

still is taking some of the stuff that they're doing today using the indicator, keeping the liquidity piece of this in place, calling it something different i don't know if that matters at all. >> i know the joys we can make your, enchanting name is bobby a good thing at least for people in washington. i talk to people around the country -- >> i think i should collect taylor and milstein. [laughter] >> which one would be fannie? >> i leave that up to you guys to figure out. >> just the other thing on the table is simply, don't fix what is not broken. we actually did have a very robust system of mortgage securitization. that fannie and freddie played a huge role in. there wasn't enough conspiracy. they are 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 extend credit to people who are not credit worthy and who don't have the ability to pay, we fix the. we passed a law. the best thing ever happened to letters in america was dodd-frank. we made it illegal for them to do the stuff they did before. just in case that wasn't enough we created a consumer financial protection bureau. finally, consumers have some protection by jeff fisher, people with badges where they can go in and find people who do bad things. so actually we cleaned up a lot. it doesn't mean people are degraded and mortgage lenders and others are not going to do things to try to mess things up. but the truth is it's not the same environment. remember again, fannie and freddie followed the free market. the free market was free to abuse and fraud and all the other things they did. they followed them. they didn't leave that. after losing a trillion dollars of the marketshare.

we are about to throw the baby out with the bathwater along with the plumbing, the top the whole bit. what i'm saying is let's fix what was wrong with fannie and freddie, keep the system that was once -- i remember being in south africa and people were talking of fannie and freddie, what a great system. notwithstanding the problems you might have had. other governments looking at it as a model to we're about to put in the private sector which played a major role in the kind of subprime distribution of loans and problems we had in the past. so why do you to create something new, and industry, rather than fix where we see the problems and make sure we have a robust, strong system? >> you are advocating reform. spent i just call it something different spirit the original question about the timeframe and go to appoint jimmy. i think it's important but it needs further conversation. so it may be true that we give jonathan crapo -- johnson-crapo

what most people's a represents a legal bill the fact that it isn't going anywhere doesn't change the nature of the house and its prospective 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 affordably right and johnson-crapo cannot be improved by going to a house that has a pass act as sort of their leading example or idea of what the housing finance system of the future would be. you would end up with a compromise in which he come right back with a compromised bill that is less accessible than the current housing market which by the way the conventional market is mostly refinancing. it's a big refinance bill because it's not funding mortgage purchases for the american household, for the american population. 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. i do agree with one thing jim said which is the idea that the

new director mel watt shoulda members of congress to forget what is the real intentions behind closed doors. because the housing market is 15-18% of the us economy. one of the reasons were not producing jobs, one of the recent homeownership markets to is because we don't have a strong economy. we don't have five to 10 years to wait and flip our thumbs when effect what to entities which if we address them right now we can make the housing market work anyway we need it to work while still having these sidebar conversation about legislation and perfected even for the. it's not a matter of the door. it's right now fixed the system and to look at if you want to improve it. but this people are not out of the market while we are waiting to improve. >> i largely agree with that, but i do -- >> when i going to come up with alleged solution unless they have a consensus on what went wrong.

hear me out a little bit. karl rove taught us all if you repeat a lie often enough people start to believe it's too. the american enterprise institute has promulgated the big lie that fannie and freddie cause the financial crisis, simplifying a very complicated event in the history of the united states down to two billions. it's wrong. it was never right, and we've got to get over it. unfortunately for the house and the senate they've got to get over the big lie. we're going -- but for the affordable housing universe, and i'm in alliance been done here, here are also going to get recognize that fannie and freddie were broken. that allowing private corporations to pedal a government guarantee to run a government sponsored hedge funds up to 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 coverage to go shopping for the benefit of the shareholders. so we have to fix that and we have to make sure that this system is properly capitalized. that we don't have cute huge entities dominating 40% of the market which is where they were in '04 before they went crazy, wander around with 25 basis points of capital with $4.5 trillion of risk. >> we could beat this to death for a couple of hours. let me move on to another question that i think is potentially fairly important. gym, i would like you to address this. all the proposals from the administration to what you the senate and house talk about private capital being the basis for the upcoming solution. given the regulatory environment

that we now have i keep on hearing people say i want to get out of the mortgage business, it's such a pain. some moderate sized people are upset about the regulations that dodd-frank has brought in to 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? and to what extent does the existence of the capital and the demands of the capital help shape the final solution? >> yeah. so, look, 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 is manufactured along a long manufactured line from the guy, a mortgage broker or banker at the front and sign a consumer up for a loan all the way through to the wall street giants are packaging and securitizing these loans. the big consequence of the crisis and the complete collapse of the private securitization market is the private investor commuting has lost complete faith in at least two of the three pillars on which this digitization, the private-label securities asian market was built. diversification which is a basic principle of structured finance actually work. but the underwriting was horrible, and they guarantee function that was provided by the rating agencies assurance that this is a credit where the instrument also was horrible. so you that two of the fundamental pillars on which the

market was based, the underwriters and the rating agencies completely -- it's going to take a long time for that to be rebuilt. you will have people on the margins prepared, you know, hedge funds who can afford and credit funds who can afford to really spend time and again to the securities. but today, if you look at the markets today while the private-label securities asian market is growing, they did $20 billion in a trillion and a half dollar business last year. so sort of little bit more than 1.5% of all securitizations in the market base were done by the private-label market. and that's reflective of the fact that the institutional -- institutions that compose the private markets will he have blown their own reputation with the investor commuting. and the new institutions, your

institution brentwood trust there's a couple of new style 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 at a government guarantee market. so the real issue to me is how do you transition out of a system where we had no capital backing, and a government run conservatorship to a point where we actually have capital backing, 4.5 trillion $51 and we have standards that are set. fan and freddie have provided this for 40 years. they have been standard setters and the servicing business, in the securitization business. and that is what is missing in the private-label securities asian business that standards and investor conference in an

and freddie, so we have to build on that as a way to attract and keep capital, private capital coming back into the system. >> build? >> as an eloquent response, and i agree. private capital -- the one thing i would say that top of that is private capital needs to know what the rules are. but to that point, outside of cuban you in a private market to come back and play. so for all the points jim talks about, the private market isn't coming back to play in any non-cuban space. so when you talk about access to credit, qm is the box. i think it will have to be a lot of evaluation about what that box looks like. to me is getting the credit box right for everyone. but intake into 3.5% have fha loan 5% have conventional loan

those things do exist today. yuki balled of stuff in place. but back to the private market peace, 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] private investors don't trust the private market. they don't trust anybody other than fannie and freddie because fannie and freddie have the best of the government behind them. that's why they are the business. that's what i keep seeing dodd-frank was the best thing because it's a message to the private investors it's safe to come back to the water. the rating agencies will not be able to give aaa ratings to 85% of the high cost loans that were made at the beginning of 2000 and on. fannie and freddie they are simply, they are still to be trusted. what's ironic is what's being

proposed and never on the table seems to be keep fannie and freddie. what is being proposed is get rid of them. and now we'll go from an implied guarantee that we had for fannie and freddie and given an explicit guarantee to the private lender that the private investors still don't trust, but we're going to give an explicit guarantee and anybody who doesn't fit into the box will go to fha which is now 100% taxpayer guarantee for those loans. why are we reinventing the system to essentially make it harder for average working working-class americans to be able to get a mortgage? it makes no sense to me. >> you are presenting an outcome which i don't think -- i think we should all wait, take a deep breath and wait -- >> i've been breathing deep. >> i do think some of us -- i propose a transition plan out of the conservatorship were fannie and freddie to survive and they

become the first of the private guarantors to play in the new system. so ensure we have some private guarantors to play in the system. but i totally agree with the notion that the government should be providing the guarantee in arms length for a fee, building a reserve fund trying to protect taxpayers against laws. i think that's a 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 directly that capital and make sure it has adequate capital to absorb the first laws. something that fannie and freddie did not have. so i think -- i don't think -- >> making sure the working-class americans use it as a build to build wealth. >> i think there are problems in that. >> do you think that ought to be with the new system?

>> we 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, are the funds. and to allow by analogy, the highway trust fund is going to use the new securitization system whether private-label or governments say you should be paying a fee into a trust fund and those trust funds should be allocated out. >> this is the great misunderstanding of so many people involved in this debate. let me make this clear so people understand. the trust fund is a fee-based thing that puts at max as you heard about $5 billion. so it is explicitly for low and very low income, mostly rental housing, not to mention money for a bunch of research outfit as was the community development financial institution to

different aspects. and for research people to do research on housing. that's what they are for. >> is not under necessary -- >> well, what's been proposed. what's been proposed so far we can talk about pie in the sky until something is put on the table. as opposed to, right now we already have laws that say that has to happen. a trust fund and a capital magnet fund but it's supposed to be funded by fannie and freddie. the problem is that conservative decide not to do that. number one. number two, the biggest contribution that fannie and freddie make has nothing to do with those subsidized housing study talked about in the trust fund. it's an their obligation to serve all credit worthy borrowers without a subsidy that amounts -- this is what mark looked up $500 billion worth of securitization during the course

of the year, even under the demarco rules diminish the goals as low as it could. they did in 2012 $260 billion with the securitization of affordable housing bill which, including 600,000 rental units mostly low-income. and by the way, under the goals and under the regulations, those subprime loans and eligible under affordable housing. also a -- alt-a is primary overwhelmingly go to low income people. is that even that which is serving the population were most concerned with. but by regulation the fannie and freddie goes really -- the most important thing, nothing to do with the trust fund and magnified, both of which we support, but by regulation they have to go to people don't need a subsidy of who happen to be a truck driver or work in a

bakery or work for a newspaper and they're trying to get a mortgage only they're not making two and $50,000 a year. they are moderate income picked fannie and freddie have to serve them and that's what they did and that's what did you. and what we are doing is we are converging and confusion trust fund and the subsidy with what the market does. this is what people have got to understand because that's what is at stake here. not having that affirmative obligation because that disappears under the card proposal. >> as i said i talked to a lot of people about it and i think in the primary market, cra is a pretty straightforward thing. to take the deposits from the community, you've got to put them back. did you do deserve and a second market is much more compensated. >> any other thoughts on that? >> yeah. i think one of the ways jim's

comment on the profitable investment portfolio and appropriate for the gses things like you said that their government guarantee, i'm assuming you meant the fact it was an implicit guarantee. these are all things that can be addressed right now. so we don't need to wind up institutions down to fix both in so the question i think we ought to be asking is what is it that we cannot accomplish right now through administrative action. and if we can accomplish everything through administrative action why are we sitting on the sidelines waiting? that is i think the message to director mel watt as he takes over now but it doesn't mean you can't consider to perfect the system. but what is it -- when i say i'm the kind of earnings for firms. i'm talking about outcome public post at them for the american public, meaning build homeownership, revamp the effectiveness and efficiency of the housing market, rebuild the engine of opportunity that is greeted by a large housing

sector and serving all populations and build 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 is missing from so much of theofthe legislation because you're legislation this as we can do this, we can do that, but in terms of the outcome and how it creates a better performer housing market, you just don't hear. a ghost to john's point about serving the broad market. a 5% down payment for a bar with a six over five credit score is not subsidized. it's called a typical american mortgage housel. since the great recession and to your point jim i think it's good you put on the table, the misconception that it put out there to detract from what caused the crisis and as result what has to happen. but put it back into operating position. >> look, i think there are lots of things that can be done administratively. the conservator has a very broad

powers. but the fundamental -- the essence of fannie and freddie and the charter they got in 1938 and freddie got 40 years later and it created that implied guarantee and he cannot change that without congress. he cannot change their charter or he could up the assets into a delaware corporation and privatize them but they both have the benefit -- [inaudible] spinning do you remember how much it was? >> they have the right to borrow $5 billion in the treasury. >> right. by the way -- >> you can fool some people some of the time. [talking over each other] >> it's called the fdic. >> i don't think the fdic is what failed. >> no. but this is speeded know.

i'm saying -- >> i'm with you. i'm going to make your point for you. [laughter] the right wants to take fannie and freddie get the government out of housing, but the banking system doesn't have enough deposits to step in and take their place, and the banking system doesn't benefit from an explicit guaranteed to get benefits from and expressed guarantee. they have deposit guarantees from the fdic which prevents runs during a crisis and have the right to borrow from the fed, all of which they did during the crisis. >> i think the man with the hook was standing up there and he wants to move on to the questions. >> i think we're making progress progress. this has been a very good colloquy. i have six questions i'm going to share with our panelists for the thought and the feedback. and actually, i think they also follow the conversation very nicely. the first question as we were

looking at new legislation, is it possible to develop a simple transparent, measurable and enforceable set of goals with regard to affordable housing goal whatever entity is in existence? second question today, the u.s. census department is releasing homeownership data and they will undoubtedly report that latinos hispanics, have accounted for more than 50% of residential ownership growth in the united states. how will the absence of affordable housing goals impact on the future of populations such as the latino population in joint homeownership? the third question, sort of a mix of response and the question. michael sackman claimed that the gses were profitable only because of a tax break and the bailout. but isn't the same true for the major national banks who would benefit from some of the proposals on the hill? question number four, the

speakers have not addressed the possibility of a public utility model for the government sponsored enterprises. are there any thoughts about that? number five, is there any little urgency possible as a result that we are in an escalating interest environment for homeowners across the country? is there a likelihood that we may see a bill because of this change in the economy right now? and then number six, how do we ensure market liquidity and continuity in all communities in all markets across the united states? especially those impacted by foreclosure, recession, and the absence of private capital. ken? >> i'll start with -- >> jim? >> one of the things, again we have to learn from our experience. so if you look at what occurred over the last, between 2007-

2007-2009, basically private capital fled to the housing market crashed. all private capital, the banking system with do and started reducing lending to the mortgage market, and the only game in town were ginny, fannie and freddie. and they did exactly what they were designed to do which is to be countercyclical providers of credit to step in when the private market isn't there. we cannot lose that function unless we're prepared to lead our fortunes and our home values be subject to the animal spirit of the private markets which come and go. and you could see the impact you can see the impact on the real economy the kinds of crashes and enthusiasm for financial assets that occurred in those -- the fourth quarter

of 2008. the real economy dropped almost 10% in one core as result of the financial crisis. so we are very lucky as americans that in the last great financial crisis of our country, in the '30s emergency powers were built in to the fdic to the fed, and into the fha to allow them to step in and play the role of countercyclical 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. >> anybody else speak with a comet about what the earnings were from fannie and freddie. it sounds bad but of course we don't -- it's standard, transfer funds from loss reserves, tax

consequences, that's what have a tax code, et cetera, et cetera. it's part of what's being in business. .. >> goals are a way of helping to make sure that the public support for the housing system actually serves a public policy, which is to serve the american public. and what's really interesting is you go back to the 1930s when the current modern housing finance system was structured. it was not str