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tv   US Senate  CSPAN  November 20, 2015 10:00am-8:01pm EST

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growth in 2016. let's turn now to the rental market, because a lot of these new, young households are going to to start off in the rental market. and often times we think of rental as just being apartments, and a lot of them are. there's no question about it. but a lot of rental stock is single-family. in fact, more than a third of the rental sock in the u.s. is -- stock in the u.s. is detached single-family houses. let's take a look at the rental market initially, and let's focus first on the apartment market and then the house market. overall, rental market conditions continue to tighten in the rental market. this is a survey conducted by the national hullty housing -- multihousing -- [inaudible] speaking to property managers in lots of different areas, and they asked them over the last three months have conditions in
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the markets that you follow tightened? that is, are vacancy rates going down? rents rising more rapidly? have they tightened? and overall, still on average, we continue to see some tightening in rental markets on average around the country, even compared to just three months ago. so rental markets clearly have continued to tighten even though vacancy rates are low and rents a rising faster than overall inflation. jason referred earlier to the rise in multi-family construction and how multi-family construction has returned back to levels that it was at prior to the great recession. and that's absolutely true. but what i think is so interesting is not just that multi-family starts are up, but multi-family starts for rental apartments are up substantially and are running at the highest level in almost 30 years.
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so developers have responded to low vacancy rates, rising rents and are constructing rental, multifamily rental apartments. now, may be natural to ask, well, gee, with all these apartments being constructed and can coming on the market, is there enough demand? are they being occupied? rented? and, indeed, absorption rates of newly-completed rental apartments are extraordinarily high. absorption rates, that is the percent of newly-completed apartments that are rented or occupied within three months or six months, those absorption rates are currently at the high itself level in ten years. so there is demand, and the new completions are being rented, occupied, absorbed into the rental stock. i want to just share some thoughts on the single-family rental market. we've seen a really large
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increase in the stock of single-family, detached rental houses in the u.s. since 2006. and, of course, a reason for that is because of the great recession, the foreclosure cry is sis which -- crisis which then led to a large number of homes transferred from overoccupant status and placed into the rental market. and between 2006 and 2013, the number of single-family detached rental houses increased three million. it increased from nine million in 2006 to twelve million in 2013. that's a one-third increase in the space of just a very short amount of time. it's a large increase in the number of single-family detached rental houses. and we highlighted in green some of those markets that have actually seen a doubling in the number of single-family rental
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houses in that local metro area. and some of them are, you know, places where the foreclosure has particularly hard like phoenix and las vegas. but what we've observed in our data is vacancy rates, rental vacancy rates on single family houses remain very low compared to rental apartments indicating that this continues to be very strong demand for the rental houses even though there's been this big supply, this big increase in the number of single family detached rental houses in the rental stocks. and when we look at rent growth on husbands, rental house -- houses, rental houses, we see nationally the average rent
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growth is 4% over the last year. so pretty comparable to what we're seeing in the apartment market, rental apartment market, 4% on average. but, of coursing, it varies by metro area. some markets are a lot hotter or, tighter. seeing much more rapid growth in rent over the last year on single-family rental houses, and other markets are a bit softer where rents are stagnant or maybe even declining a little bit over the past year. i want to turn now to the owner and the sales market. what we've seen in our data is a rise in home sales over the last year. home sales purpose 2015 once -- for 2015 will be up about 5%, and we're anticipating begin the macro backdrop that we'll see a further gain in home sales in 2016. a little bit more home sales,
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maybe 5% or higher in 206. that will put home sales in 2016 at the highest level since 2007. that's nine years. that's to good, that's good. but, again, put things in perspective, even with that gain home sales in 2016 will still be below what they were in 2000, 2001, 2002, 2003. so the overall turnover rate of homes in the housing stock is still relatively low compared to what we typically see. house prices, i mentioned earlier, we're expecting that they will continue to rise in national indices, we're expecting about a 4-5% rise in the national house price index in the u.s. we've already seen a fair recovery since the drop in house prices in 2011 depending on which index you look at, house prices, national indices roughed
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in 2011 -- troughed in 2011 or 2012. so they're up about 37% from that trough, but they're still a good deal below where they were at the peak in 2006 now, we expect with our house price forecast that by the middle of 2017, the house price index in nominal terms will once again approach or be at where it was in 2006. in nominal terms. but, of course, in that period from 2006, the prior peak, up through 2017 we've had some inflation. not a whole lot, but we've had some inflation so that even when the national price index atapes that new -- attains that new peak in middle of 2017 as we're expecting, in real terms house prices will still be roughly 18% below where they were in 2006.
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so i think that's a good thing to keep in mind. oftentimes i hear people say, oh, my gosh, must be another bubble. keep in mind that in real terms prices would still be 18% below where they were in 2006 even when we hit that new peak in middle of 2017. so we've already had 37% house price growth in the cost, why do we think that'll be sustained and continued? one reason is that the for sale inventory of homes continues to be extraordinarily lean not only across the u.s., but in many markets that we follow. and the for sale inventory, new homes, resales relative to the housing stock. and what we see is that the for sale inventory has been really very, very low, a very lean inventory for an extended period of time.
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the leanest inventory that we've seen for an extended period of time in the last 30 years. so that helps to sustain the price gains that we've seen, and i think it makes conditions ripe for further gains in house prices going forward. those are national figures, and it's helpful to keep in mind that the experience in local markets really varies substantially. some markets, again, are very, very hot, and those hot markets, houses sell for quickly. house price growth is a lot more than 4 or 5% over the last year, it's closer to double digits, and there are other markets that are a lot softer. homes stay on the market a really long time before they transact, and house price appreciation -- if there is any -- is very, very low. not even keeping up, perhaps, with inflation. so conditions do vary by market, but overall inventory remains quite low. we've constructed a housing credit index at corelogic that
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takes into account various factors with credibility, and the higher the value of the index, the easier it is to get credit, the more available it is, the lower the value of the index, the tighter. credit the is, the more challenging the availability or the accesses s. be we've traced it back over the last 20 years, and availability currently is still running very tight in the marketplace. there are half a dozen factors we take into account, some that tie in with underwriting, some that tie in with the channel at which consumers access credit. and overall, credit still seems to be relatively tight compared to what we've seen over the last 20 years. and we can take a look at each of those six dimensions that we look at in forming the housing credit index to see where is it
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tight. and when we look across those six dimensions, we can compare, say, recent originations with, say, the average in 2000, 2001. and what we see is that the tightness is not along the ltv dimension, a hitting bit on pay and -- a little bit on pay and income. it's mostly for low credit score applicants and mostly in terms of applicants looking for loan document loans. pretty much everything is fully documented. i want to turn now with, to talk about the origination be markets. as i mentioned at the outset, we expect overall single-family originations to be lower in 2016, that's the height of the war, and you can see it comes down about 10% or so in 2016 compared to 2015. what i think was so interesting
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to keep in mind is that the mix between purchase and re-fi changes. so we expect purchase money which is a rent component to rise in 2016 because we got 5 percent be more home sales, and we've got rough hi 5% increase -- roughly 5% increase in the national house price index. so that feeds more purchase money originations in dollar volume. so we have purchase money up about 10-12% in 2016, but we got higher mortgage rates. and higher mortgage rates then choke off that incentive to refinance to those folks who aren't refinanced yet. so we expect refinance originations to drop by more than a third. as that drop in refinance pulls down purchase money, total single-family originations. contrast that with multi-family originations which in dollar volumes were at a record level last year, this year is even better, and we expect that to
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rise a little bit further in 2016 in part because of increases in property values helping to sustain origination in the index, helping to support property transactions, and further we've got this big increase in multifamily construction. so as the construction loans turn to permanent loans and over the course of the next year, that adds to originations as well. so we're looking for a little different trend in multifamily compared to single-family. so we cover a lot of material. overall the macroeconomic and demographic backdrop is very supportive for the housing market overall, especially the increase that we're expecting in that household formation. among those younger millennials -- finally leaving the nest -- they'll help to support rental demand in the course of the next year, keeping
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rental markets tight, and we expect the improving economy and continued high levels of consumer confidence to help to support the owner market as well. i think we've got time for a few questions. dr. bradley. >> yeah. could you talk a little bit more about the single-family rental market? two things. one, is that going, you know, given a lot of that was housing banking people buying housing very cheap, is that going to be sold back into the ownership market as people dispose of those properties, or is it going to -- >> and a core area question. do youdo you know anything aboue ownership of the single-family rental in terms of where these
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single owners are the accumulations and so forth which will have an impact on the dynamics of how those things get disposed of. >> so great questions, and just a reminder if you can introduce yourself when you ask the question. dr. bradley, would you like to introduce yourself? [laughter] >> ex-freddie mac, and now i'm kind of a private consultant. [laughter] ..
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>> >> to send a positive net flow that they are gaining on the properties. we're not expecting any big sell-off in the next year or two over a long period of time we will see some of those transition back into order status. >> national association of homebuilders. frank, you showed a picture that i worry about that is the low inventory of existing homes for sale. it seems to be a quirk in the turnover in general and specifically because the majority of people who buy a
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new home are those to sell the existing homes of we have a low turnover we will have a low turnover of new homes. day you have any explanation why that is low you mentioned it is historically low. >> it is a great question several factors contribute to the relatively low turnover rates you mentioned the new home's part of that is construction supply new house construction remains relatively depressed compared to the level we would normally expect to see them that as part of the equation the overall inventory is low but there is other changes that the flow into the marketplace has fallen off considerably
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over the last few years so that decline is a net reduction of inventory of existing homes coming on to the marketplace we also had millions of people who refinanced by a sure many of you have the last few years to walk-in -- locking in the cheap cheaper rates that i have mentioned if he did at the right time perhaps you have a 3% contract rate or lower in many homeowners in that position are perfectly fine with a really low mortgage payment that they have. ordinarily they may have chosen to sell and to move they are happy to have this cheap pavement that affect their decision to delay selling their home and putting it on the market and
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that is contributing to the inventory of the homes for sale. >> national association of hispanic real-estate professionals. you mentioned those lb forming households or to enter the market to buy the home. kid you explain those demographic changes? >> absolutely. by age there is the big wave coming into the market but there is a change if you look at if you compare the millenials may be compared to their parents but race and ethnicity, with the
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households that are forming. and in fact, projections and of household growth over the next decade somewhere around 11 or 30 million households are formed over the next decade, for those to be the minority headed households. is a very different mix and diversity compared to what the u.s. has seen fakes for your time. [applause]
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, of. >> that was fantastic in many of those statistics are on the app you can download. we will take a 15 minute break and then we will introduce you to the next round. [inaudible conversations] >> a short break of the daylong coverage of the housing symposium. up next in 50 minutes of panel on consumer financial health and well-being set to begin 10:35 a.m.. live coverage chauncey's been to. as president obama begins in southeast asia he is in malaysia for the final leg of the trip after a short
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flight from the of philippines and while in malaysia he met with the country's prime minister telling them there were tears to seize the hotel setting a short-term extension of highway funding in the united states senate kissinger is then idealist from the harvards of the '50s but it is the of distinction to stand up from the pack of people of the systems analysis
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>> all persons having business before the honorable supreme court of the united states give their attention. >> on c-span landmark cases we will discuss brown verses board of education for a third grader linda brown separate but equal would drive her a mile to be all black school even though the all white school was a few blocks away her father sued
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the school and made it to the supreme court. we will examine this case to explore racial tensions at the time of the individuals involved and the long-term impact of the decision. coming up on the next landmark cases live 9:00 p.m. eastern on c-span, c-span 3 and seized a radio. order your copy of the companion book $8.85 plus shipping at c-span.org / landmark. >> irritated chair of economic advisers offered remarks on ways to strengthen economic prosperity in the u.s. >> thanks so much for having me here today to talk to a broader set of issues
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ultimately what we're interested in is how much productivity growth we have which is the size of the pie and how of productivity growth is shared. housing plays an important role in particular to the effect on the mobility and dynamism of the economy so that aspect in particular lens the regulation with the role it plays with what i will be talking about today. the backdrop is the cyclical recovery of housing has continued to be quite strong residential investments is helping to lead gdp growth 4.6% annual over the last
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two years, housing construction continues to rise over 1 million units per year. prices are up that has cut the number of households and underwater in half relative to five years ago. the rising housing wealth has played an important role of one of the bright spots driving u.s. economy forward which is consumer spending. financial and market reforms have improved of the housing market although we continue to seek credit growing more slowly than we would like especially for many underserved communities and that's is the push of the administration that i will talk more about later. as we have seen this cyclical recovery that urban
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has led in the analysis christ kraft that has affordable rentals. and the other structural issue that i will be talking about is excessive use or zoning restriction to flow productivity growth and raising inequality. of course, there are many benefits to land-use restrictions that served a legitimate purpose in terms of health or safety of the environment but the growth has been excessive and has created economic rent in excess of return to one
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chapter production above and beyond the cost and that economic rent in turn leads to the economic problems that i talk about but also to create an opportunity if you can introduce more competition to reduce barriers, you can improve the efficiency and growth while reducing inequality at the same time and that is the holy grail and other areas like this like the rise of occupational licensing. of people getting jobs are moving between jobs. there is a discussion that has a long history published over 50 years ago and was that economic research to fill in the picture.
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so starting with a backdrop which was a familiar set of facts with the rise of equality. 1973 more than two-thirds of and come with to the bottom 90 percent of households now that is 50% going to the bottom 90% at the same time that i has been distributed unequally it has grown more slowly. productivity growth was growing in the decades up through 1973 and since then productivity growth is 1.8% per year. and over time it accumulates to a dramatic difference.
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at the same time you have seen a variety of measures of dynamism in the economy declined. the rates at which people move between states or change jobs or occupations occupations, businesses create or destroy jobs and all of those have gone down steadily for many decades. we don't fully understand all of the trends of any quality and productivity and dynamism that when i will try to argue today is that the land use restrictions and the growth of them have played a role in all of this. so let me talk first about the growth of land use restrictions.
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we have detailed direct nationwide data on this question over long periods of time better range of observations and circumstantial evidence and case studies all of which tell a consistent story. i will start by looking at the difference between real construction cost and real house prices. roughly we are in tandem growing at about the same rate for several decades and even prior to the housing bubble and after the bursting of the bubble that divergence remains were housing prices, a 56% of construction cost is 23 percentage points above the
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1990's. so that is one piece the you can sell something more than the cost with the scarcity of land naturally due to the typography. also looking across a set of cities it shows how much higher to see places like anaheim are said with cisco and los angeles have very high cost relative to how much it cost to build in this compares 1989 through 1989 there are more in the lower right-hand part with
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those divergences with the house prices was construction cost of land use restrictions to play an important role in with those measures of land use restrictions but to see it in places it in new york and some of this at least potentially grounded with the turmoil of the 1960's with a set of zoning restrictions to reinforce
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and locking the increased segregation. >> zoning is everyone notes reduces the supply of housing when you have more land use regulation you have less construction and to have fewer permits to reduce construction to drive up house prices and higher house prices in turn leads to more segregation which leads to a greater desire of the part of the people living in this community to establish more land use restrictions and as cycle to
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lock in the sets of gains. event in turn to reduce affordability. with that residential land use authority and places like boston and have constraints on the use of land have low affordability and it had an interminable to build housing with greater affordability. >> we want to welcome the people of a standard housing
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and are intreat -- intriguing and those of you are a the house irregulars and be doing something a little bit different and that the housing finance world to undergo a major change in the next panel is of the demographic to focus
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on the consumer side. period my favorite people in the world to talk about it is a pleasure to introduce the panel. rachel snyder is a senior vice president from the center for financial-services innovation. it has a long history in the mortgage world but these days from the consumer financial protection bureau. and next also the absolute fabulous chair of the consumer advisory board at the cfpb.
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but i hope you can find their connection of what is going on with american households so with that we will start with rachel the deal including cfsi and the panel for some of us better not housing experts. in particular we. but we're thinking a lot about the idea of what it means to be financially healthy and i want to share that with you. we recently did a study of the american population to a survey a broad sample of people and what we think it
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is extraordinary and complementary but they are financially healthy of the day-to-day financial system allow you to whether the shock to be resilient in india's struggle to pay bills? and then struggling to pay bills. 30% of the american households could only make ends meet for three months or less if they needed to. adding together a lot of those things as a reminder of 57 percent of american households to be financially vulnerable.
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it is important but it is not though whole story. think the financial health with those under over $60,000 the year. 1/3 of those that our healthy are under $60,000 per year. and housing also matters surprisingly so 50 percent of americans are not healthy. only 40 percent of homeowners are. with renters is higher which is consistent that holders tend to be healthier.
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as homeowners. it is not as strong an indication of the overall cost of housing housing relative to income in starts quantum -- not to matter so it is more the overall cost and quality and affordability to choice to own or rent to. also we have been a partner called u.s. financial diaries that i am a call principle on that word at then why you. it is an extraordinary steady over the course of one year we tried to gather
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2305 families in a full in and complete way of every single dollar. ellen is on the advisory board for that to be an incredibly important partner in that work and it is supported by the foundation that we have gotten a chance to know these households very deeply. so mostly i am thinking about two stories. another that we don't use real names of all but that they have our own good
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amount of stability but one comes on the fact she lives in subsidize middle-class housing so her income has a lot of variation and other potential sources of instability but housing is the source of real consistency for her. but with the rodriquez in california to with the rising home market they also have volatility because the household structure is in flux. both are households led by women nearing retirement age kid thinking of the financial well-being of their'' children. it is a much more complicated picture for the rodriguez. credit, mortgages, credit cards, annuities but the value of her home is what she thinks of as to be her
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source of security. in both cases they're worried about retirement but thinking how the current housing will enable them to have a secure retirement. in the rodriguez case thinking of downsizing. and in sandra's case to know that she can have low rent for a long time if she had to she to start contributing to that because the place is big enough. so to think about the connection but it is not that drive necessarily but it is hard to imagine one
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that does not include a significant amount of housing stability. unnaturally rachel has of ukases -- a few cases. also doing work on households of financial well-being. and i know you have been thinking about this connection because that is where you come from. >> it is great to be here. thanks for inviting me. the ada to bring our research is a great opportunity. the mortgage crisis was also a crisis that the consumer sentiment that financial help can affect the housing market. also the long term data on home ownership, rental affordability, i will add
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one that 49 percent of americans reported not feeling financially secure. clearly many consumers are still struggling. with financial education over their financial life is a critical part of the mission of the dodd/frank requirement. so the research broadly defined to be more effective than the research on financial well-being is a cornerstone as a part of that. so we start by recognizing people talk about financial education homebuyer, a counseling, coaching, a credit counseling with the
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end goal of financial well-being. but their lack of definition so we come up with subjected to provisions with the of racial financial health measure to have the ability to manage day-to-day finances the second is a feeling you could weather a financial shocker emergency and the next is to be on track. and finally the fourth element is freedom and flexibility to allow you to enjoy the of quality of your
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life of where and how to live is the aspirational quality it is the definition that also captures. so we think this is important under financial security the personal preferences because financial education it feels like you tell people to eat their spinach so if we could help them meet their life bowell with the goals of making life goals so home ownership goes very deeply into this. so why you should care with a healthy housing market you
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grasp the solutions are long term to challenge education is just one part with the marketplace is another with those pieces that need to be brought together. >> as a lender that talks about the experiences he is having while he will describe in the mississippi to you, of bringing people through to successful housing up comes whether rental or home ownership. >> good morning i appreciate the opportunity to be here.
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this is the different audience than i normally work with with those financial institutions as speed data about the projections in rand of strategies and those who are underserved by the traditional financial industry. but i feel like a broken record to engage did several educations the dark period -- areas other counties that are classified that are over
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20 percent poverty for least three decades in a row. if it does show a the concentrations and with that delta region with indian countries and the central valley but if you would get this collectively demographically of the united states is the rural white folks of african-americans bases certain parts of the country are affected ended with my
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home state with those points that i like to make the map on the left this part of poverty. it is a surprising but it is dark when you looked at the map that illustrate other indicators of economics of of a demographic trends. to drill down a little bit more as to to percent of the white children live below poverty level and almost half of black children is as
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significant affect to have the 45 highest unemployment rate in the country and those that are shaded with the unemployment map are one and a half times with the terms of unemployment. in the most clear pathways out of poverty but said darkened counties are those that have school districts rated seat 4d. -- c or d but only 7 percent of the black counties are
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rated a r b. the cardiovascular with the brutality that is rated in terms of productivity to address these challenges but even more so a the people of color but the prospect is pretty low. and unfortunately is not helping themselves in these
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places so is in mississippi that is twice the national average with the high cost of the mortgage lending map compared to the u.s. average of 4%. again in these counties the the highest concentration of people they don't have access to financial services. so by and large they are not helping in the environment from the previous panel with
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three-quarters of the growth isn't just mississippi as the previous map shows. is clear from across the country and throughout the nation. to determine people of our more likely to have access with the environment since the of low income the recession of low income areas from when you don't have a bank. that cause of the relation
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to access to a mortgage than the cost decreases in not including a lot of people in the vigil system. access matters thought the front if the financial sector will kayhan -- have a healthy volume of customers. >> braddish spee alternate point is incumbent upon the entire service sector but also the financial sector to understand how the new were
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population will move into the housing market and how they are best served so let me ask the questions if household financial stability a precursor to housing stability or is that something that will create household financial stability? >> what struck me with the financial well-being was the security and freedom which i am used interchangeably with stability it struck me what we have seen survey after survey with a fitted show
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motivation and to back them up with americans were asked which rather have economic security or to increase your income is 82% financial security verses mobility. that zweig it is hard to get people to move for economic opportunities. i do believe it is hard to imagine to establish but mitchell stability without this of the first place and in order to make that step our research looks beyond the definition to where can we have some impact but we
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do know the importance to establish financial well-being income and economic opportunity are not the whole story even -- to reach the different levels into walkways to move the needle for education. . .
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ways in which the system can make it easier to make the right choices. >> you are faced with demographics in a situation that you put out there but i also know you bring a lot of people through to success and financial health and stability. how the institution can do it? >> the question you posed earlier made me think about the mortgage survey we do for customers bond a biannual basis. we ask them what the impact of getting them, 90% of our borrowers are first-time homeowners which is very unique in the financial service
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industry. 60% of respondents tell us getting a mortgage has improved the way their children perform in school. they have better recreational opportunities which leads to better health outcomes, safer neighborhoods, think about the story of a woman in a jackson apartment experience a murder next door to the home where she boned and it was a drug-related murder and she like most of us would want to do this, we want to get our children at home so she moved, got an apartment and tried to sell the home but the home was hard to sell. she had been making mortgage payments on time, she tried to get another mortgage and she
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couldn't, she could not. eventually she came to us and we were able to take the time to of term the police reports, that she actually had dramatic experience, track record of paying mortgage and we were able to get her back into a mortgage and she is overwhelmed at how bad has affected her children. taking time to not treat people as a formula but looking at their balance sheet, financial position, understand you don't want to overlook these issues like medical collections where you know they will be disproportionate on people's lives and look at how they handled it, look at, look at the
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traditional credit, and underwrite each of the monica case by case basis. we all try to be as efficient as possible through the financial system, if we don't take the time to actually look at individual circumstances a lot of people look out without looking in. >> the nerdy question here, at these portfolios. >> quite a roller-coaster in terms of several years wheat were the servicer and we would actually provide a secondary market for many community banks and banks that didn't have a direct relationship, a region a alone, get the fees, seldom and it is a win/win, you know what happens at the secondary market,
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run away quite frankly for several years and it is not attainable. for many of our customers and i was surprised to find a few weeks ago the we are selling 70% of our mortgages. for a while we were holding 60% for several years, the past few years holding 60% and couldn't find a purchaser for those mortgages so in that session we have less than half a 1%, slower today but they pay. many people, it is their only opportunity to grab the american dream so they hold on to them, get behind on a car payment or tv, cash for title payment, they will make their mortgage payment
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and we have seen an increase in our ability to sell mortgages. there is more money in the market, people are trying to find a higher return and starting to find more mortgage insurance companies and regional banks, primarily. >> one of the features, a real revelation about volatility and in come and you have done some work on which bills people pay and which bills people don't pay and i would like you to comment on something i heard you say before which is everybody has a plan. volatility -- how do people work through it? one of the really important points about the changing world,
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the changing demographic is that may look pretty difficult and obviously is, but it is the world we are going into so the question is how do people coke and how do people work their way through it and what is needed which bill spoke to to make it easier for people to get through some very tricky situations, this is not just for people, jpmorgan chase institute did some work with people of much higher incomes that show an awful lot of the same things racial talked about. >> exactly. i think it is a really important issue for people in the housing finance world to be aware of. one of the things we looked at in the diary study was volatility of income. the magic is we have a year's
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worth of information so we can see not only how much people have been snapped chat but what it looks like overtime and we looked at to what extent income and spending are stable and what we found was on average within the population people had more than 2-1/2 moments in the year when income was 25% more than their average income and just as many moments where income was 25% less than their average income. almost half the month people's income was not the same as their average income but pretty substantial order of magnitude. whenever i talk about this i want to put average in quotes because it is useless to think about what your average monthly income is. if this amount of time your income in fact is so far off
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from the average and almost -- the diary study is focused on lower and moderate income houses, part of the sample is near the poverty line, a third of the sample as above, a third of the sample is roughly middle-class but mostly middle-class and around a median, not upper-middle-class. and the jpmorgan chase steadies it came out came out in spring extraordinary volatility. another study year over year on volatility, what is different about our study and the chase study is we're documenting volatility within a year. that has substantial implications of all kinds. volatility if you are going up and down over a cushion doesn't
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matter that much. i have been talking about myself, i have a ton of income volatility, it gets paid at the end of the year, we have a ton of interior volatility but who cares? nobody should worry about me, we have a cushion, a pretty substantial cushion. given that more and half of americans and not have a cushion of any sort what they are doing is going up and down around zero, trying not to get below zero. that causes all sorts of expenditures in the effort to not go below zero. what is really interesting is when we do the same analysis looking at spending, economics suggests you seek more stability. the idea is slow your consumption overtime. and you would be able to say when you have spikes and call
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from the savings when you have dips. in fact what we see is spending variation is pretty much the same as income variation which is really surprising and suggests that a lot of people are either waiting until they have cash on hand to make necessary purchases or spending, income volatility begets spending volatility, it is circles. i don't have money this month to pay some bills so i don't pay my cellphone bills the next month it is twice as much so all of a sudden my spending is erratic and the third thing going on for people this some spending is erratic by nature because christmas happens once a year. the beginning of school happens once a year, cars breakdown and have to be paid to fix them when that happens, there's no wiggle room around that so for those reasons i think we see a lot of volatility in people's spending patterns along with volatility
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in income. and i think this has really substantial implications for how to think about bill collection. when we look at expense speights it is more than one thing happening at a time. in those moments where people have expense bite that makes their expenses more than 25% over revers average spending, in only 44% of the time could weave remove one expenditure and smooth it out. 28% of the time we could remove two expenditures and smooth it out but another 28% there's nothing you could remove to smooth it out. to me this is important because of mental model that may be people spending is divided into
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six expenses. people's financial lives are pretty cacophonous. i want to bring that back to the housing part. by echoing what bill said which was one of the consequences is people don't pay their mortgage every month on time but they can't tell. a lot of the conversation we had a round tround the new demograp talked about underwriting, this suggests we need to do additional work on servicing and mortgage instruments so i want to ask one last question and open it up. you have done a good job telling us why we ought to care and a
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room full of housing finance people, mainly policy people, what should they do both to mitigates some of the issues you raised and also to respond to them? i will start. i think for the mortgage market as a whole we recognize in the macro sense it is important to provide a basis for consumer health. we saw the crisis largely caused by the mortgage market and one way to foster this greater stability is through a more stable housing market whether it is the kind of product you use or macro sense there have been a number of steps over the last four years, payroll servicing rules, officer compensation most recently, new forms for closing the consumers know more about what they are getting into and better prepare for closing and upcoming changes that will give
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more transparency into the market or housing counseling requirements call these are parts of the healthy market side of the equation and donned the healthy consumer side of the equation which is where my work comes in we are taking the challenge to provide stronger and better evidence of what work so i want to take a moment to recognize the urban institute released a study commissioned by the cftc that did a random controlled test of financial coaching programs for low to moderate-income consumers in two different markets and found a really good material improvement in financial help, things like savings, debt reduction, improved credit score as well as more subjective elements of sense of control over finances and reduced financial stress. obviously this industry has a lot of history of experimenting with financial education as part of the housing process whether it is repurchase, post purchase the link would see and default
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counseling lots have been learned, pretty good evidence around the benefits of repurchase counseling in terms of default and other indicators and post purchase counseling resulting in better incomes for home ownership is so from my point of view i would suggest taking a good hard look at that evidence, trying to build off of that in terms of offering preparedness and coaching and servicing supports that help consumers. >> i was in a very interesting conversation, one of the comments was around income inequality and opportunity and one of the comments that was made, we need to stop looking at low income people as people of color as liabilities to be managed and in many cases of what it and still look at them as assets to be developed. it is the market we need to
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figure out a way to respond to and the only way in my opinion to do that is basic blocking and tackling, developing products that are appropriate, not rigid but opprobrium for markets we are trying to serve and taken to consideration the use of the down payments to produce costs of entry, financial counseling, financial counseling, education has to be coupled with access to the financial system. 36% of our members of our credit unions do not have bank accounts before they joined the credit union. they had a great deal of income volatility, they have the ability to manage that, tax
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time, accounts deposited, lives and income, on a reasonable basis. access to the financial system, respectful customer service, lessons learned from the heyday industry. they bring folks in, they know them, they drink and like they're the best friend. customer service, they did a survey awhile back that said even middle -- people of color of leaded banks because they felt they were not treated with respect so training people with respect, went into the -- getting to know and yes. marketing through channels that will be received by residents,
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radio stations and communities, and i love npr and classical music but my members listen to different things, different things, really going to wear your market, where this market is going to hear you and i can't emphasize enough the importance of diversity, management, staff, these financial service providers, we are not where we need to be and we will miss the mark if we don't diversify decisionmakers and the people who interact with the markets. >> i agree wholeheartedly with everything my fellow panelists have said and another point is i mentioned it is fully determined by income, when we return to
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control income and what drive as a financial help our and would be important of planning and orientation and savings, both of those elements are part and parcel with the process of becoming a homeowner and stating a homeowner so i do think there's more that can be done in design of homeownership products that would leverage that, that would encourage long-term orientation and also help people set aside savings a you could envision a mortgage payment might include an extra amount it gets set aside enough savings account for emergency repair for example or on -- before someone gets to be a homeowner you could imagine a savings product that helped drive towards putting aside a down payment sell more integration across savings products and home ownership related products, or payments would be really valuable and
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likely make it easier for people to say because it is behaviorally very challenging to set aside money on a regular way in a purely voluntary way. >> okay, we will open up to the audience. starch in the back because the mic is closer and we will come to you. >> i am with cambridge financial in boston. we are going -- it is interesting, wondering if you have seen this because the housing market is inventory constraints while lenders get blamed the law for credit overlay and the mortgage market today, really seen, realtors are often in posing additional credit requirements on buyers, actively select buyers that are more likely to be approved or
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all cash buyers and they have mechanisms for filtering even where the differential in their commissions is the menace between 5% and the sale price. it is very difficult for a buyer who doesn't have a 20% down today, get on the radar of a listing agent to be competitive in the market. i am wondering if you seeing that in other places? >> no. >> we absolutely are. and we are very -- we do everything we can to engage realtors can and let them know we can help them to serve more customers, they are looking for larger -- looking for as much as they can generate, average
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mortgage is $80,000, we do a lot of them. they perform well. mortgages the two or three times there size so in addition to trying to engage the man to educate the best we can we also try to go directly to the customers and again the emphasis on marketing, making sure consumers know the we have products that meet their needs and we are very serious about services, how best we are able to do that. that is the response. >> i am the housing specialists, i have a question for you about credit unions. we are looking to the right now with banks and seeing what kind of partnerships there are around the country. we are finding there are several of them, i assume you are
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probably -- do you have any partnerships with commercial banks to help you expand the mississippi area as opposed to one or two communities and to what federal policies or initiatives programs could be promoted by federal government to encourage those partnerships beyond what is going on right now? >> a great question. reminds me of a point i forgot to mention earlier. because this is not something that is a natural way of conducting business in financial institutions i think partnerships was nonprofits that provide financial education and also financial services that are experienced with grant dollars and federal programs with
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consumers probably important. we have done a lot of work over the past several years and raise the awareness of community development financial institutions, we develop banks and credit unions and loan funds as a really important part of the financial service system in this country and particularly for lower-income, historically underserved residents and i spoke earlier about initial earlier efforts for secondary markets because we don't have that tool available, we anticipate loans, we are a member of the home loan bank, grant funds, traditional banks to do development of housing as
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well as develop mortgage products the serve the communities. i think more and more banks, particularly larger banks, it the value of investing and referring customers to them, and in some cases, the issue of community reinvestment seems to be the primary focus of policymakers. there has been some reluctance to modify, reflect the reality of today's financial service, based on branchmaking and then into the bank. and to the transactions online,
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and at the same time my mortgage is held by banks that don't have banks in the region and they don't get credit for making investment in the deltona, and preservation and many places that are dancers that may -- should they don't have a presence and those proportions are the banks that do more significant community development investing so revisiting those, with the reality of the day's market place. >> time for one more question. >> thank you. i have a question about holding onto loans that may not fit the traditional credit and diving we all recognize the common-sense underwriting and low-level underwriting, sometimes makes great sense and there are a
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couple great examples of that. current models on your books and the secondary market, does that call us to rethink q m where deposits are controlled and have some exemptions with common-sense lending? is that something the panel has an idea about? >> pass on that question? you have an exemption, right? >> we do that huge share of mortgage committee. >> something throughout the day. >> the important issue, it is a really important issue. >> even some to -- >> we will talk about it. my own opinion is they have gotten it right in the past and any expansion needs to be
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extraordinarily careful but just because the mortgage is in portfolio does not mean it is fabulous. in fact having been the director of the office of supervision i can tell you the story of a lot of california friends that held their mortgages, and enough fed. i think this has to be very carefully dealt with. i do think the exemption is a really important one. because those institutions work carefully with the bar horse. others don't. but prove it first. i think with that, we will give you back 30 seconds and thank you very much for your time. [applause] [inaudible conversations]
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[inaudible conversations] .. conversations]
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[inaudible conversations]. [inaudible conversations]
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[inaudible conversations] >> am i on now? great. this panel will be on housing, urbanization and demographics. i'm very excited to have a number of distinguished panelist s. [inaudible].
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[inaudible conversations]. >> okay. is my mic on? everyone come on back. we'll get started. so this panel is on housing, urbanization and demographics. i have a very distinguished group of speakers. starting from this side, shakir, the managing director of the quinn partners. ralph pindel, my colleague and director of the metropolitan housing and communities center
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at the urban institute. joe neri, president-elect of national association of hispanic real estate professionals and national board member, treasurer and attorney. and gwynn fisher, vice president for research and economics at the mortgage bankers association. i asked each of the panelists to do short presentation. five or six minutes. we cut them off at six minutes on something that they have been working on or thinking about a lot lately. we'll start with rolf, who will discuss our paper on housing and homeownership. followed by lynn fisher who has done a demographic study on behalf of the mba. the results are somewhat different than the results of the urban study. shaky will talk a bit about financing rental housing. joe will talk about the role of hispanics as future homeowners. with that, let me have rolf kick
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it off. he has the clicker. excellent. >> thanks for everybody being here and thanks for the invitation. i will start out right a way with the first thought. this is something that should be familiar by now because it has been on several other presentations already, but the number of households who rent was growing pretty slowly in the '90s and 2,000. with my work of laurie, the number of young diverse people entering housing markets next 15 years will lead to substantial growth in rental demand housing. number of white renters is going up a bit but in particular african-americans and latinos and other races are contributing a lot to the rental demand. at the same time the growth in owner occupants are going to slow for two reasons. one because, there is increasing number of older homeowners, most of whom are white who will be passing away.
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and also, until the 2030s, that millenials will enter their home-buying years. so the 2010 period is slower than the 2020-30 homeownership. renters are growing faster than homeowners, we project the homeownership rate will drop to the 61.3% by 2030. that doesn't mean we're becoming a renter nation by any means. i think it is important to shift to a view that we are, renting and owning are part of a life course transition. i hope we can talk about some of that in the q&a. because rents are going up and wages are flat, rent cost burdens have gone up a lot. this is 2,000 and 2012. by 2012 half of all renters were paying over 30 of their income. that means they lacked affordable housing.
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black and hispanic bore heavy burdens. 58 and 55% of them lack affordable rental housing. since the majority of black an hispanic households are renters it hits whole population harder than non-white hispanics. if you don't have a of fordable rental housing hard to save for down payment, hard to amass a good credit record bus more likely to fall behind on your bills. you might accumulate substantial debt of the for young households that carry student debt the picture can be very frustrating. they work so hard but their economic security may be farther away than ever. mortgage credit box. this is unwith many great charts that lori and her team puts together in the monthly chart book. probably a new one of these right now from earlier this week. we're seeing a lot fewer owner occupied home purchase loans than we were in 2000 and 2001. the white purchase loans have rebounded in the last three
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years, hispanic and black loans are barely moving, even though the number of households who are hispanic and black is growing. purchase loans to asians have surpassed those to blacks. when lori and i were doing projections of rental and ownership demand we looked at recent trends in housing supply and demand, housing policy and economic outlook. we agree policy can make a material difference in the home inship rate by 2030 especially households in late 30s and early 40s. even optimistic picture, that is who is portrayed here, 35-44-year-olds, home edgership by race but optimistic picture shows slippage of those with ethnicities. if we have affordability problems and impaired credit among low income and minority households homeownership could decline further especially for african-americans. there are a lot of actions we could do to help build affordability and economic security and financial health so
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house something once genpath way towards upward mobility instead of source of instability. i hope we talk more about some of these during the q&a. >> okay. thank you so much for the invitation to be here today. i'm going to discuss our version of housing demand study. this is joint work with jamie also at mba. our work focuses on three at the time tonic forces. ever changes demographics of united states which you already heard about today. shifting societal trends. some which are delaying decisions when individuals form households and take on other important life decisions. third one is fading of economic recession and perhaps that is one of the areas in which we, you know, have differences of opinion with the prior study. i'm going to jump right to the chase and tell you about our forecast for household formation
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over the next 10 years. our study looking at 2014 to 2024. the headline number is 15.9 million additional households in the united states. that could be one of the largest increases in households this country has ever seen. if you look on the chart here we depicted change, additional households or change in households by age group. because of course age has a lot to do with the type of housing you consume and whether or not you choose to own or rent. above the age of 60 you can see increase in the number of households will be driven primarily by non-hispanic whites whereas in the middle range between ages of 45 and 60 over next ten years the decreases in households will be driven by non-hispanic whites that moved into the above 60 age group. then of course under the age of 45, this country will become much more diverse than it has ever been. so you can see that bit
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different colors in these bars. overall, one of the notable things about this chart is that hispanics are a positive influence on household growth at literally every age. and they will need increased by 5.7 million, with 5.7 million additional households. there will be about five million additional non-hispanic white house holds and i refer you to the study. i'll keep going down the list if you wish but this is our headline number. right, we're getting at 1.6 million additional household as year. you already saw this picture on frank's study because in addition to the demographics themselves, and the societal trends that many people have been talking about, the economy is improving. we've gone from 10% unemployment back in 2009, to 5% as of october of this year. the, and i think we can't discount just how hard the
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economic recession hit young people in particular. so not only are young people staying in school longer, choosing to get married later, having children later, the economic recession doubled down on that trend and particularly impacted them. when you look at household formation rates, that is where you see the greatest impact. one of the things we've been trying to do is unbundle that, so we get more accurate picture what might happen going forward. the other thing we often here talking about increasing diversity of the u.s., the fact that we know different racial and ethnic groups have different propenties to be homeowners. if the u.s. is going to be more diverse, won't that naturally bring down homeownership rate? that is probably a true statement but at the same time, the population is aging. and so if you look here, it has, how the change in population of hispanics in the u.s. between, over the next 10 years by age group, 2/3 of the increase in
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population are going to be among hispanics who are over who. if you look at black line here showing you homeownership rate of hayes panics in each of these age groups. over the age of 40, the homeownership rate is 60% that is after 2014 where we're at a little bit of a low ebb. there is offsetting factor to diversification which is aging which will naturally lead to different homeownership and housing decisions in general. this is one of my favorite pictures because when we talk about ownership we often think about single-family housing. when we think about renting we think of multifamily housing. others brought up single family rentals as important component. we also have multifamily ownership which is condo housing in this country. what is interesting here, when you look at sort of the age adjusted shift in owning to renting that is taking place over the last few years, much of that action was between single family ownership and single
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family rentership in the country. if you look at the yellow bars in this picture, interestingly the share of housing that is multifamily rental really did not change that much the so this is important for us to keep in mind as we're talking about policy. you know, ideas and decisions that we're going to make. there is many different ways which housing demand can be served in this country. and i'm just going to wrap up here. i think we'll talk about a little bit more. we really focused on housing, i.e., the number of households that will form in this study. people push us up about homeownership rates. we go about that two-ways. what if all the age, race, ethnicity groups had the same ownership rate in 2014 and 20 it 4? we also look at second scenario where the averages could revert back to long-run averages. not the lows of 2014 but also not the highs of 2004. and what that gets us is a way of bracketing what we think
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might happen. almost 65% homeownership rates in the first scenario and that is 66 1/2 in the second scenario. so still a good bit more optimistic than i think the prior picture. >> if i can make this work. okay. so first of all, lori, they were both extraordinarily well-based. they weren't competing but i was wondering who to short on the homeownership rate projection? >> i have a vested interest in this. >> it also strikes me that since we started to track that index we really screwed the housing economy by the way. so anyway. maybe it isn't the most relevant thing actually, is what is homeownership rate? so, i tell you what i'm going to
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do. four slides, because i don't have any original data i hope i can glitch you one or two or semioriginal ideas. i want to spend most of my time on really the last slide. first of all, one of the issues of our homelessness and housing is, why have all these renters come? i think you have got the answers from fake and number of people. the question is where did they go? it turns out that most of them actually, at least between 2006 when we had about 10 million single family rentals and 15, the latest estimates i have seen we have about 15 million. five million absorption essentially from the great recession through now in single family homes. which has always been a significant part of the rental landscape. multifamily construction which we've talked about as well before, hey, there is a quite a bit going on, highest in 30 years. maybe we built about a million
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six and delivered those units in that same period. a million six of apartments and actually five million of single family rental. so that is where the renters have gone. now, what, what's really interesting to me, and this is the cart that i -- chart that i follow and i gather it is about to be updated. this is obvious in some ways. we know incomes have been pretty stagnant. we know rents are rising but the spread between those two, which really, you have to stablize the dollars, and it's one thing i can tell you for sure, based on either of the projections you just heard from rolf and lynn. what the fact that over 85% of multifamily construction is at very high-end, luxury end of the market, this is not getting any better anytime soon. and then we have just to make you are feel even prouder of how good this housing economy is, we have a huge problem coming up
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over the next 10 years in terms of the loss of already subsidized affordable housing. and the risk of loss can only be overcome if there is some dramatic change in the way our sub sy system works, particularly in the low-income housing tax credit. otherwise we will lose substantial units of currently affordable subsidized housing to the non-subsidized stock. now that we are feeling really cheery, there are three parts to any dynamic especially in the rental housing stream. what's the supply, what es the demand and where's the capital? sometimes capital can drive the solution to those two but, first of all, you can not build workforce housing. in other words anybody, we call, you can stratify this market at 60% of area median income, which is where subsidies essentially end, and then you can start again at about 100% of median
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with some form of whether tax expenditure in the mortgage interest deduction might otherwise take up or property tax deductions and otherwise. so the people between that 60 to 100 is what i like to call, you know, workforce. where people are getting -- they're really, i call them the screwed middle by the way. like they're not going to get it over here, they're not going to get it over here and they actually can't afford to buy. basically the problem is, in order to rent in that workforce category, you need to be paying a dollar a foot of rent. so you have an 800 square foot apartment. you want to be paying and an afford to pay about $800 in rent. what's the problem? the problem to build brand new apartment complex today anywhere usa, somewhere 2 1/2 dollars a foot to $5 a foot, even higher in san francisco which is quite obnoxious. there is a lot of reasons for
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this. i don't want to go over all of them but i know you will cover a couple in your questions. if you take increasing demand, assume number of renters is rising especially hispanic renters, you're assuming that you can't build to this market without subsidy, we're going to assume there aren't any quote, new subsidies coming down the pike unless someone has heard something different. and that all the easy land for building is gone. so if you go talk to builders and you ask, why aren't you building? there is all this -- somebody said the mortgage credit index is getting better. people are trying to make loans. great. why aren't they able to buy? well, it is not just savings. it is that there isn't certainly any inventory and starter homes being built or affordable family being built without subsidies. to add everything, frank, this will make you really depressed, rates are going up. if you take all that together what can you possibly do?
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one of the things we have to do, a, start thinking about the low-income housing tax credit and how we increase it and expand those dollars. two, start experimenting a lot more cog niftyily -- cognitively with research. evidence is good that focus how you take single family renters to convert them to owners. let's talk about demand. demand is clear and you have talked about it a great deal in the statistics. i think we have to again take same dollars we use for housing vouchers and for choice, and think about how to expand and extend those. the assumption that a voucher has to be perpetual or a family needs it for extended periods of time when many housing authorities in the united states have shut down even taking applications is irrational. it should not be a lottery system. we talk about the fact we don't want to define people by zip code or their color, et cetera, et cetera. let's not define them they got into the queue at a point in
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time and just got lucky. luck should not dictate whether you get a housing subsidy. we need to be more flexible and portable housing vouchers. i'm sorry about my friends on left and all the right get offended. dammit, if you only so many dollars and serving roughly 2 it% of the demand you do something about it. you don't sit on your hand and argue how you reallocate dollars in the same group. by the ways capital. there is plenty of capital. you saw numbers frank put up. highest originations of multifamily ever. gses are pumping money out and boy are they doing well. so are all the lenders. the problem fundamentally it isn't necessarily the right cost of capital. to build an affordable housing complex in multifamily setting in addition to subsidy you need flexible capital, you need long-term capital. we need to take the same program we already have which is actually quite successful,
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tax-exempt bond multifamily authority and expand it so that it can serve not just mixed income but also lower income. and we need to provide incentives for the states to do that using the same subsidy system. >> thank you. [inaudible] >> all right. so thank you for inviting us to be a part of this panel. national association of hispanic real estate professionals. i'm the president elect. i will serve the presidency next year. nahrep has 30,000 chapters across the country. we compile information from all the chapters and research from all different resources. we put the together state of hayes panic homeownership report. what i want to do this morning share some of our findings we compiled on that. i'm very fortunate our directer to research is in the audience
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and he gave us the latest tidbits he compiled this morning. look at hispanic formation, you will see hispanic households in the year 2014 increased by 320,000. that is brand new households. that is 40% of the u.s. household growth just for the year of 2014. to the left you will see that since 1970 the hispanic population has grown 592%. by way of u.s. population overall has grown only 56%. astounding difference between the two figures obviously. in the next slide, actually before i go on to the next slide i will give you more recent tidbits i received from alejandro. when you compare this year alone, 2015, talking about the third quarter hispanics achieved a net growth of 338,000 owner households accounting for 86% of the total net growth in the marketplace. so that is an astounding number, 86%. when you compare from the third quarter of 2,000 to now,
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hispanics accounted for 55% of the net growth in owner households. and then by way of further comparison, since the third quarter of 2000, non-hispanic whites have experience ad net loss of 400,000 owner households while hispanics have gained 2.8 million owner households. i think that those are pretty startling numbers. those are pretty impressive stats to bear in mind. i move on really just our buying power in the hispanic community. in terms of income and purchasing power that the hispanic community has, currently we're at 1.5 trillion. by 2020, a mere five years from now we're expected to be at 2 trillion. at the 1.5 trillion, equal buying power of entire country of canada. so hispanics a whole experienced increases in overall income with 57% of hispanic households other thanking over $41,000 or $40,000. 41% earning over $50,000 and 13%
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earning over $100,000. you see a wide range but on the whole you see a positive increase throughout the categories. consumer attitudes and preferences that we have and we were able to determine within the hispanic community. most hispanics, about 58% say they expect the personal financial situation to improve. despite the fact that only a third of them say the economy is on the right track. so there are some concerns obviously with employment. i think you see that through all the segments. still there is overall positive attitude about their financial situation gaining in the future. nearly hf of all hispanics, about 48% say this is good time to buy a home. so there is a lot of positive sentiment becoming a homeowner within the hispanic community. you see a lot of folks really efforting that goal. just in terms of some homebuyer nuances really unique to the hispanic community, when you look at some of the general characteristics, we really run
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full gamut and spectrum of borrowers. folks on the lower threshold of income and higher income. some self-employed. some folks obviously working for companies. so we have folks that run across the entire spectrum. 70% of the hispanics are first-time homebuyers. lynn mentioned some of her studies. you see the numbers bear out hispanics being substantial amount of first-time homebuyers. we have growing income, but our household wealth is still lower. so that is something that we're trying to overcome. it is barrier we're trying to overcome but you see it growing constantly. other characteristics are very common within hispanic homeowners, there are multiple coborrowers. you may see, one, two, three, family members go ahead and borrow to apply for a loan to try to secure financing. very common. i'm an attorney in chicago and i handle real estate law and i represent a lot of purchasers and sellers of properties.
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very common for me to see two or three brothers within a family going and applying for a mortgage because only way they can afford something. they will pool their resources. it happens all the time. thin credit files is also a norm. a lot of folks that just have not established their credit history. and sometimes that's stems coming from countries in latin america where there is mistrust of banks so that mistrust of banking system carries over here as bell. a lot of folks, sad to say i would rather keep my money under the mattress and feel that is safer for me. unfortunately that doesn't lead to establishing a strong credit history. there are also, an aversion taking out credit cards and debt as much as they can void, try to avoid. there is no opportunity to develop a thicker credit file. a lot of our individuals are self-employed. seasonal workers. you see a lot of folks that have different companies from your different landscaping to stores, to restaurants. you name it.
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a lot of folks that are self-employed, entrepreneurial types, that is a big portion of the hispanic community. so you find, it results in non-traditional income sources. also a lot of folks have good component if they're able to manage, there is a lot of belief property is big way to build wealth. so folks will go ahead to try to effort that, to purchase that two-unit building, three-unit building relying on income property, rental income as source of income as well. non-permanent residency is factor within our community. immigration is a big issue to us. we have a lot of folks that don't have legal status or have temporary status. that is obstacle we have to overcome. depending where immigration goes in the future that certainly can impact the hispanic community greatly. multigenerational families is not uncommon to have three generations living within the same roof. grandma, grandsons. everybody is really contributing to the family pot, if you will
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to make sure that the monthly payment is made. you know, there are sacrifices made by everyone to make sure that mortgage payment is paid at the end of the month. so multigenerational families are the norm. cultural, obviously there are spanish speakers, abundant of folks comfortable speaking in spanish. there are issues concerning with financing, making sure as bill mentioned earlier, folks with similar background to speak the language to trust when you go ahead and apply for mortgage and apply for a loan. the. .
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>> >> we all recognize the aging population but yet with the same ingredients you can come up with different numbers. >> first we are very much focused on demand for all types of housing so home ownership was of secondary emphasis in part because we don't really know how a rescission -- a recession will impact people with the
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risk tolerances. there is a lot of unknowns to differentiate the trends from the cyclical impact. that said, the 2014, we start to see home ownership rates fall a little further looking at ethnicity but more importantly taking into account to give into housing demand other are not credit will allow people to step into the wealth building opportunity of homeownership.
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and in particular we believe households and firms we don't believe the rent will go up infinitely. it is more valuable or cost-effective. but it generally that they can choose places even more so they and in the past. and we know in particular that home ownership rates have started to bubble out and real wages will start increasing there is an indication it has started to happen.
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there will be a list coming from the improving labor market there's trying to work their way out but the assumptions using the average home ownership rate to normalize the market's. >> without going into the deep technicalities' what we do is look back to almost 100 years of data with the baby boom context and if you look back that far would you see the baby boomer era when restarted to be born was extraordinary in american history. to re-emerge from world war ii without competition internationally and grow
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income fasted increase homeownership rates for a 40% to about 60 percent in just in 20 years and also took the demographic anomaly that women and men are both getting married earlier to have more kids and have them earlier. what will the of millenials city look like? and in getting into the adulthood. >> with the secular trend with that homeownership rates because of immigration with united states with the increasing diversity with marriage and childbearing among of millenials.
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and we have been growing in different places in detroit has the highest homeownership rate of most major metro areas in the united states. so then we are growing in parts of the united states to set back that transition for those in their '30's. that would accelerate a secular trend that means we have a different starting point to get to a new normal that is a different normal than what we would have had that we would have is geared towards a way.
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but instead of focusing in your parents' home in which your an odor is the life course story to transition the life force so it achieves a financial security that are in their renting life course right now and also from homeowners being in their houses for logger. to be stable that is a completely different new normal bin which we had those to life courses shore
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in doubt. to start thinking of the of quality of life as a renter and then choose to go back to renting. >> tight credit had the ability to purchase a home. what the policy actions to be taken? >> one thing that we have noticed and they're just so outdated with these systems it just does not accurately account for how they spend their money to establish a strong credit history. one of the first problems to alter those credit scoring models to have those
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adjusted. with a marketplace in terms of other things there is risks when ever lenders are making loans said that becomes a burden to secure financing. so with that mechanism to believe that concern to try to understand sometimes it is probably just as creditworthy the czar to
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issues we need to address. >> and credits gore is in the changing distribution but to be filed for steely. and some people don't want to undertake that. and we have made good progress that is the greatest obstacle is not too
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early to talk about the future homeowners have to do that? when kids are little hell executive function works if we think the united states that the country that will grow between now and this is the secret weapon as a nation in how we will be prosperous the future after raising the kid who was born with it went to be homeowners at 35 the water redoing to ensure they had that stability but on the financial security side but what are they learning in high school? would drop their first car loan is a good or predatory? that is a big issue right now then moving into the
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rental market is that 18 or 22? there are decisions about how to do that there are ways has no way to get ready for home ownership but they are still financially secure >>.
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[laughter] >> nothing says homeownership so the issue is housing stability if you address the issue it is the single dash issue the idea you're renting go up dramatically to have control over that environment that makes the motorship aspirational and we know that that is not true so the operational nature so ordered boeing to tenure the reason the divorce rate is really terrible for the
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markets. but what i would love to see with the different savings and credit culture to the evidential running. the single biggest reason why they don't buy a home. and then after you are blue in the face but what they do understand they cannot only $400 in the bank. they understand that. so how do we create individual housing? that potentially will be a
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home buyer. how can they be induced to save money with a potential toward the down payment that leads them to become a homeowner? >> so to give ourselves all wound up with that demographic change can we continue that ownership of housing notwithstanding the changes of the market where they're coming from. >> getting the home ready program was targeted to the hispanic community to allow income for those who are not on the mortgage to count toward qualifying. what you think?
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>> it is definitely one step closer on a larger scale to allow for the borders and allows them to me it into the credit scoring and credit worthiness so it works well for hispanics multifamily households with several individuals that will make that mortgage payment. this concept is a good one in the hispanic community to carry over to other lenders because with hispanics you will have that unique household that are contributing so it is a great concept whether the government sector or just adopted.
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>> a few very much all presentations manchin the affordability is a huge issue. what would you do to increase the supply of affordable rentals of the of capital? >> you have to address the fact as the federal government we have been reluctant to do anything for things that make sense of local communities. if you don't address the fact it is not easily obtained in many communities in some cases up to 14 years or entitlements but some communities but there is a
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way in the transportation bill to begin of conversation we should be thinking n.m. not talking ownership but to make sense for that community to make sure a portion of that housing that leads to the whole issue that is on a federal tax expenditure and the etf to target them more when the spread would rise so had we do this with maximum private sector engagement? to create land for high-density housing for
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transportation cost. >>. >> with the multifamily side by g since comments earlier doing a lot of work in the boston area looking at the use of destiny bonuses that basically allow the market to subsidize with the inclusion kerry units there are tools like that but the interesting facts is two-thirds of the rental units have two through 12 units we have really small building rental stock and
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since the '70s we quit building being i'd like the double-deckers'. but a lot of the reasons are out of these communities and those are interesting products as well to have an odor in one unit and renters in the other. so i go to the supply-side. >> i will open to questions from the audience. >> we cannot let the housing collapse in to any positive
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ways but what is the substantial migration? but the number of bedroom units becomes much larger so that act of large families to some degree is alleviated by this how do we maintain the single family the large family units in the inventory. that hasn't always been the largest single demand. >> that leads to a whole conversation obviously some
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permitted others don't but many do it anyway. the question i think you're asking is not just of housing prices but the averages were footage of the house is even larger so a the problem for excess three dwelling units it is like airbnb to create a massive stock of available units at affordable prices. >> anyone else? >> i was that a high-school
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at a lower income neighborhood when i asked the kids about the debit card about saving i immediately had responses but then they took the money for the overdraft fees. and i began to ask questions that sounded like a credit repair skimmer with those trusted mentors we have great online resources but i cannot think of ahead approved housing counselor and there are thoughts on how we can develop that housing nor capital providers and how it is in this area for a long time
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and then to really be tested >> beyond the expertise and it is a lot about the incentives for the private sector for the federal level but that can be induced in from the previous panel has ideas. with those credit agencies there are first-time financial literacy for
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children and first-time homebuyers end to have some basics of finance to become a first-time homeowner. so again local chambers of commerce to see if they have referrals or had centers but there has been an emphasis some literacy training and now to drill down for those kids in her high-school. >> the traditional mortgage
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underwriting with this table monthly income those that have unstable monthly incomes and with seasonal workers and self-employed workers that is a population that is unstable. to see that in the face with the barrier to mortgage credit access. what is the policy of prescription? >> it is a barrier. >> is up preference but it does become a hindrance to make it happen but at the
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same time you have other individuals to pick up the slack to increase the amounts of the things in the ways that some of the prague wrote -- because if you do allow and looked at the borders of the other family members it is a common to say contribute $500 my elbow is now taking up snow plowing i'll increase by $500 up at $900 set to see more flexibility at the end
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of the month having a roof they will do everything within their means to make that mortgage payment so that as we will find with a seasonal workers are in the landscaping depending on where they live in the country so there has to be that flexibility to allow for that adjustment. >> one more question. >> lever asks this question is standing between the panel and lunch. [laughter] >> we heard earlier today about the rental
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construction boom the largest in 30 years and i have read from sources that 85 percent of the rental construction that doesn't seem like what is needed right now so is to stop that from continuing? what will cause them to build more affordable rental units? >> look to your own jurisdiction with three to five years before it put a stake in the ground and then before i can start renting and that cost with all of
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the amenities it is still $3 a foot and they can afford $1 so usually when gaps like that happen is a construction cost we have to increase the subsidy with income support or capital support there is no magic to that whatsoever so those jurisdictions have to step up and support mixed in calm sea conservancy's the one place. so if even has that been come to rent but another to% but everyone is also budget
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and those that are working to get help from the federal government. but it has to be the forum of capital support of the tax credit. >> looking to the existing stock coming out with the story on the wire last month 4,000 privately owned apartments over the next two years this is critical in places over one-third of the units have the poverty rates below 10% unable to arrive
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the mosso working with those groups with the coalition for non-profit housing working building by building to preserve. been looking at the single family stock. with the opportunity neighborhoods it is so expensive to apply subsidies to construction. >> it is day filtering mechanisms in back to jesus
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point with more restrictive zoning we have of very distinct increase and as i mentioned a moment ago to a smaller property that is double decker there is more we should do about understanding with housing that is small enough years and years not just with is on the ground right now. >> great job. we will go to lunch now. [applause] the next panel is that 1:15 p.m.. [inaudible conversations]
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>> they are breaking for lunch now the next panel will have been in about 45 minutes from now with the political realities of policy that will start this afternoon at 1:15 p.m. so we'll have live coverage here on c-span2. the capitol christmas tree was delivered today from
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alaska. the first time that has happened after it is decorated the ceremony will take place on the second of december. >> it is called the crossroads of new york state in this weekend our cities tour joined by time warner cable partners will explore the history of literary life of syracuse new york. we will visit the special collections library at syracuse university with the antislavery movement with the garett smith is a local author to discuss her book prelude to prison to explore the link of school suspension and incarceration then we talk with deb helmsley about his book going viral. >> that is the process of
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social sharing retentive think of a viral video by which that happens so what happens when people share content? and oftentimes if you have a lot of followers or people paying attention it also spreads the content reaching a wider audience. >> we will visit the erie canal museum how it helps the growth of syracuse is central in your state, and the nation. then on to harriet tubman tell where the abolitionist acted as a conductor in caregiver to numerous people as part of the underground railroad. cartridges syracuse also take this to the matilda engaged, the nation's first women and her speech and
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women's rights convention the launcher into national prominence on the subject of women's suffrage. >> to have four children already and learned it will ocher and writes a speech to bring her oldest daughter with her. they had not contacted any of the organizers and asked and there is a quiet moment to march up onstage trembling takes the podium and begins to speak. with an incredibly moving speech to go on to become a
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leader in the women's movement. >> did i feel prepared? yes for a first of all, i wasn't elected it didn't make that much difference but the difference between the vice president's wife and the president's wife is because of vice president wife can say anything and nobody cares if you say one thing as a president's wife, that was a lesson i had to learn. >> barbara bush used the office to promote literacy in raise awareness of hate -- aids and homelessness she
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also was only the second first lady besides abigail adams big -- to be a wife and mother of a president. first ladies examining the public and private lives of those who have filled the position of first lady from martha washington to michelle obama. american history tv c-span 3. >> ahead of the president bomb was council of economic advisers low housing supply limits the ability to relocate to current -- and other cities. >> speaking at the daylong forum you can walk to comment before amazon a break right now for lunch will take you the
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opportunity to show you a earlier panel on financial help of consumers. >> talking about financial health and what it means to be financially healthy. a wanted to share that with you. we recently did a study of the american population to understand and then to talk about this that is extraordinary so you are financially healthy if your system of large to be resilient 32 vantage of opportunity so we ask questions how long can you make ends meet? do you struggle to pay bills ? forty-three% of people
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struggle to pay bills 30% of american households are for three months or less. and read added together a comprehensive segmentation that 57 percent of american households are struggling and financially vulnerable to talk about that group as financially and healthy. but it is not the whole story so think of financial health was there that are financially and healthy or even higher about one-third of the families that our healthy have incomes under $60,000 per year. income matters. it is not the whole thing.
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housing also matters. homeowners are more likely to be healthy. 50 percent of americans are not healthy only 40% are not. with renters the number is higher. 77%. that is consistent with the idea homeowners tend to be healthier. it is a nearly a strong of an indication with housing relative to income looking at the housing cost then it starts not to matter but either way there will not be healthy. so that relationship is more
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driven by the overall cost of quality and affordability we have also been a partner of financial diaries to work with a professor at nyu is an extraordinary steady over the course of a year we tried to gather the financial inflow and outflow in a complete way. it is a small sample. with the advisory board and then to be on the advisory council.
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than with our network and to get arno the households with those households it is a household the recall the rodriguez but not really. with that subsidize middle-class housing. with other potential sources of instability that is a real consistency for her. >> but also with the household in california that bought a home but they also have volatility because of
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the influx. so looking at the financial well-being of their adult children and. so those home equity lines of credit but the value of her home is the rodriguez sees as her source of security. in both cases thinking how the current housing will enable them to have a secure retirement. they think about if they need to downsize and approve as a way to bolster their retirement and it is knowing that she to pay the rent for a long time and contributing
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towards the rent. so i think about the tension between housing and financial help is symbiotic. it isn't that housing drives people necessarily to the that the financial health but it is hard to imagine a path that does not include a significant amount of housing. >> and to have a few cases that did not work so well. to do a lot of work with the financial well-being in you have been thinking about this connection. >> it is great to be here
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although i need to think a little bit harder as the great opportunity the mortgage crisis is a household financial crisis and i don't need to you tell you about consumer sentiment said it can affect the housing market with the long-term data on home ownership. said in a recent survey to not have to be financially secure. en to empower consumers to take more control so one of
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the things to research the field of education to be more effective with the financial well-being and a lot of people are talking about financial education or coaching or credit counseling. end everybody seemed to agree that they lack a definition and that is how we go at it. we start by defining in terms of the consumers themselves they came up with definitions to align very nicely with the financial health measures.
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said to manage your day to day or month to month finances to feel you could whether an emergency the next is on track but finally with the fourth element with freedom and flexibility to allow you to enjoy the quality of your life. it did also captures. we think this is important in then to be kept in mind
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in to tell people and in this way with the consumer on their terms of meeting life goals and then deeply how they will achieve them. and why do you care about these things with help the consumers to grasp the solutions are long-term and challenging a good transparent financial-services marketplace and others that need to be brought together. that is the challenge. >> but then to talk about
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the experiences he is having to describe mississippi to bring people to successful housing outcomes. >> i appreciate the opportunity to be here. and with the development financial institution and that also spent time with those other strategies to improve those that are
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underserved with traditional financial service industry but what is on the screen now that the treasury classified to have 20 percent poverty with baltimore and the bronx but it does clearly show the of concentration. is it appellation of.
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and part of the rio grande valley or in a country from california first was the pitcher demographically with hispanics and americans with a certain parts of the country and then to lift up the points in this map with the that our poverty is not surprising but look at this map to illustrate other
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indicators of economics with the demographic trends. end of the 50% live below poverty level almost half but the black children is also below the poverty level. this has indications in several sectors. look at jobs with the 45 highest and obliterate in the country. is one and a half times in a statement that is already
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45th the most clear pathway out of poverty. and those that have the poorest performing school districts with 81 percent of the county's. with a majority of the black counties and then it shows the percentage of the low birthweight babies mississippi is rated 49 and obesity rated 49th with infant mortality.
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en to address the challenges and people of color it is the economics so that is important to been to help in these places one of the maps show in mississippi with the people at twice the national average with a high cost mortgage lending. with the average of 7.3% compared to the u.s. average
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so again in these counties that are the highest poverty disproportionately they are not providing access. and they're not helping themselves. with three-quarters of the growth to be people of color as the previous maps showed the statistics are more clear but it is across the country the federal reserve has determined to have
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assets when they have a banking account. in the environment since the recent -- since the recession from the low income areas and that there is a positive relation between the bank granted access to mortgage. but again we are really not including those who need it most in the financial system. access matters. with the financial service sector takes those volume of customers.
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>> but it is the ultimate point for those demographics . .
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security and freedom, financial security and financial freedom. it just struck me how this echoes what we have seen forever survey after survey on why people aspire to home ownership. it isn't a financial motivation. it's more broadly about security and freedom. to back that up a recent survey when americans were asked what you rather have economic security or a chance to increase income, 92% preferred financial security to economic mobility so that took part of the reason it was hard for people to move around for economic opportunity we talked about at the beginning. i think it works both ways like rachel z. but i do believe it's hard to imagine establishing
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household financial stability without housing stability in the first place and that said one has to obtain a certain level of financial health and well-being to make that next step. our research is looking at what are the drivers of the financial well-being and where can we have some impact to move the needle in a case around financial education intervention. but we do know the importance of the socioeconomic opportunity backgrounds in establishing financial well-being but exactly as the research found it is and the whole story and people can achieve financial well-being. it's important to understand we found a general.
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not only the capability building there are trees and attitudes that can be areas for attention. the choice architecture for example having access to the low interest rates stable transparent mortgage or affordable rental housing makes it easier for consumers to build their financial health without having to require vast amounts of knowledge and really strong discipline. as the ways in which the system could make it easier for people to make the right choices to find a solution. >> i know that you are faced with the demographics of the situation that you put up there but i also know that you bring an awful lot of people for success and through the financial health and stability. can you talk a little bit about how some financial service institutions can do it? >> it's interesting thinking
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about the customers. [inaudible] almost 60% that responded to tell us that getting the mortgage has improved the performance goal. it says they tell us they have better recreational opportunities that leads to better health outcomes and safer neighborhoods. think about the story of a woman in a jackson apartment who experienced a murder next to the
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home that she owned, it was a drug-related murder, so she like most of us what we would do is we would want to get up her children out of that home so she moved that the home was hard to sell and she had been making her mortgage payments on time, she tried to get another mortgage and she couldn't. eventually she came to us and we were able to take the time to affirm with the police report that she had this traumatic experience and track record appearing on the mortgage and we were able to get her back into the mortgage and she is overwhelmed at how that has affected her children and so i think taking the time to not
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treat people as a formula but looking at a balance sheet and financial positions and understand that if you don't want to overlook these issues like medical collections where they are present on people's lives and look at how they've handled it. for the financial systems. if we don't take the time to actually look at the individual circumstances people are outside looking in. >> the question here udall told these portfolios, right?
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>> it's been a roller coaster for several years they would provide a secondary market for many of the community banks and they would entity would have a direct relationship in the fees it was when when and we all know what happened to the secondary market. i was surprised to find. we are selling -- [inaudible] we couldn't find a purchaser for those mortgages or in the
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recession we had less than half a percentage where the scores are going to be paying. it's only to grab the american dream. they may be getting behind on a car payment or other cash for title payment but they won't name the mortgage case. we have seen an increase in our ability to sell mortgages and there's more money in the market and people are trying to find a higher return so we are starting to find more insurance companies and regional banks primarily. >> said, one of the features of the work was a revelation about volatility and income.
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i know you've also done some work on certain bills people pay and don't pay. that's what i'd like you to comment on is something i heard you say before which is everybody has a plan. so notwithstanding my 20 asides about mobility and and how do people work through it? because i think one of the really important point about the changing world and changing demographics is that they look pretty difficult and obviously it is. but it is the world that we are going in to answer the question is then how do people cope and how do people work their way through it and what is needed which bill spoke to to enable people to make it easier to get through some very tricky situation and this isn't just
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for people, j.p. morgan chase institute did some work with people at much higher income that shows an awful lot of the same types of things. >> it's a really important issue for people in the housing finance world to be aware of. one of the things we looked at was volatility of income. so the magic that we have a years worth of information and so we can see not only how much people have but what it looks like overtime and we looked at what extent income and spending are stable and we found on average within the population. what we have on the infamous 25% more than the average income and when they have just as many moments where income was 25%
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less than the average income. people's income wasn't the same as their average income by a pretty substantial order of magnitude. whenever i talk about this i went to the average in air quotes because it becomes really useless to think about when you're average monthly income is this amount of time the income effect is so far off from the average. and referring to the study is focused on lower moderate income households in about a third of december was near the poverty line. a third of the sample is about one third of the sample is roughly middle-class but mostly like middle-class and the around the medium, not upper middle class and. let's look at some of the same questions with a broad national
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sample. the trend has been documented by other researchers fairly substantially around year-over-year volatility. what's interesting about the study is that this study is that we are documenting that there's also volatility within a year so that's pretty substantial implications. a volatility if you're going up and down over a cushion doesn't really matter that much. i've been talking about myself and income volatility. i've been in partner law firms and we have a ton of volatility but it's like two pairs. nobody should worry about me. we have a pretty substantial cushion but given that more than half of americans do not have a cushion of any sort, what they are doing is going up and down around zero and they are trying not to go below zero and that causes all sorts of in the
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effort to not go below zero. economics suggest that maybe we have seen more stability and the whole idea is that you would smooth your consumption over time. >> back to the urban institute now. looking at the banking and housing policy. secretary donna from the policy council.
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thank you everybody for staying with us after lunch and we intend to meet this likely. thank you for being here. it's important to note that we have a group of leaders here who represent both a great deal of knowledge about the workings of a set of firms who are central to the systems.
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in the housing sector that we have been talking about that's how they come about. the governor as i'm sure many of the window is very successful two-term governor of minnesota and since 2012, he's been leading the financial services roundtable, which is an organization that represents a whole range of different kinds of companies and financial service sector including insurance companies, banking, asset management, finance and credit card lending firms. secretary, he's been president of the housing policy council which is a division of the financial services business roundtable. if there's anybody in this room that hasn't he's been everywhere he is the president of the mortgage bankers association in america and his prior-year private sector work includes the
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tourism duty at wells fargo. he served as the commissioner in a time in office is a challenging task and he served in probably the most challenging time to ever hold that office. so we have an extraordinary group and i think our goal is to try to lift up a little bit from the conversation that we were just having and put that in a larger policymaking context. so, governor i'm going to start with you if i might. it's been seven years since the worst moment of the crash. if you put yourself back to what you saw, what about today's environment something that you never would have expected back then what surprises you most. >> thank you for inviting us to the likes to be with you and be part of this discussion.
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>> i'm surprised that a number of things. the actors that were part of an arguably substantially contributed to the crisis mainly fannie and freddie stilling conservatorship with a congress that seems to be unwilling or unable to tackle the reforms necessary to put fannie and freddie in a better place of with obviously unsustainable and it's unacceptable it's ridiculous congress hasn't tackled the issue. beyond that, in a change in the wake of the crisis was so large this is one of the worst economic crisis in the history of the country almost brought the economy to its knees. there is another muscular
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response ever should have been. you would think even though it was big and complicated doing things that seven years removed that it would be fully implemented so i live close by saying the second surprise was because lopez of implementation of the aspects of dodd frank. >> i'm going to come back to where fannie and freddie are today but i wanted to first ask proceeded to collapse that has occurred. i don't know how many of you remember the period in time at the end of 2008 we were watching institution after institution to simply collapse. danny and freddie put in conservatorship. the home prices dropped 30%, hundreds of thousands of jobs, 600,000 jobs a month we lost when the president obama began his first term and so much
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damage clubhouse come out of it. there's a lot of frustration on the various issues and how things have been implemented in a lot of dynamic tension in the regulatory process etc.. but you know, in many ways the markets functioning far better than i would have ever expected given what happened preceding. and you know, today we are just past implementing the final rule that was obligated under dodd frank. >> which will argue from -- are you referring to >> clarity into those kind of things. i look at the fact that we've got through this and now we can begin talking about opportunity again at this point as sort of a positive most surprising outcome when it was a pretty difficult scenario as we all think back a few years ago.
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>> when we were at that moment after 2007, there were two assumptions that were pretty widely shared. the first was that the lending had gotten completely out of control and we have standards that were way too loose and from all sides of the political spectrum you would consent on the plate and then the second was while there wasn't clarity about what to do in some ways fannie and freddie had to be repositioned and re- organized or broken apart. there was some kind of consensus that they had to change and when you look at today, people are arguing that the credit box is too credits box is too tight and fannie and freddie are actually there is at least a strong subset of people not so much, this is okay. >> did we learn the right lessons in those those bombings were the early inception on? back before i responded to the question first i want to thank the urban institute for having
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us and for all you do issues that are important to us and. 7 million people. i want to thank you for the six years that you have led to hope now and worked with us on that. the fact that i remembered just how deep that cavernous was that we were in and secretary paulson came to one of our fall
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conferences in his face was white as a sheet and he had just come from meetings with chairman bernanke and leaders in congress and so forth. and we were at a real depth crisis of recession and depression type of situation and what surprises me is the resilience of our economy and the fact that we have come back as strong as we have. the fact that we are coming back and granted there are different parts of the country that are lagging i was pleased to see recently they were higher than they were in 2005 and 700 miles east to las vegas and is still
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40% below the peak so there's been no recovery but we aren't getting their end of the loans are being made the market is working and there's some invalid and that i am optimistic. >> yuletide you're itching to jump in. the lessons we learned at the beginning were those lessons right about the tight credit and the role? the >> let's be real. i was a grant of federal housing commission i'd been in the job a few months and i went to the secondary conference in 2010 and i sat on the -- said on the stage the government guarantees 90% which it wasn't at the time of all mortgages being created in the country is the the country is the scion of a sick system. that's a phrase i used and i got lectured afterwards by publicaffairs guys.
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but the media immediately grabbed onto it and i will read or make the point the good news is that they have been there quite frankly to provide continuous false capital along with the programs and without those programs this housing market would be nowhere, dead on arrival and we know that the only private mortgages being created in this country are going to a very affluent set of americans other than the few isolated programs some of which were talked about in the stage earlier today so i think we have support structures in place but it's not the market political to mislead the system has to have to support itself and i think that's going to be the struggle that we work through because ultimately i think we all want the same outcome but it's how we get there and structured and it can't be a system that is entirely dependent on guarantees to defend makes no sense over the long run.
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>> what have we done right so far. a lot of people don't have access and there's a lot of consumers. we have visibility in the house prices and market and there's a lot of things we can talk about that are not really what we want them to be. but what did we do write dot us to hear? the >> one thing we did right is reintroduced the notion of responsible underwriting. and you could agree or disagree with the details and all the rest area to the fact of the matter is we can all agree what was done before the crisis was an abomination. it was ridiculous and it was reckless. it was outrageous. it nearly wrecked the economy and the country moving towards responsible underwriting with accountability directionally it
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was a "meant. that's one thing we got right among others. >> the other thing is those risky loans that got us in the crisis. so i think the fact that the mistakes that we made it hard to see how we could make the same mistakes again. >> i would make the spectrum of the consumer experience from point a to determination of the loan.
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compensation is controlled, so there can't be more people gaining them a market than the market based on the products page and more versus less. to save the products that are regulated we have to amortize and be able to prove the ability to repay some of it is extremely noble. the entry crisis period and have some standards that are hopefully applicable. this confusion involved in a separate side of it but from front and back end we've created the safest and soundest finance market in the history of the country. collectively advocates and industry that work together on these things.
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you can talk about what is less well and maybe less undone if i wanted to the them aside for a second although to some extent some of the pieces of reform are happening. >> the fact that the credit availability is a total credit availability and that is a total concern and i think that we do have significant new regulations to deal with and lenders are still feeling their way with respect to that and. there's requirements on loans and there are those that are not qualifying.
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we need to address that. >> i think we -- it's difficult because when we talk about the concerns we may have in the rules i often get calls trying to see dodd frank because nothing could be further from the truth i think in the effort to get this fixed and make sure there's a framework of protections in place to make sure the system operated while i'm everybody got involved with phentermine under regulated market pre- recession when we could argue clearly that what evidence the system is overall under regulated and now we have everybody regulated. and it's created confusion in the policy making so that i can point out policies where one federal requirement under the one agency doesn't comply with another regulators obligation. so i think that in the effort to do all this processing i think that the part we got wrong is not making it clear the authorities to determine outcomes for certain segments of
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the operational process of manufacturing mortgages in how they get created in such a manner that ultimately we created -- we have an outcome here that we have to sort of cleaned that up to get credit expansion. ultimately where it needs to be. ..
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unsustainability ex-i think we have credited the financing system is easiest for the wealthy you are and the more assets you have and gets tighter as you move down the curve because lenders and their inability to rationalize some of the confusion in rulemaking are holding credit policies back of what they could do, and i think getting clarity and getting some revisions in a way that could
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help broaden that box to that same boundary, i think that's really where the opportunity lies. we could go one after the other but we need to recognize the changes now need to happen so that it can truly standen its end and provide the broadest access possible. we can go reps and warrants and fha and other things we talk about amongst yourselves, but there are changes that have to be made to bring the clarity and policy of back into the market. >> so one more minute in these wisdoms. the other police i think we -- i'm curious about your reaction to the one place we haven't done enough yet is under the system, both economic incentives built into the system as well as the kinds of guts of it. we have rules we didn't have before. but we also have a lenders who feel that the average price
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costing is causing them to be unwilling to take risk because they fear certain mortgages are more likely to have higher servicing costs. would you argue that's a big area of unfinished business and are there others? john? >> there clearly are others, and you said we want to talk about gses, and that's the big one. i think the fact that lenders are getting used to these regs. its applies to both loan originators and servicers and working their way through it, and the system is working, but it's not working for everybody, and those -- as i said earlier at the margin are not being served. >> i think themeaticly, whether trying to find ways to get to the outer limits of the credit box or managing risk, think
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themeaticly omost of the companies are saying we can't take anymore big high profile lawsuits, can't take anymore big dings to our reputation so, team, you have to be inside this box. if you think the box is here adjusted internally even a little tighter to give us a margin of error so probably 15 things to contribute to that and if there's newness, ambiguity, uncertainty, they're going to err on the side of pulling in, because most of them -- the reputable ones are saying we may stumble into a problem but we're not intentionally going to take on that extra element of risk. it's not without it. >> let's talk about the gses now. the prospect for near term legislation are relatively slim. there's a whole lot of regulatory action that are -- is going on around pieces of the system, whether it's the kind of securitization platform, the
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risk sharing deals and other things, that start to develop more crisply what the people meant when they were talking about various different reform proposals. is this process moving us towards the day when it's possible to reach a consensus reform? >> i hope so. i do believe that. and i think that senators corker and warren and johnson and crapo defense a lot of credit for moving the debate forward. granted we didn't get a bill passed but we did cover a lot of the issues that are going to have to be resolved, and i think they deserve a lot of credit for moving the ball down the field. as far as the fhfa and the things they're addressing you referred to, i think those are definitely very important and meaningful to setting the stage
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for legislation. and i think you -- the risk-sharing, both the front expend the back end, in the securitization platform, single security, what has been done with fhfa deserves a lot of credit for what they have done with warrants. i think clearly lenders have a better understanding of what their limits are as a result, and so i think all those issues, each of those issues, need to move forward and be addressed, and i think they are addressing them. >> it's clarity around issues like the goals and duty to serve also going to become important to help us move forward? >> well, i think so. i mean, i think clearly you have the left and the right concerned about the left being concerned about those issues, the right concerned about the guarantee.
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i think we have to have a backstop in order to have the 30-year fixed rate mortgage, which the american people want. they've been voting with their pocketbooks since the '50s on that issue, and that's something that we as an industry want to provide for them. and so i think legislation is going to be required to do that, and i think the things that fhfa can do will put us on the path to that legislation. >> this is a massive issue, and there's a top of opinions here in this room on how to get there. i think we spend a lot of time talking past each other on the subject, but we'll have to find ways to create more common ground. here's where i think the core dynamics are that we still have to solve for. the system has to be accessible by everybody. large institutions, small institutions, bank, nonbank, you can't start creating disadvantage in the structure.
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there are parties of johnson crapo would have to fix in order to get sure to was a clear separation of roles and originators could access the system on a level playing field. that was creating a lot of bifurcation of opinion, and we're not going to get there unless we solve that. and as we all know, one of the other big land mines, which is important to the gses' role, how to meet this -- you can call it duty to serve or goals -- whatever the topic you want to bucket it into, we need to have a system that's going -- if it's going to have a federal guarantee, it has to have an obligation to support communities that might otherwise get capam from the private sector, particularfully bad markets. good markets it's easier to get capital, bad markets it's harder. so you knee the continuous flow of capital and that's got to be define it or you won't bring together the stakeholders. we have to talk about how you get there and, -- but to john's
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point, on -- i think corker,washer, johnson, crapo, deserve a lot of accolades for putting a lot of the debate in place. things we're working on now, common security, risk share, the csp, those were idea that started in corker warner, and then became items we can now pursue on a regulatory front. i think for many of white house have been involved in this for a number of years, our own views how we get there, involving the best way to get there so we don't create unneeded disnew england the flowing of the morning backed securities market that we all depend on to make housing develop. so are there steps to make the legislative lift smaller, perhaps more defined so we can protect the common elements we need to absolutely maintain that exist today for the long run to stay going forward. so, it's an interesting work product that's going to be our big challenge in the few years ahead. >> we have been having a conversation to the people in this room is comfortable and
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easy, but we're outside this building there's a national debate going on about essentially choosing our leadership for the next four-year period, and i not only are we not ever going to hear a debate at the presidential level about the structure of the common security platform, i hope -- [laughter] >> please. >> the ratings would go down. >> but i -- what is interesting to me is that i see a general lack of interest in almost the housing policy fatigue around the mortgage market, home ownership, access to credit issues. just curious, you know this face well. are any of the housing and consumer credit issues we have been talk about here today -- how are the likely to find themselves, if at all in the presidential debate.
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>> unfortunately only moderately or almost invisibly so. so if you think about it in macro political terms, you ask the american people what concerns you most, the two things that rise above everything else by far are the economy and security. some people say put money in my pocket, keep us safe. give me a good job. keep us safe. everything else trails in a different tier or two or three tiers below that. then you add to that the comeplexty, listening to john and david talk, it's interesting here, but put an ice pick in your head if you were listening to this in a group of what you call everyday folks. so i think two things stick out, though, against that complex background. one is there's a constituency for disliking fannie and freddie, and dislikingliking the gses. there's political juice at some niche level what to do about it and there's also a political constituency around the issues of equal access and affordable
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housing issues. again, those are not the same at as terrorism, economy, jobs, and the like. but at least in certain forums and certain settings, if you are trying to get the support of three percent over here and three percent over there hairs at least some opportunity for discussions and has to be at a high level. people don't sit around the vfw, wearing carhartt jackets, playing the meat raffle. they got a great white paper on -- [laughter] >> -- that corker warner white paper. they're just, like, more of a table-pounding -- they just say it's crazy you have something calls fannie and freddie, government-backed, 95% of the mortgages in the country. is that smart? hell no. do you think people who are disadvantaged to have extra help in trying to get access to decent, safe, affordable house, yes, within reason. so that's as details as it gets.
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>> but people do know that rents are going up in their cities, and they do know that it's harder to gate mortgage or they don't have the income or the ability to save to support a down payment. their kids are living in their basements rather than on anywhere own in the market, and yet i don't quite see those issues in housing terms being in the debate. dave, do you think that's -- there will be other issues to be the proxy for economic insecurity? >> i think as tim says, we all talk -- some candidates are running on both sides of the party for president, not all of them i think actually have a chance. not making labels. but the -- as they tell you, they go back and do roundtables in their communes and nobody is saying what are you going to do
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about freddie macand fannie mae. nobody knows what those institutions do we're not a doing a good enough job of bringing housing to the forefront. i serve on a group, and our whole task is to get the candidates thinking about housing as an issue. we go to the meetings, we were in new hampshire and going to other states and it's difficult to get the candidates to even talk about housing as a subject, and yet when you look at the data being presented here, it's alarming. especially in the rental markets, how many americans are living in poverty and can't afford their rent. so, we need to make it an issue. part of that is an opportunity in the next election, but until there's an outcry, they're not going to focus on it and that's where we stand right now. >> so the energy -- i want to go back to you again, dave. the energy around fannie and freddie that exists in some populations, i think it's
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emblematic of a larger attitude about institutions. large institutions, particularly institutions in the financial system, that still is a legacy of people's own personal experience in the financial cries. there's a deep-seated belief at this point that what the financial system does is rather than being facilitating of the real economy and facilitating consumer lives is somehow or other in tension with the needs and interests of the average americans. and i think you see candidates on both the right and left, and politicians on the right and left, appealing to that. did the industries and the institutions you represent here have a role to play in trying to demonstrate where that narrative is and is it fair? >> obviously we do.
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my organization represents almost every lender profile that exists in this country, and we have had a lot of conversation on how to change the narrative. i'll tell you, every time i see a new headline, couple of big ones yesterday about financial institutions that were related to to the mortgage business, not positive, of course. it becomes difficult to change that narrative. i've really -- i've been doing outreach to the regulators, particularly rich core tray and folk -- cord rey and everybody in the room should be really recognizing the fact that disspeed the disagreements we have created the same set of consumer protections that's country has seen. it's safe to get a mortgage. the disclosure and protection for american home ownership have never been better. i don't hear that message coming out. we can talk about it in terms of loan officers at the street level and real estate agents trying to do that in their communities but we need more of that coming from academics and
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policymakers despite the internal discussions we're having. mary we are war torn and tired and battles along the way, and the gray coats and the blue coats -- can't forget the ewan formed they're wearing. at the end of the day we need to change the narrative, and i think it's important to create confidence in the system to create confidence in a market to get the participants all involved, to trust and trust is a deficit that is huge, that was created, this trust deficit was created as a result of bad practices from our industry, bad regulatory oversight, investors with unsash shabble appetites, consumers and real estate agents made bad decisions, we all did collectively. we fixed so much of that now it's, i think, critically important for us to turn the page. don't -- that doesn't mean don't forget the protections we need to keep in place and always keep a higher level of focus on that but turn the page on the narrative. we don't start doing that, i think we'll keep the sort of
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chasim that exists. >> and instead of how toll said housing to the top at the presidential issue, you might take the people in this room might take solace from the reality on the ground as a policy matter. i if you add up the real estate developers, the agents, the suppliers, the builders, the contracts, the originators, the underwriters, the servicers, the financiers, the consultants to all those people, the advocates for affordable housing, and the advocates for different housing policy and you go from far left to far right, and add up what is the housing cabal, don't think you look at that and walk away from the discussion and say, our problem is we -- this group doesn't have enough influence in washington, dc. that's a false premise. this cabal -- i don't want to
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say this cabal -- the cabal that is housing has fortunately or unfortunately one direction, which is more, more, more, and sometimes more can get irresponsible. and to be responsibly more. >> and i feel like just in the balance of the conversation, dave, i'll challenge you. i this the question a narrative question alone? somehow we have to be able to describe what we do in the economy differently or is there a question about how financial firms could do -- can try find more way i to meet the needs. we had a panel that talked about the volatility in income that many families have, and the volatility in their expenses. but most of our financial products are designed for a world in which you assume everybody pays the same amount every month all the time in mortgage servicing and credit cards. is is there something beyond narrative that we need to do to try to be more responsive to the
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economy and demonstrate value to real consumers? >> yes. the narrative is the easy one for everybody. you brought up the servicing question. we didn't get into servicing compensation and how it's structured and accounting for it. it's too complex. we need to get into the weeds and work on these various components. i put them in three large buckets. i put in a bucket called confidence to lend. and confidence to lend, i think, comes into role clarity, motivating institutions to be able to expand the credit box in a way that doesn't put them at extraordinary risk. confidence to borrow. we need have consumers having confidence in the system that works, and then we need confidence in the systems itself. where does capital get formed. how do we resolve the gse issue. what's the financial structure of the future housing finance system. three big buckets and under those are a whole bunch of work streams to work on. >> all right. we'll ask you to join the conversation there are people
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wandering around with mics and if you could raise your hands, we'll bring a mic to you. anyone? this is -- there we go back there. thank you. >> tim duncan, i spoke before. in boston, two, three buyers for every home that's for sale, and i think everybody would acknowledge we're pretty close to the speed limit in terms of home price increases. there's a lot of talk about bubbles already, and how is expanding the credit box really relevant in that environment? obviously detroit is different than boston but if we look across the country and most of the markets, the constraint is in the supply. houses for sale. how is it going to impact the markets by standing in the credit box? do we have a problem there? plenty of lenders and plenty of mortgages available.
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the constraint is the homes for sale. >> that's -- you take your markets where the demand is far greater than supply. boston, washington, dc, san francisco, that's a different challenge, about how to -- it's a supply challenge, but if you go to detroit, fresno, still parts of florida, parts of nevada, there's still home prices still have not fully recovered, and there's a lot more diversity in some communities, and so making sure we're providing as broad a credit box as -- sustainable borrowers can take advantage of, that meets the markets. john pointed this out early on, some markets have already recovered. other markets are still not there yet and the needs in each market is different. i thought your point earlier was
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actually spot on, and it's something that is a whole other set of dialogue about how do we create affordable supply and stimulate building about all of these innocenttives or lack thereof, that are impacting the supply issues that affect a community like you're focused on. >> let me add, the geographic variation in the problem definition is within markets. if you think about ward seven and eight and you're in the neighborhoods around the arc, there are-is a robust economic activity that is going on there, but -- and house prices are appreciating but gradually, but more of the residents of those neighborhoods, even those with savings, don't have the same credit profiles, and because of the neighborhoods and underwriting standards, appearing sees to credit is really tough. so, it is a much more granular and local market by market. >> in fact, take yourself even the hardest hit wards in
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washington, dc. look at the difference? what is happening with home prices in prince georges county versus fairfax and montgomery. there's a lot of work to be done on the credit side. >> we have one over here. >> go back to -- if you listen to the conversation sounds like we are in a pretty stable system, some legislation needs to pass. we're on a glide path towards a future that makes sense. where are the sources of instability? we just saw gse take a draw but they had capitol cover it. there's going to be a recession again. where are the things that could upsend this glide path that we're on? >> there's any number of things, but from the dramatic to the more sublime, but somebody put a dirty bomb into washington, dc tomorrow, you would have a significant upheaval in the economy and housing market and
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everything we talked about would change fundamentally. that's one. on the other end of the continuum, you have a seven-year recovery that has been fairly anemic by historical standards, and while we're all hopeful for continued positive direction in that regard, you could have a recession. by historical standard its we're seven years into a recovery and there's no guarantee this doesn't turn down in six months from now. that's an intermediate level of concern. maybe a large concern. then you can pick up some tactical level things that would be disruptive. for example, people like large banks saying it's not worth our time and trouble to be part of the fha program. too risky. and it's too litigious and costly, and ten more of those say that, that's -- so if you look at the continuum of what could disresult the relative calm of these two gentlemen to
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my left, that would give you some samples along the roadway. >> and, keith, to follow up on the governor's comments, the fact that we've had our two gses, fannie and freddie and -- no real plan in sight to fix that. there's not going to be legislation in this congress, this year or next year, but we do have to fix that. it is a -- you know, it is something that we cannot continue to have these two major institutions and conserver toship. i think i'd like to see something that worked well like the base re-alignment closure commission, congressionally chartered and maintained group that would look at the issue and bring it to congress and have them act on it.
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base re-alignment closure was something that had to be done, but each senator and each congressman, whether they had a base in their district work not have any part of it. but when you put the whole tow totality and present it to the congress and they had to require an up or down vote think did get something done. i think that kind of thing is what we should consider doing with respect to housing financial reform. >> so, people -- i want to just be clear. i didn't say things are great. i just made in my opening comments it's remarkable we're actually as stable as we are given what we have been through. i think we have great risks ahead of us. we need to resolve. and i worry every time i see a piece of legislation or i see some regulator focusing in on one segment of our industry, like licensing for some companies, an exception for banks versus nonbanks, for qm.
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i think all of this is just sort of -- this is a spotter. there's been over 30 pieces of legislation about the gses, between 114th and 115th 115th congress. there's constant tinkering going on here no matter how stable people really think it is. we have huge risks, and when the interest rates start rising we need to worry about sours of lick -- sources of liquidity. because it's true, you can't rely on the large banks to support the housing system. we have a whole bunch of dynamic new institutions in the marketplace today, so we have a lot of work to do to make sure the whole infrastructure doesn't fall particularly as you see the credit spreads change. from that standpoint we have a lot of work to do. we're right now in a far more stable environment than i thought we would be a few years ago and that was the good side
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of the double-edged sword. >> time for one last question down here. do we have a mic coming? thank you. >> national association of hispanic real estate professionals. this is for you, dave. media accounts seem to show you an agreement with the hud secretary castro in having struck the right balance in reducing insurance premiums but ate least for now to be cautious about reducing them further. also recently fha has taken some action to change the regulations on condos. in terms of positive actions, what would the administration or any government housing entity undertake between now and next year at the end of next year that would open up the credit market? >> so, again, fha just got over the two percent capital reserve
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requirement. most of that increase came from the reverse program, which has been extremely volatile year in and year out. you can see until the report. my own sense is the last thing fha can afford to do is put itself in a position of being in political risk, and if they were to swing the other way based on a different hpi forecast and go back under two percent you want want that to be on the heels of doing an mip reduction too soon. so, i think there will be one, but i say keep your powder dry, whoa it win we need to be system lative and build more capital into the reserve. that's how i would behave if i was the commissioner. rates are extremely low. they're not the inhibitor to access to credit. what fha has an obligation to do is create clarity in mortgage certification. there's other work to be done in service but today the use of false claims and treble damages is a new regime that never
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existed prior to 2011 in hud. puts every lindner america also greater risk than before to do an fha mortgage, and that's why you hear particularly right now the larger financial institutions almost championing the fact they're exiting the fha program, and it's almost a race away from that -- from the fha program that is so critically needed to support first-time home ownership. what fha could do right now more than anything else is create greater clarity so that lenders are held accountable for egregious material errors and make clear that for minor mistakes in the loan file that will never meet the test of a false claims act under a department of justice legal action, because if we don't make that change initially, nothing else really matters. we'll continue to see learneds pulling away from the program. it's absolutely intolerable and any affordable housing person here on the home ownership shied
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should be championing that right now. it's the biggest issue that hud faces. >> maybe i just want to -- about out of time we represent not just banks but insurance companies, payment companies, as set managers and other financial institutions and we pick up some things that sometimes have maybe parallel applicable to certain discussions. you think about the world we live in and would we are going. the difficulty of the mortgage process from a user experience standpoint is to put it charitably, suboptimal. you have other institutions that are offering very complex products with a lot of what you call underwriting behind it, but very soon getting to the point of being able to say to a person simply, here's our proposition, buy now, one click. and for for example, in the life insurance space. it's a difficult process and it's deterring lots of people to
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consider buying -- and people are moving to a much simpler, quicker, user interface. that's a problematic side potentially which is the way they know so much about you so that you don't need to fill out forms and do all this stuff, threw big data and data analytics and there's a lot of legal andth ethical issues around that but setting that aside, the idea we put an individual or a family through what amounts to a long, difficult march to get a mortgage, is not going to -- i just can't see it as a sustainable experience or at least an optimal experience, given what we know about how con summers are interfacing with products and services through technology platforms. one tactical thing we can do to improve this, including the potential of getting people in prequalified or at least mostly qualified states, maybe even in some sort of legal safe harbor state and make it really easy
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for them could provide some nice ben it in in value to the user to the customer in the process. the process now -- i'm a lawyer and i'm persistent and type a and i can barely stand it. >> maybe that's a perfect place for us to close because imbedded in that comment is both some potential dangerous pitfalls and reasons for optimism about the future that the consumer that really understand and engage with. please join me in thanking our panel. [applause] [inaudible conversations]
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[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]
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[inaudible conversations] nod [inaudible conversations] [inaudible conversations]
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>> the last panel of the day. you know, today we heard a lot about the consumer, which is nice for the financial services industry to start talking about the consumer. and the first panel was excellent, talking about both the strengths and the challenges for the consumer post crisis, along with the changing demographics. we then -- we continue to move on options for how we can get financing and open it up and today is a little bit about the back end of the process, the financing, the dominance of the government. we're fortunate to have two government officials here today who represent a huge portion of mortgage origination, from both the gses, bob ryan from fhfa and overseize both gses, and rich green from hud, and then i want to make sure we still have
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the consumer and community impact that we could talk about. so julia gordon is going to represent that perspective. a lot of what was heard today. equally important -- we heard at bit from dave stevens and others -- the lender, investor, the certainty of how to get funds to base level consumers, is what does it mean when there's litigation and risks inherent in the system, and what is the current statement and where do we go. what's the path forward as we move forward? so, i'm going to ask each of them to give about five to seven minutes, a little bit of an update for you on the current state. big picture, and then i'll have a few questions, but i wanted to open it up to this group. this is a great group here today, and i think there will be a lot of great questions. so we'll start with bob ryan first. bob is the acting deputy director of the division of conservatorship and special adviser to director watt at
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fhfa, and bob is wi well-known to many in the room as a trusted official from the government, certainly was the acting commissioner at fha, but i know bob well from his days a freddie mac and from the industry as well as wells fargo. so, thank you for joining us, bob. i'm going to start with you. >> i thought i would just spend a couple of minutes this afternoon and talk a little bit about the key areas that we're focused on, and just put it in the context of how we have been talking about it. i'll focus most of my remarks or spend my remarks now on the gses, freddie, and fannie, we call the enterprises to facilitate that and shorten that up a little, and do so in the context of how we communicate with them, these objectives and goals, which is the conservatorship score cards. in that framing, we'll talk
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about what those big items are we're trying to wrap up and carry over into 2016 as well. so one is the maintain part. that's really about what the fhfa working with the enterprises are doing about trying to maintain and meet their obligations according to their current statutes and mandates, and around that part, making sure there's broad liquid and broad access and liquidity in the mortgage market and housing finance market, and to too so in a safe and sound manner. those are the vast majority of the activities. one area we continue to focus on and will continue to focus on going forward is access to credit. i know many of the speakers before' expressed a lots of comments on the challenges in
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that area. so, we have done a fair amount with the enterprises. they've done tremendous work in developing that, and part of what we have been addressing there is, again, i think the enterprise's credit box, the terms under which they will purchase a mortgage, the underwriting guidelines associated with those are less the issue -- i think that's at a very healthy spot. reflects many of the changes in the -- and lessons learned out of the crisis. but also supplies more than adequate room to address the needs, the financing needs in the market place. what we have been working on are the issues of the constraints within the lending community be able to exercise and use the totality of the credit box, and the big developments are around the representation and warrant advertise, or trying to quantify and minimize the risks to the
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lenders of a putback or some unforeseen costs, and that we think that has contributed to some expansion of that market and also their willingness to go there. it's not the only issue and challenge but we think it's certainly the one that is within the fhfa and again the enterprise's control. and so over the course of the last two years there have been tremendous work. we're wrapping up most of that. we have made tremendous progress, the most recent piece being around trying to make sure that folks understand if you have a defective loan, if there's a lender that the only -- there are remedies other than the repurchase, articulating what those are, what the conditions around those are and providing greater certainty around that. so many of them will get resolved. an opportunity to resolve. the. that's an important piece. there's another piece in the work, that's been piloted somewhat but not complete yet,
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which is an independent dispute resolution process, and we see that is a one of the final steps in the process to say if all the back and forth between the lender and the enterprise around whether they met the terms and conditions of the contracts are resolved or not, this is one independent view to work through that. so there's still more work to be done there. there have been work and efforts on quantifying defects in the service siled of the business and trying to clarify identify that, provide more certainty to lenders, as to when they will -- they are inviolation -- in violation of those terms and what the consequences would be. so another similar view of what is a defect, what is the remedy, and one big piece is articulate that and locking it down up
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front into you don't understand the suppose -- -- there's movement in the mix of loans coming through the process. areas that are coming out of this have also recently fannie mae in particular has rolled out a home ready product, or is about read you to roll it out. and moving through implementation on that. another great development and work and research they've done in that area, both the enterprises are spending a lot of time and energy there. so good activities there. the other thing we have done in this space that we're hopefully wrapping up here shortly is the duty to serve rule, which will address many of those, and that one will be actually a proposed rule. so that is forthcoming in the near term. let's -- within this area, too of maintaining -- there also have been less a focus on loss
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mitigation activities and keeping borrowers in their homes. so you have seen how you deal with aged inventory, how to help stabilize neighborhoods and the nonperforming loan sales is a big component of that. we think we have worked hard to address some of the issues and challenges with that part of the market place. there's more to me done and we're continuing to work with folks and the enterprises are making sure that we're getting those through the best buyers that can keep people in homes and give borrowers a chance at modification when the new servicer and under new terms. so that a big piece. the reduced part of the score card is a very big and dramatic change from where the gses, the enterprises were, at the time of the crisis or just after the crisis. so, while the footprint, if you think about the gs es
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footprint in the market place and think about that in terms of market share of loans purchased or licenses financed, is still large, the risk position is dramatically, dramatically, smaller and continues to risk. if you go down how much have the retained portfolios, they are under half the size they were before. the underwriting guidelines we talked about, the delinquencies are down. loss mitigation, foreclosures, credit risk transfers are down significantly. the risk profile and the risk footprint is down dramatically. it's very different housing finance system in that sense with those rules. and addition to obviously things like the -- so big reduction there and that is happening both in the single family arena and in the multifamily arena. both enterprises transferring large amounts of the risks they bring onboard out to the private
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capital. so big movement there. a very different way to look at them. finally, the last piece i touch on here a little bit is the build part. this is an area -- actually the credit risk transfers and the build phase, the common securitization platform, are areas where policymakers can learn and understand and help inform some of the potential policies and actions that can inform future housing finance reform. and the platform is building the infrastructure on the securitization side to say that how can others utilize this down the road. first, focus has been on the enterprises, and that's deliberate. when we came in, we wanted to scope that down and make sure we had something that had a chance
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of succeeding. and making sure that it could get up and rung, and so that was -- cope scoping that down and focusing on business that the enterprises do all the time. securitization and do it specifically for their business lines. that kind of future of it. and so that was another big component and we can talk more about that. and then imbedded in that is also the movement to a single security and that is to again help improve the liquidity in the overall market place and reduce the costs to the taxpayers associated with the freddie mac security. >> thank you. that's great. our next speaker is richard green, and richard is a senior adviser for a housing finance and policy development and research at hud, and before joining hud, richard was the director of the university of southern california lusk center for real estate. we're welcoming you back to washington, richard. we're delighted you're here.
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your deep expertise is greatly needed. so, welcome, and please proceed. >> okay. well, i want to spend a little bit of time talking about the access to credit issue. that was on the agenda. there's a question which is are we where we need to be? and i think the answer is, no. and i just want to give a couple of facts. i'll say two uncomplicated facts and one complicated one. the first is there was a report out by the ncrc, a couple of days ago, on lending to minorities, and there are issues with these advocacy reports because they don't have a lot of things we call control friday my business. but fewer than three percent of gse mortgages are going to african-americans. that means a quarter of the population, relative to the population of african-americans, mortgages are going to gse loans
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are going to a fewer than a quarter of that percentage. that strikes me as a problem. i don't think there's any set of controls you could put in place that could explain that. second thing is, as bob said correctly, the risks being presented to the broader economy by fannie and freddie has gotten considerably lower and that's a good thing, but one might ask whether it hasn't gotten a little too low, and that if you look at the default rates for loans originated in 2009 and thereafter, they're extraordinarily low by historical standards, and so the question is, what is the right default rate? that actually is a question we have to ask yourselves seriously when we're thinking about access to credit issues. we don't want to go back to the way things were. we don't want to put people in houses that we have to take them out of in a few years. but the pendulum metaphor is overused but in this case it
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applies. i think the extraordinarily low default rates -- talking about points of default -- reflects that the credit box is too tight. there's something going on that is a problem. the third fact i'm going to present you is a little more complicated because it involves regression and this is what people like i do for entertainment, is when we wonder about something, we -- regression have their own set of probable elements but i'll tell you about the following regression you. take a regression in 1990, explaining home ownership. you use -- you have millions of observations. when you're doing this, and you look at home ownership as a function of how old people are, whether they're married or not, how well educated they are, what their income is, what city they're living in, their race, ethnicity. i think that's the list. if i'm missing one or two things i'm sorry. take that regression, get a
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model, and then use that mod toll test what happens ten years later. so this is 1990 data. ten years late center it nails it. it nails what the home ownership rate ten years later was. let's do that model again. written forward and see where we are. there's a lot of stuff that's causing home ownership rate to decline, marriage is a big one. married couples are 22 percentage points more likely to be home owners than renters are but in putting in marriage you put in race and ethnicity, and education attain. has gone up. that's going to tend to push it up. people gerting older. throw all those things together, look at the forecast, you look at where we are, the home ownership rate is 3 percentage points lower than that model predicts. so, then you ask, why is that? so we take one step further back and we say, okay, let's look at
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differences in racial outcomes for housing, for ownership. after controlling for income, marriage, education, et cetera, and what you find is after controls are in place, african-americans 25 years ago were 14 percentage points less likely to be home owners than nonhispanic whites. run that forward 25 years, now 17 percentage points. so what i rule call the unexplained gap has gotten bigger over that period of time. if you look at latinos, it's a smaller difference and the change has been smaller but you get a similar kind of trajectory. why has this happened? and i step back and i think, it's an access to credit issue. when we use census data, we don't have wealth. it's not there. we don't have credit scores.
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so, wealth is -- as much as we americans like to think wealth is largely a product of our own good hard work and to a very large extent it is, but also has a lot to do with who our parents are. and i am grateful for the following fact. pretty much every day my parents paid for my college education because they had the affluence to do it, which meant i was easier for know establish good credit history and save for a down payment to buy a house. so that enter generational transfer of wealth is a big deal. second thing is, again fico -- if you're in a strong position to begin with its easer to get to a 500 fico score than if you're in a weak position. the expression being poor is expensive. everything that you have to pay for costs you more money. not everything but a lot of things you have to pay for cost you more money if you don't have a lot of money. so that makes getting up to the
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stronger fico score more difficult. so, those are the two key components in the credit box, down payment and fico. how do we make -- open up the credit box, and still be responsible, in light of these phenomenon. and i want to suggest -- there are a number of things i'll talk about. one is let statistics dominate -- let's not a use overlays. when we have models, we have score cards, du, lp, total score card, these are model-based score card that rank borrowers bit credit hoyt and do a good job of it, but ranks are likelihood of default. they do a pretty good job of it. put an overlay on it, 42% dti overlay, now people who are deemed creditworthy by a model
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are no longer able to get access to credit. it harms ethnic and racial minorities, they're more likely to be kicked out by that. and the second thing is it actually could worsen the risk characteristics. how can that be? well, the thing is if you have a high scoring person who misses then heuristic they're less likely to default an lower scoring person. so i think overlays do an awful lot of damage both from the standpoint of access to credit and from the standpoint of managing credit risk well. second thing is one of the whole points of automated underwriting is supposed to free up time that would allow people to do manual underriting. there was an excellent conversation about people who have unstable income. by unstable i don't mean they're
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unstable. i mean seasonal employment. and it's really hard to underwrite that with an automate underwriting system. it just is. that's where judgment for manual underwriting can make a big difference to a lot of people. look at people who have made good income fog three years, four years, but comes in fits and starts over that period of time. if you're going to make a very different decision about them as a manual underwriter than somebody who doesn't have any income at all. so, terms of the credit box, i think we have to think about really using what the automated models allow us to do and also taking advantage of the fact the automation freeze us up to look more seriously at loans that might not fit inside the model. >> richard, thank you. that's certainly a long the theme of what has been talked about today. trying to think through the innovations of access. julia gordon is here.
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she was with another company when we first asked her to speak and now with the national neighborhood stabilization -- >> national community -- >> i always get that one wrong. we know that your issues and themes are along the lines of what we're speaking to so we're delighted you're here and thank you for joining us. >> thanks so much for having me and i'm delighted you kept me on the panel even though i no longer have the job that may have been relevant to the panel. but i am going to take the opportunity to move us because richard said much of what there is to say, and that could i also say on the access to credit issue. i want to talk a little bit about something that has come up in a variety of places today so we haven't really deviled delved into, the unvaccineness of the house -- unevenness of the economy. a report i think everybody
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should look at calls the uneven housing recovery because call it what you mean. and that report looks at negative equity and particularly where it is, where it's going, where it's staying the same or getting worse, and why that is. and what we should do about it. and i think it's really important to focus a little bit now on some of the areas that are not seeing a big recovery. we know it's not just about real estate. we know it's about job growth. we know it's about household formation, it's about incomes generally. it's about disinvestment, about move away from rural or nonmetropolitan areas into cities. all of these things are in play. we can't talk about all of. the today. i mean, for those who are here for the earlier panel, when bill showed you the maps of mississippi, you can do maps of
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the whole country where you see all of the factors that line up, and in order to work effectively in these neighborhoods, it's absolutely imperative to work on all of these fronts, and so i am a fan of working across silos and trying to bring concentrated efforts that can address the whole panoply of issues but we're here too talk about housing so i'll focus on housing...
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>>
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>> en mower to be spent then invested them up program went away as they tend to do and then the situation to address this problem but so much access to credit per se but the nonprofits and others working in the neighborhood need access to capital and they cannot find the right now. that is a new problem, it is an old problem but in this context it needs to be part of the access to credit conversation because we need to work with partners in these communities to get the homes back into percolation and back into use with the
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owner occupancy and with the upper aerialist along with something else to announce the fannie mae and freddie mac ane the fannie mae and freddie mac and fha offloading the delinquent mortgages and with those participants a little over 100,000 notes have been sold. is headed giant number? no but it is significant in the communities for their concentrated. but what is concerning to me before i came to my job now
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that the organization work for now with the academic i am concerned the buyers of these notes with privately funds to buy large chunks of loans to have a certain percentage so not anymore walk away from alone they will just the release the
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lynen walk away. but interestingly, but there is no prohibition but with these distressed assets it is the of worst of the worst to have all whole second wave of crisis without doing the intensive asset worked you need to do to get it through foreclosure and if you have to demolish with time and effort and money. when we get those, they come with a donation you cannot
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just give this a way and not expect somebody to do what a land bank doesn't have that and they need to get money so these things on my mind lately in terms of what will happen in the particularly hard-hit areas. on a related issue the trend of the single-family rental is a large part of the market. so we have seen over the past several years as larger players either engaging in large-scale rental programs or providing financing for mid-sized investors and is important to spend some time
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from the policy makers to think about how we can major this is an area where we think about affordability and think about how the new landscape work and they're not regulated by the normal housing and banking regulators and how that will work were a lot of homes from the occupancy to the rental. i will stop there. >> you will get some questions for sure. >> of the financial services
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if you look through the bio that we have a lot of rewards. it has come full circle when what is happening in the market with liquidity. >> so i want to play the lawyer many of you have heard me go one about these before i apologize they're not innovative but their problems for many of my clients so the first legal requirements themselves are either overly prescriptive or overly ambiguous or to be subjective simply put the fact it is so disproportionate if you
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count to the disincentives and the willingness of the government and what is available to them. talk about fha and the ambiguity and what constitutes a material effect and what is required but the big one now is the cfpb enforcement authority over abusive acts and practices. i know it when i see it. it is predicated in part or in whole on an active practice. with the disparate impact going carolina of court cases how a lender
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determines and what the policies then procedures will be it is ambiguous because it is after the fact analysis but that is ambiguous but what about overly prescriptive? has anybody read it? it is as detailed as a committee to know how detailed they are it is just the tripwire because there are remedies there that's cfpb is the new nsa. with that level of detail they will get talked-about
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the goldberg system so we have overly subjective and overly ambiguous on the other hand, overly prescriptive there is too much very clear to much to tell utility object of underwriting criteria and then to determine in their judgment was not appropriate how about inconsistent? in compensatory feeds so don't you dare propose a net borrower so what you want from lenders there are no inconsistencies between fha
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and servicing regulations and cfpb so lenders are caught where they have to decide which one they want to violate. both agencies noted inconsistencies nobody will do anything about it. about the ability to repay? we think they're doing a pretty good job. to come from enforcement so to get the al long subpoena of documents to produce to say it is the new normal now.
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so looking at phh i cannot say with certainty that the director's position on marketing agreements and insurance arrangements was wholly consistent with years of judicial decisions. think there is a good chance of it gets overturned but to take the certifications no large lender can say it can comply in all respects. it can. like you even need a certification? is respected if there is one if somebody does something wrong there is a remedy available for failure to comply so the certification is nothing more than the department of justice can use to balance the budget
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look at the chart to see the falls claims almost all of them are banks. the legal requirement is not difficult but then second are the remedies to the government. would get the false claims act, it is three times the amount dash liquidation but three times payment dash liquidation as bad as that is when what do they extrapolate? and then to find 65 loans and then we come up with x and we will extrapolated over the entire portfolio. so in our view if you sign
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today we will take 3 million. that is how those things unfold but on the cfpb with $5,000 maybe you knew about it with these four servers seedings we are doing this it has happened so quite some time we are extrapolating to only use by thousands of 25 for 1 million and we will take 900 million the you have to sign today. restitution gives money back to borrowers.
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so we're making a river as far worse for the losses we cannot identify or prove then you have to pay. with the gse they are making progress on them purchases with those risk allocation devices this is the fha to madrid 25,000,145,000,000 there is an equal opportunity enforcer looking at that closely is the the
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penalty with the restitution with 109 million these are real dollars they deserved it i would say in many cases they did not so disproportionate remedies thank you. >> we're almost out of time so open and up to all of you. to rise at of o all of you. to rise at of the ashes and also to be there when private capital said - - lead after the crisis because of hud and cfpb and usda and then 2.0 why and
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lenders are reticent with those originations with the balance sheets to take up the rest. who will innovate to broaden access to the ever present demand with the mortgage market private capital cannot compete and it never will. any thoughts? we can open it up.
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>> that 30-year fixed-rate is not a product and it is hard to have the product but still the basic problem is investors are willing to take on interest-rate risk and credit risk but to take on both but they're still very good analytical reasons and the banks could do a perfectly good job on their balance sheets to have lots of long-term fixed-rate mortgages. if we believe in the pre-payable mortgage is a
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good thing is impossible. >> will government innovate in the future? that is the question. if. >> is more stifling you can come up with innovation i have one client on the student loan side they determine if they're eligible for a student loan based on the college that they went to is all algorithms to said they could not get a loan? my latin major son could not. but if you're penalized for failure it is another to actually be penalized to take a risk. >> evening the government decide they will not be responsible to innovate with
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the safeguards in the case that richard was talking about to have the product to have conversations and other products but for right now that is a product that is relatively safe compared to what the innovators can up with the larry had is the nicest guy you'll ever meet. but when you look at lenders right now the ascension of lawyers and risk managers to say no, no, no. you cannot do anything. just like that movie.
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[laughter] baking we need some time to get past that. there are times when with consumer advocates have joined together to say in fact, with clarification is important to wind things up with each other you can do a certain amount of that but what ic and that is an opposition to each other.
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with that innovation and how that equates. >> so what needs to take place on the credit fox to expand the credit fox if you look bad it so lgbt where do want to go? up by coast gore at 580 with the fha the income ratio that those in the 50 area. there is a lot of room there.
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and that is very real for the reason that larry talked about with the monetary vault values so it is risk averse so it is not a great situation we don't have a super robust economy. if there is a real opportunity help people learn to make a living with large changes of demographics and the models
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are always backwards looking will be uncomfortable but that is the way it needs to go one -- on but it will take some time and innovation and a willingness to go out there. we certainly don't want to see the invasion of products with the house prices are rising let's go do dash amateur eyes alone -- amateur eyes loan. >> so as laurie has shown it is the number one predictor
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what he is doing now the product relates to what the gentleman said before lunch to the resources of income. which is a quarter to repressions. >> picking up on a point that julia raised but among those sent counties dash equity rates are getting higher ended another 600 counties they're finally getting better. to help the markets recovered to ensure they're not walloped with the vacancies by the park did
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that. there was a tremendous amount there than there was a large piece that was under water over five years there are some serious delinquencies and those are very difficult and challenging to redress so while the nonperforming loans to address the challenges of the guidelines and there is more to be done there. the alternative is they just sit there to afford another
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opportunity to look to those pieces there is more work to be done there. the staten island extension was up part of that they're treating the buckets of the link loans to sell off basic conditions is if different and so far we haven't seen a real different treatment with those programs and i hope going forward we do trust that a little bit more to be more targeted. for example, if you could do principal reduction of the
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gse there is the idea the buyer getting a discount but that any economic incentive we don't have a requirement and 70 going down to 115 is fine in one area but if you are where the whole values are stagnated and still declining maybe want to get them down at 92 really major modification works. >> we have hit the witching hour. they give for being here. >> laurie will come up just for a moment thank you for being here i have a great
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day. >> but what they said earlier. [laughter] . .
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>> given large number of folks as rachel pointed out, flexibility and underwriting is necessary and the current system is not willing to do much of this lending. so let me actually go very quickly panel by panel in terms of highlights from each panel. jason pointed out that land use restriction has been growing and then it says created economic rents, supply of homes and lowering mobility and productivity and the effect has been strongest in multifamily construction which is importantly in light of demographic change in rental population. he expects interest rates to rise by 50 basis points, low by historical standards, it's going
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to contribute to decline and volume. however, purchase volume should be opt to 5% increase in home prices and 5% increase in home sales. the rental market is very robust due to demographic trends. multifamily start highest in 30 years but still not meeting the demand as demonstrated by the absorption rates. panel one on consumer financial health and a huge number of people are not healthy, 57%. the amount of income variability is very, very large. it also speaks to the need for flexibility and mortgage underwriting and it speaks to the affordability problems. panel two on demographics spent a lot of time on focusing on non-white, particularly hispanic formation. today's tight credit doesn't serve the population well.
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the fact that it's hard to save for out down payment contributes to a lower home ownership rate going forward. we need to think about new instruments and also new instrument that is move renters into home ownerships. it's clear we are not constructing enough. we also need to think more about preserving existing affordable housing. in sarah' panel there's no focus on housing and housing financial issues. we still need to solve three issues, future of the system giving lenders big and small, bank and nonbank the confidence to lend and giving borrowers confidence to borrow.
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lender overlays are an issue, damage access to credit and make it difficult to manage credit risk. bob ryan pointed out spend considerable amount of time trying to break overlays. problems remain unclear rules, over prescriptive rules and inconsistent rules. that's what i learned today. thank you all very much for coming. i hope to see you next year in the seminars. pick up -- again, pick up your packet. [applause] [inaudible conversations]
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[inaudible conversations] >> and some news today from a
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man from florida who flew on restrictive aerospace. he said earlier this month that he agreed to a deal in which he would plea guilty to a felony. his lawyer has said he would ask for probation and prosecutors have agreed not to ask for more than ten months in prison. >> book tv, 48 hours of nonfiction books and authors. our featured programs this weekend the 32nd annual miami book fair, live coverage saturday and sunday at 10:00 a.m. eastern. after words with niel ferguson, kissinger.
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>> i think it's what made his contribution distinctive. it made him stand out from the pack of people. >> he is interviewed by car lea anne robbins and sunday former editor and aught -- author of the book islamic state, on the rise of isis. watch book tv all weekend every weekend on c-span2. >> all persons having business before the honorable, the supreme court of the united states give their attention. >> coming up brown versus the board of education for topeka, kansas third grader, six-mile
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walk to the bus that would drive her a mile only for the white school to be a few blocks away. we will examine this case and explore racial tensions at the time. that's coming up on the next landmark cases, live monday night at 9:00 eastern on c-span3 and c-span radio. and for background while you watch order companion book. it's available for 8.95 plus shipping. >> house speaker paul ryan sent out the tweet about terror attacks in mali, un officials say 27 people have been killed
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in an attack. two of the islamic mill -- militant attackers also died. they talked about screening refugees from syria who want to come to the u.s. the hearing ran about two hours. [inaudible conversations] >> the judiciary meeting will
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come to order. we welcome everyone to this morning's hearing. i would just tell everyone that proper quorum is going to be observed, witnesses deserve to be heard. this will be your one and only warning in that respect. i will tell our witnesses we are going to do things a little differently this morning. i have colleague that is will be shortly so we are going to recognize our witnesses for their opening statements before we recognize the members for theirs and because there's a lot of floor activity this morning at 10:30 we want to get as much done as we can so while each of you has very vast and impressive resumes i'm probably going to skip them as i introduce you and recognize you by name for the opening. before i do that, i would ask for everyone to rise for the
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administration of an oath. just the witnesses, i'm sorry. [laughter] >> that was my fault. that was my fault. i was ambiguous. do you swear that the testimony that you're about to give is the whole truth and nothing but the truth so help you god. i am going to introduce you and recognize you individually for your opening. we are delighted to have ms. anne richard. we are delighted to have mr. león rodríguez, we are delighted to have mr. zeth jones and we are delighted to have mr. mark. with that, ms. richards, i would recognize you for your five-minute opening. >> thank you very much, mr. chairman and thank you to the subcommittee for holding this important hearing at such a key moment in the discussions
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about the programs of very successful program that the u.s. government has to bring refugees to the united states so they can restart their lives after living through very, very difficult situations of war and persecution. i know the murderrist attacks in paris have raised many questions about the spillover of not just migrants to europe but also the spread of vile -- violence. let me assure you that the entire executive branch and state department that i represent have the safety and security of americans as our highest priority. as an essential fundamental part of u.s. refugee admissions program, we screen applicant rig -- rigorously and all under go
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screening involving multiple agencies, law enforcement agencies including the national countererertism center and the department of homeland state and defense. consequently reissettlement can take up to 12 months. these safe guards include bio metric and fingerprint and lengthy overview by specially trained dhsa officers to ensure applicant is a refugee and not known to present security concerns of the united states. león will talk more about this,
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it's his department that the responsibility lies with who comes and who does not come. they are incredibly careful and if they have any doubts, they will not allow anyone to enter the united states. no one has a right to resettlement in the united states. it's something that we offer out of -- based on our history and our humanitarian values. the vast majority of the three million refugees who have been admitted to the united states including from some of the most troubled region of the world have proven to be productive citizens, they pay taxes and send children to school and many take the test to become citizens. some serve in the u.s. military and undertake other forms of service for their communities and our country. in fact, our program is so well regarded, other countries come to us to learn more about it and i'll be taking the british member of parliament richard
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harrington who is responsible for trying to get more refugees through process to the uk for a visit to one of our trs tomorrow. so i'm happy to answer any questions you may have about this -- about anything in my testimony and my testimony talks about our humanitarian assistance overseas and diplomatic efforts but i know that right now the american public wants to hear that our first priority is the safety of the american people. thank you. >> thank you, ms. richards. mr. rodríguez. >> thank you chairman and good morning congressmen king and smith. i think we can stipulate to two things. and secondly, that the situation in and around syria is with
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11 million people displaced. the question is to continue that tradition of being a welcoming country can i as the director of the agency that vets refugees assure the american people that we are using all the resources that we have and that those resources are meaningful resources to vet refugees, what i'm here to tell you this morning is the process as assistant secretary richard described is a multilayered robust and intensive process to which individuals must pass to travel to the united states. given the limitations of time, i will sign post three critical phases. there is the department of state phase, there is then the phase conducted by my refugee officers and hopefully i will have a little bit of time during questioning to dig into some of those elements further. during the unhcr process
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individuals for the first time are reviewed -- i'm sorry, interviewed for refugee status, extensive information is captured as well preliminary analysis that apply to those individuals. the fruits of those interviews are then passed to the state department and ultimately to uscis, at the state department stage a second layer of interview is conducted. at that point a series of critical biographics are checked. the first look at advisory support system against a number of critical law enforcement and intelligence holdings. the security advisory which are hosted by the fbi, but most importantly of all, what is
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called the interagency check. that is check against a number of both law enforcement and intelligence holdings. and important for me to let you know this morning that through that sweep of checks, we have, in fact, either denied refugee status to individuals or at minimum placed them on hold based on derogatory information that came through that check. that check is populated by the extensive work that's being done by the u.s. intelligent services which is, indeed, one of the most robust. at that point, they come to my refugee officers who have extensive training both generally in protection law refugee law and interviewing but also very specific in targeted training as to conditions in syria including the lessons
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learned during the refugee process. as we interview each family of refugees, we gain more and more information and more and more clarity as to what's going on in syria. that is coupled with another round of fingerprinting, a set of biometric checks, customs and border patrol databases. fbi databases which further check the status of these individuals. also when i talk about the interagency check, i would note the fact that that is now a recurrent process. so these individuals are checked on an ongoing basis so if new derogatory information arises about the individuals during the process, that comes to our attention during the process. i hope i have further opportunity during questioning because i think it is critical for the american people to get
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the reassurance they need to continue to be the kind of welcoming country that we are, but i also ask us to consider the price of inaction, the fact that being welcome to go refugees contributes to stability of the region, it put us side by side by our allies in europe who are taking the problem to the same extent or greater than we are and honors tradition as american people. >> thank you, mr. rodríguez. mr. jones. >> thank you, chairman and distinguished members of the subcommittee. it's an important subject and the tragic attacks in paris over the weekend and links with syria make this hearing particularly important. i've divided my comments two -- into two sections. the second and background on
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terrorist groups and foreign fighters, that's my expertise serving in u.s. special operations and for the fbi's 9/11 commission last year. we did look at some of the stuff for director. the first -- let me just talk about the extremist from syria, just to put into perspective. u.s. led air strikes and recently from france and other coalition partners have probably halted the advance of daesh or islamic state in syria and across the border in iraq, u.s. efforts including special operations forces on the ground have helped halted but the group remains strong. daesh remains strong and is currently not on the ropes. the al-qaeda affiliated is probably more capable more now, that is fighters, funds,
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territory than any time since its creation in 2011. it's affiliate, it's pledged of al-- allegiance and we have seen travel to and from syria in iraq. the battlefield is the largest concentration of foreign extremist we have seen in any major war. certainly ones that i've participated in and looked at the number in pakistan, afghanistan, somalia, libya and national counterterrorism numbers put this at over 20,000 foreign fighters who travel to syria to fight. about 17% of them have come from the west with depending on how you counted somewhere in the neighborhood of 200 americans who have traveled or attempted to travel to syria mostly against the assad regime.
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the islamic state in paris recently and garland, texas, denmark in australia, brussels and other locations. the threat clearly from this region is clear. i note the recent mi5 director's comments ahead of domestic intelligence saying that they have 750 british extremists that have traveled to syria and many have joined daesh and have been involved in plots in the uk. the threat is notable coming to our european allies and to some degree to the u.s. homeland. so that brings me back to the u.s. and the refugee issue. let me just start by saying that refugees clearly have played an important historical roll in the united states and ensuring u.s. economic prosperity and cultural diversity. the plots we looked at last year on the fbi's 9/11 commission,
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time square bomber to david based out of chicago involved in attacks, almost none of these major attacks or individuals were refugees. the threat historically has been relatively small, but i would just highlight a couple of things that make the picture in iraq also worth noting. one is as i said earlier we see the highest number of foreign fighters on any modern jihadist battlefield. that border is obviously very poorest and there obviously has been fighters into the west. second, several european intelligent agencies have expressed concerns refugees in europe who have been in contact with daesh or islamic state, including most recently in belgium. there have been some concerns,
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in some cases after they have gotten into europe. and then third, i would say, this is based partly on my own experience, what we had in iraq and afghanistan was a pretty good intelligent architecture. we certainly don't have this in the syrian context. i'm happy to talk in more detail about this. let me just conclude by saying that the u.s. has a long standing tradition of offering protection, freedom refugees, but obviously an integral part of that needs to be ensuring that those individuals considered provide, that the u.s. is able to provide security to the homeland and the syria battlefield is a -- is of some concern just because of the u.s. collection gap that exists compared to other battlefields we've been involved in so thank you very much. >> thank you, mr. jones. >> thank you chairman. refugee protection policy has to be based on two principles.
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one what policies we adopt must not pose a threat to the american people and secondly, whatever money we take from our people through taxes to devote to these purposes should yield the maximum humanitarian effect. resettlement of refugees from syria or from yemen or somalia or other failed states, fails on both of those counts. hillary clinton said at the debate this weekend that the united states should spend, quote, whatever it takes, unquote to properly screen syrian refugees. i think everybody would agree with that. it misses the point. the problem is not that we are devoting inadequate resources. it's certainly not that our people in dhs or fbi or state are not committed, our people are doing the best job they can. the problem is that proper screening of people from syria cannot be done.
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we are giving our people an as-- assignment they cannot accomplish successfully. birth certificates, driver's license, school records all of those things that we take for granted. the fact is that those tracks, traces are nonexistent in much of the world even in the best of circumstances and in the kind of situation, the chaotic situation in syria or somalia, yemen or libya or afghanistan, what little informati that might have existed is probably gone up in smoke or at the very at least inaccurate -- inaccessible to us. quote, we are not going to know a lot about the individual refugees who come forward, unquote. that's true. in fact, just this week we found more evidence of that, the french sent our intelligent
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agency the fingerprints of attackers in paris and there was no trace anywhere in databases. you know, our screening of refugees resembles, i don't mean to be flip, resembles the joke about the drunk that loses the keys but searching under the street lights. well, the light is better here. the clearest statement of this came from matthew, nothing personal, i was in charge of fraud detuks, he told the senate last month, we check everything that we are aware of within u.s. government holdings because the light is better there. the second point is eficacy, are the resources for refugees, whether syria or anywhere else
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being used to the maximum effect. bringing refugees to our country makes us feel better. it does make us feel better, but the point of humanitarian protection is not to make us feel better, it's to assist as many people as possible with whatever resources we decided to devote to this purpose. and what we found, we did research on this, it costs 12 times as much to resettle a refugee from syria, from the middle east in the united states as it does to provide for them in their own region. in this case, say, syrian refugees in turkey or jordan or lebanon. ..
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to devote to refugee protection compels the shift in emphasis away from we settlement toward greater protection for people in the region. thank you. >> thank you. mr. hetfield. >> thank you, chairman gowdy, ranking member for honoring -- [inaudible] hias is the oldest refugee agency -- >> go mic isn't on. >> can hear me now? okay. thank you, chairman gowdy, ranking member lofgren and distinguished of the subcommittee for inviting me to speak here today at half of hias which is the oldest refugee agency in the world took we been
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reselling refugees since 1881, not just because it makes us feel better but because it saves lives. refugee resettlement have saved millions of lives since 1881 but not nearly enough. we are confronting the world's most horrific refugee crisis since world war ii with 69 displaced across the globe, 20% of them are c rating. link a conflict that has taken over 240,000 lives. without concern for more international assistance, countries like lebanon, jordan and turkey are beyond her saturation point with over 4 million syrians gaza refugees to risk their lives to flee for a second or a third time. the crisis fund attracted international attention and attention in this country when the body of the three year old syrian boy washed up on a turkish beach on september 2, 1 of 813 men, women and children asylum-seekers to perish at sea that month trying to make a perilous journey to europe.
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this is an extraordinary crisis requiring extraordinary leadership but so far that tried response has been tepid at best. while this is the largest refugee crisis of my lifetime, we are recently far fewer refugees than we did in 1980, when we resettled over 200,000 indochinese refugees, or 1983-1994 when we resettled well over 110,000 refugees each year. my great sadness at the murderous acts of terrorism perpetrated in their root in paris last has been compounded by the reactions of some politicians in this country -- beirut. that divert the focus away from fighting terrorism and toward keeping refugees out. they have blamed the victims. this place victims. this plays on people's fears, turns prejudice into policy and weakens our national security and our national character. i mistakenly thought that attitudes and sites like irish need not apply, no callers, no
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jews or dogs allowed for ugly relics buried in the past, but apparently not. governors are clearly saying openly, new syrian muslims are welcome in my state. one governor even said him from my home state of new jersey, new syrian orphans under five are welcome either, which can only recall the ugly debate that occurred in this house in 1939 which resulted in the defeat of the wagner rogers bill which would have saved 20,000 refugee children from nazi germany. governors are right to be concerned about security, but so was the federal government, so are the refugee resettlement agencies and extensive screening process in our refugee program reflects that as director rodriguez has already testified and as it's in my test went off a number of refugees being resettled here today is relatively anemic, jessica the protocol in place are stronger than anything i've ever seen in my 26 years working in this field. so strong that it is that the
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refugee result of program into a more fortress than endless causing massive backlogs of legitimately deserving and not necessarily suffering refugees. the fear of resettled refugees here is based on erroneous assumptions. the flow of refugees to europe is entirely dissimilar to the refugees except for the u.s. refugee resettlement program. the refugees arrived in the u.s. have undergone extensive security vetting prior to setting foot on u.s. soil. refugees to europe are not screened until after the into. this isn't the distinction. it simply doesn't make sense for u.s. lawmakers to react to the tragedy in paris are proposing legislative changes to the u.s. refugee program. history has demonstrated our democracy cannot only withstand large influx of refugees from other countries but will prosper as a result. when we welcomed millions of refugees from time in his fascist and nazi regimes, our country did not become infected
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with any of these ideologies, nor would he care associate with them. if anything, these refugees immunized us from the algerian ideologies they were fleeing. -- totalitarian ideologies -- the u.s. rap is hardly a piece of swiss cheese. in essence it is not even a wide reaching rescue program that was intended to be. given the complexity intrusiveness and a predictive of the program for refugees, it seems highly unlikely if not impossible that a terrorist which used the refugee resettlement program as his or her pathway to the u.s. my written testimony outlines a number of suggestions to improve the program while increasing both security and efficiency, but it does not recommend a certification process. thank you for inviting me to testify here today on syrian refugees. this country must continue to be both welcoming and safe. >> thank you tom mr. hetfield.
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i will remind the witnesses and members to address their comments, for witnesses it would be not to one another. with that i would recognize the ranking of the full committee, the gentleman from michigan, mr. conyers. >> thank you, mr. chairman. i apologize for appearing late, but this is an important hearing which focuses on the syrian refugee crisis and its impact on the security of our nation's refugee admissions program, has the potential to shed meaningful light on critical issues of interest to all americans, to all of us. unfortunately, the valley of
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today's undertaking is greatly diminished by the fact that immediately following the conclusion of this hearing, we will go directly to the floor to vote on h.r. 4038, the so-called american safe act, a bill that would effectively shut down refugee processing for syrians and iraqis. clearly, there are no easy solutions to the humanitarian crisis of this magnitude, as well as the security threats we will hear about today. yet, 4038 is not the right answer, in my view, and i want the witnesses to please let us know what should be our response, keeping in mind these factors. to begin with, while ensuring the safety of all americans should be our top priority, h.r.
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4038, which would effectively be barred syrian and iraqi refugees from the u.s. refugee admissions -- admissions program does nothing to promote security. this measure sets unreasonable clear standards by the department of homeland security cannot meet and thereby would halt refugee resettlement in the united states, which is perhaps what the whole point of they're doing this is. so without question, the program should be held to the highest standards to ensure to the greatest extent possible that the security screening is thorough, effective, and timely. in fact, refugees are already subject to the highest level of vetting, more than any other traveler or immigrant to the united states. this extensive screening process
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performed by the departments of homeland security and state, in conjunction with the cia, the fbi, and other law enforcement agencies, relies on methodical and exhaustive background checks that often take up to 24 months on average to complete, and even longer in some cases. but like any system there can be room for further improvement. i would appreciate your thoughts here at after this hearing on how we can accomplish that goal. we must keep in mind that our nation was founded by immigrants and has historically welcomed refugees when there is something around the globe, whether it's an earthquake in haiti, a tsunami in asia, or four years of civil war in syria with no end in sight.
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the world looks to the united states. we provide protection to refugees and asylum-seekers, especially women and children. nevertheless, in the wake of september 11 attack on our shores and the tragic november 13 terror attacks in paris, we must be vigilant, especially in the midst of a global refugee crisis. the measure i keep referring to, however, is an extreme overreaction to these latest security concerns. rather than shutting our doors to the desperate men and women and children are risking their lives to escape death and torture in their own homeland, we should work to utilize our an immense resources and good intentions of our citizens to welcome them. and, finally, congress needs to do its part by properly funding
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refugee resettlement, as well as funding our federal agencies so that they have the necessary personnel and programs to complete security checks. rather than slamming the doors to the world's most vulnerable, we should be considering legislation to strengthen and expand refugee programs. for example, i'm a cosponsor of h.r. 1568, the protecting religious minorities persecuted by isis act, which allows persecuted individuals in isis held territories and iraq in syria to apply directly to the u.s. refugee admissions program, rather than rushing to the floor to consider legislation that was introduced just two days ago and has not been subject to even a single hearing. we should devote our legislative resources to developing meaningful solutions.
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and i thank the chair very much for this opportunity. >> i thank the gentleman of michigan. the chair when i recognizes the. national security a public stage of the print function of government. national street and public safety or not simply factors to be considered in the administration of some broader policy objective. national security and public safety are the ultimate policy objectives. the safety and security of our fellow citizens should be the driving force that is behind all decisions that we make as representatives. and has represented as they would be incongruent for us to undertake any act or fail to undertake an act calculated to jeopardize this agency could of those who sent us here in the first place. people do not import post to represent them so we could take risks with their security. they sen sent us here to put thr security at the top of our constitutional to-do list. this country has a rich and long history of welcoming those fleeing persecution.
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we have a long and rich history of liberating a suffering under oppression. with the most welcoming country and the world, and we are the most generous country in the world, and we help those in need both here and abroad, and we administer that aid in greater quantities than anyone else. our country has welcomed over 3 million refugees since 1975. we consistently provide aid to those indie. we provide for protection for those who cannot protect themselves, and we provide a defense for those who are defenseless. regrettably the world we find ourselves in is imperfect and seemingly becoming more and perfect it is because we are free and secure and only society river and public safety that we have the liberty of being generous to other people. rather than address the underlying technology that results in displaced people, those in charge of our foreign policy see more interested in treating the symptoms. you are refugees from the middle east and northern africa because
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those regions are on fire and riddled with chaos and our bright lines and policies of containment and smart power or whatever we call it today have failed. terrace took the lives of over 100 innocent people in france, and injured many more for no other reason than the fact that they could. they killed 100 because they couldn't kill 1000. their objective is evil for the sake of evil. it is murder for the sake of murder. it is one in willful violence, premeditated depravity, calculated to take as many as his life is possible. the acts of barbarism committed against the people of france are the latest in of online a malevolent acts committed against innocent. and outline is not likely to be over. cia director brennan said what happened in france was not a one off event. we also know i says terrorists are in debt and find ways and attacking america and her allies
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including your. director brennan said he says has an external agenda. they are determined to carry out. another administration official said i wouldn't put it past places to infiltrate operatives among refugees, so that's a huge concern of ours. those are not the words of some gop presidential hopeful. those are the words of our very own intelligence officials who serve this administration. the president has said he's to busy to debate the critical issue and, unfortunately, what passes for debate in this political day and age is some absurd conclusion about widows and orphans. it is precisely that kind of hyper partisan conclusion decide to cut off debate rather than discuss foreign policy that has united this country in only this one fact. we have no idea what our foreign policy is in the middle east. the people i represent are kind and generous, they're asking visitors to nation and this president one simple question.
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what assurance can you give us with respect to our public safety and national security? and so far no one has been able to provide that assurance. on monday the president said the country would continue to accept syrian refugees but only after subjecting them to rigorous screening and security checks. those wonderful words, at some point you have to ask what does that mean? ahead of her own fbi said the concern in syria, the lack of our footprint on the ground in syria, that the databases will have the information we need so it's not we don't have a process, we don't have any information. so you're talking about a country that is a failed state that doesn't have any infrastructure, all the data sets, the police, the intel services you know what to do in secret information don't exist. that is not a republican presidential hopeful. that isn't ahead of the fbi. he also said we can only query against that which we've collected. so if collected. so someone has to make a ripple
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in a pond in syria or any other place in a way to get their identity or their interest reflected in our database, we can query our database until the cows come home but nothing will show up because there is no record on that person. lastly is that i can't sit here and offer anybody an absolute assurance that there's no risk associate with this but on the question then becomes what amount of risk is accessible -- accessible? if the -- so much going to need to tell me and the people i work for a what amount of risk is acceptable when you talk about national security and public safety? and i will say this in conclusion, the president says we're scared of widows and orphans. with all due respect to them, what i'm really afraid of is a foreign policy that creates more widows and orphans. so where maybe he ought to start, maybe i do start as a
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foreign policy in the middle east including syria where people can go back to their homeland which is their preference, go back to their homelands. maybe you want to defeat that jv team to document contained. that would be the very best thing you could do to a people who aspire to a better life the way that i would recognize the gentlelady from california. >> thank you, mr. chairman. when we were elected to congress, our first responsibility is to make sure that the security of the american people is that entity. that's number one, two, three, four. that's the first obligation. and i take it very seriously. that admonition has caused me once again to review the procedures and policies and laws relative to our refugee program.
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now, refugees from syria and other places in the middle east arriving in ways and screamed at europe's doorstep, as mr. hetfield has recalled. we were shocked to see the body of a three year old child on the beach, a families trying to escape from isis who is beheading people. but our process is different. we have an ocean between us and europe and the middle east, and that has allowed us to provide for a rather extensive process. and usually what it is. in order to even be considered, the united nations high commission on refugees refers you to our system for screening, and only a few people actually make that process to be screened. at that point we have a
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resettlement support center that does an interview. we do biographic checks. they would use the class system, the constant lookup support system which queries data, it's classified what all of it is, but it includes the dea, the fbi, homeland security, immigration, customs, on and on, the marshals service. then we have for certain refugees, and that includes the syrians, a security advisory opinion which is a positive sao clearance from a number of u.s. law enforcement and intelligence agencies again, the participants are classified but it is everybody. and then we have the interagency check which was a new. it for 2008 and this administration we didn't have that.
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and, unfortunately, we admitted for iraqi refugees who turned out to be terrorists under the bush administration. we reviewed the process and change that to avoid that repetition of that as well as the biometric checks and the next generation information system along with the automated biographic identification system and automated eye graphic identification system. that is all followed by in person interviews and some post-interview efforts. following that, there were additional checks for syrians. so it's no small surprise that this process takes a couple of years for someone to pass. you know, i listen to the fbi director who we are respected, but i'm mindful, the fbi essential has a veto. if there's somebody that we
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don't know who they are, they can't come in. that's our process. they can't coming. that's the current law. that's as it should be. you know, that we would think query in what assad thinks but a refugee i don't really care what assad thinks about -- he thinks all the sunnis are terrorists, and they are not. so let's put this into perspective but if i were a terrorist, what i say i'm going to go to a camp, hope that the u.n. will refer me to the system, go through this extensive process for two years, none of say, because of paris, it has now been further extended to get everyone wants to make sure that every t. is crossed and i's dotted. and then in two or three years if i'm lucky i might make it as a refugee. i don't think so. i don't think so. we need to take a look at all of the systems that we have to.
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most of the terrorists, it looks like at this point all of the terrorists, in paris were european. they have european passport. they a belgian and france passports. they did come to the dreaded very easily so i think we need to take a look at what processes we have in place to make sure that the country is safe. but it does including afraid of a five year old. and i think, i just want to say, mr. hadfield, it's important that you were here. i was listening to my colleague, luis gutierrez, and yesterday a series in the family, refugees, arrived in chicago, at the nonprofit group that was reselling them was the jewish community center. that tells places in the world that we are on the right side of history, and they are on the
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wrong side of history. how do you recruit more terrorists when the united states stands up for what it is? and that's part of this equation. we need to win this militarily, but we also need to win it in a value fight. we are not going to win that value fight by backing off from being free and being america. thank you, mr. chairman. >> the chair when i recognize the gentleman from virginia, esther good lot. >> -- mr. goodlatte. >> turn one. from an immigration standpoint perhaps the most essential lesson from the nine 9/11 terrorist attacks is that foreign nationals who want to do us harm will export all aspects of our generous immigration policy to do so. even if it takes months or years. tragically our allies in france learned that same lesson when over 120 people, including at least one american, were
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slaughtered by isis terrorist. and we know that at least one of the perpetrators registered as a refugee from syria while in transit to paris. armed with that knowledge, today we examine the administration's plan to admit thousands of syrians into the u.s. as refugees. during fiscal year 2015 the president admitted 1682 syrian refugees to the u.s. then in late september the administration announced during this fiscal year they plan to admit at least 10,000 more than that number could go even higher as secretary of state john kerry stated, i underscore the at least do it is not a ceiling. it is a floor. so since the overall ceiling for fiscal year 2016 refugee resettlement, it's 85,000. at a minimum according to the secretary of state nearly 12% will be from a country with little infrastructure in complete turmoil into which thousands of radicalized foreign fighters have poo board, parts f
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which islamic state controls and in which we have no law enforcement presence. i understand the administration conducts security checks prior to invading refugees and according to the administration of these checks are robust, especially with regard to the syrian population. but oddly enough? can these checks into the individuals admitted as refugees are not terrorists and will not commit terrorist attacks once in the united states? dhs secretary jeh johnson told congress that agencies involved in the vetting process are committed to doing the best we can come and test delivery as we can. such a statement from the top u.s. homeland security official doesn't exactly instill confidence in the banking system. islamic radicals around the world are chanting death to america, and mounting barbaric attacks on western targets the ice is specifically saying we will strike america at its center in washington.
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top administration security officials have told congress that the refugee vetting process is not adequate. in fact, fbi director james comey told of this committee about the vetting of refugees has improved, the reality is that with a conflict zone like syria whether it is dramatically less information available to use during the vetting process, director comey could not offer anybody an absolute assurance that there is no risk associated with admitting series in nationals as refugees. and allah did his boss, attorney general lynch, not refuted statements but she conceded that are infected challenges to the refugee vetting process during her testimony in this committee on tuesday. i wrote to the president last month asked why he continues to ignore the concerns of some of his top security official. i look forward to the witnesses thoughts on such concerns. exactly who the individuals fleeing to syria are is also a question of immense concern.
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there's little doubt as names of the islamic state and some of the foreign fighters who have streamed into syria over the last few years are now some of the very individuals leaving the country. in september that director of national intelligence james clapper noted regarding the millions of individuals fleeing syria, i don't obviously put it past the likes of isil to infiltrate operatives among these refugees. so that is a huge concern of ours. media accounts note non-syrians tried to pass himself off as syrians to try to get into european countries, and articles point out the many fake identification document industry were a forged syrian passport can be bought on the turkish border for as little as $200. i know the administration is trying to intimate the refugee law that congress put in place but if imitation places americans in danger it is clear that congress must take a look at the refugee provisions in the immigration and nationality act
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to determine what changes should be made. lastly i'd like to thank the witnesses were testifying today. i know some of you had to rearrange your schedules to make here today and we appreciate your willingness to testify on this important topic. i yield back. >> thank you, mr. chairman. share will recognize the gentleman from idaho for five minutes of questioning. >> thank you, mr. chairman. and thank you to all the witnesses for appearing here today. i'm actually a proponent of the refugee program. so when you hear somebody like mr. hadfield talk about is if we're going back to the 1930s, i'm actually very offended. i think your testimony is complete out of line and out of place because most of us are here concerned about the safety and security of the united states while at the same time want to make sure that we can continue with this humanitarian program that has helped so many lives, so many people throughout the world. so it was very disappointed to
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hear your testimony. the mission, however, that we have with humanitarian concerns must not come at the cost of our national security. with recent estimates of both fbi director james comey and attorney general loretta lynch that the administration is not able to properly vet incoming refugees, congress has its duty to act. we are not acting out of just plain fear based on a few members of congress just talking to each other. we are acting out of we've had testimony after testimony after testimony from our top national security experts telling us that we have a problem with the vetting process. ms. richard, you reference an intensive security screening at all refugees must undergo prior to admission. do you think that the current vetting system is appropriate? >> yes, i do. it's the toughest one for any traveler to the united states,
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congressman spent it's the toughest one but you think it's sufficient for the current crisis that we are in? >> yes, and i will tell you why. because anybody, we of any doubts about anyone who we think might pose a threat to the united states in any possible way is not allowed to come in. >> do you agree with that, mr. rodriguez? >> i do, i do agree spill how about you -- >> i do agree. >> so all of you i assume disagree with director comey's testimony that is not sufficient when processing the population due to intelligence gaps speak with me i answered that question? because i've given it some thought. you know, what director comey doesn't say is that it is normal for the u.s. government to have no information about -- >> that's not true. he was here in this committee and he testified that there was a huge difference between the
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syria and the population at the iraqi population because we got intelligence on the iraqi population. >> and the reason for that is how iraqis and afghan programs were not like the normal refugee programs. we take people who have searched for the u.s. military and afford alongside our troops from iraq. so there's a great deal of information about them available to the fbi. normally -- >> we claiming my time. reclaiming my time. he testified, has testified again and again and again that we don't have sufficient bedding. you have a mission which is to bring the refugees to the united states and i respect that you have that work to do. but i'm concerned about the national security of my constituents but i'm concerned by the national security of the people that are in my district. we have as you know --
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>> they are generated, they are generated by, first of all, country condition including classified information as i explained before. they are generated based on the information received in part interviews of that same individual. they are also generated by the experience and training of the officer and for what we've learned from other refugees spent how often are these questions older? >> those questions are determined very carefully on a case-by-case basis.
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there's constantine acacia among our officers spirit what's the typical duration of a typical -- >> i have absorbed into the an hour. i have absorbed into be two hours. the more complex, the more questions we have, the longer the interview will take. it takes as long as it needs to take. >> okay. in your opinion is security protocols are not updated, what's the future of the u.s. refugee admissions program? if security protocols are not updated, what is the future of the u.s. refugee admissions program? >> well look, i think the challenge as a look at it is the databases we have atrophied into the refugee programs. we just have gaps in syria. in iraq and afghan cases where i was involved, we have large databases, biometric information, names be some people who were coming into prison systems at checkpoints. we don't have been here so i think this is a notable concern.
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we have gaps of information we generally haven't seen in many other cases. >> thank you very much. >> that you will now recognize the gentlelady from california. >> thank you, mr. chairman. mr. rodriguez, we've heard that refugees for admission to the u.s. are subject to more rigorous screening than any other traveler or immigrant. and the screen is often conducted because refugees in particular may not often have the documents that we have had walking down the street. they have in some cases led for the lives with just a close on the back. they may not have boxes of documents. how do we proceed to establish identity in those cases? it's not just syria.
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we had the lost boys in sudan. we have congolese refugees. we have people who have fled, you know, with people chasing them and here they are. how do we go about identifying -- >> and i think it's important, i appreciate your distinction between syrian and others. the fact is actually most of the series that we see do, with the documents that are authentic documents on the whole. what we do though is an extensive process of assessing, mapping out family trees, aliases is the case may be, associations, other processes when we do have less documentation that is the norm. we have screened in our personal both my way to recognize fraudulent documents when you are presented but also to use
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the interview as an effective at determining identity in those cases. >> in march that chairman of the committee organized a congressional delegation to visit the middle east. one of the most interesting elements of that trip, i thank the chairman for organizing it, was a trip we talk to the refugee camp on the syrian border in jordan. we have the opportunity meet a large number of refugees. i with almost all of them wanted to go home, their homes have been destroyed. by the way, they were very grateful to the united states for the efforts that we have made to provide support for them. that was very rewarding to the recognition that the united states has among refugees about efforts. do we ever crowdsourced information wax some of them
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were computer science students. some of them were widows. i mean come you can find out a lot about somebody by doing not just an entity within but crowd sourcing information with everyone around them. we do that? >> we do so. we do so in two respects. one, would always carry anything what we hear from anyone refugee our founding of refugees, which is more typicall typically withn counter to what we're learning from other individuals from that town. in fact, they tend to come from least the ones we've admitted, tend to come from particular areas. and also also as part of the classified information that we receive, gives more detail in the manner you described. >> so it turns of the role of
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the refugees for the additional training, steps i've taken from officers of the same refugees as compared all of the applicant? >> the manner in which they operate on country conditions and regional conditions is more intensive than what we do for any other officers. they have their basic training our protection law, basic training on refugee law, and again. they then have two series of intense briefings. one is a general briefing on actually syria, iraq and iran. and then prior to deployment, there is an eight day period when they receive intensive briefings both of an unclassified and classified nature, from a number of different sources including consultations with security experts, really into specifics
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of the about what they're going through at the time they are going through a. so there's an effort to that that information is current. once in the field, those individuals have a 10 day mentoring shadowing period where they're able to move off on their own. >> i see that my time is expired, mr. shadegg i yield back spent the chair to recognize the gentleman from virginia. >> thank you, mr. chairman. director rodriguez, i'd like to follow up on that line of questioning. if the any due process is so effective, why do we have 5 million overseas in the united states? 5 million people who are lawfully admitted to the united states through the interview process and overstayed their visas, violated the terms, violate the promises they made when they entered the united states?
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>> i can speak to today is the actual refugee process. i mean, i think when we say -- >> do you think refugees were we've already talked about the greater difficulty of obtaining background information that you have a more highly accurate set of circumstances than you do for people or off-line to come into the united states for other types of visas and? >> i'm trying to understand the question. >> the question is very simple. if the interview process is so effective and we get a people who applied for a whole multitude of different types of visas, coming from places where we have much greater presence on the ground than we do in some refugee countries, and particularly we don't have it all in syria, why would that could process you describe we sold 5 million people who are illegally present in the united states, didn't come across the border illegally, and -- >> i do understand. what i can speak to is the
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refugee screening process which as assistant secretary richard mentioned specifically as syrians go through the most intense process. not just the into his -- >> as fbi director noted, there is little insights or you can contact. you can't access local or national databases of there. you can't interview neighbors. you can't interview business associates. you can't entity or other contacts with people because they are either in the country and we can't get to them or they are dispersed elsewhere around the world. why do you think is any due process is so effective? >> because again, it is based on extensive detailed mapping of family relationships associations, credit assessments based on prior documents.
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and, and, this is critical, congressman, it does not follow from anything that director comey me instead that we are querying a board. in fact, people have either -- >> i'm paraphrasing but he said you can query a database until the cows come home but if the information isn't in the database you are not going to find anything. and i think that is exactly the situation. >> that is why we have placed people aren't hiding the review but that is why there've been denials. that is why there have been holds. spirit why not do it so many other members of congress and other people have said that both sides of the aisle, and that is hit the pause button on this? you know, the situation in syria have been going on for a few years now. it continues to deteriorate. the situation in terms of gathering information about people, we have a problem with
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forged documents that are fooling europeans and may be fooling us as well. why not simply the latest word period of time into we make sure that the criteria that we set forth in the legislation and that we are putting for today could be met? >> i would say because the process that is currently constituted adequately resource. because your question is the best we can do good enough? and the fact is that is the most intensive process. it has resulted in the niles and holds. it is a redundant, rigorous process. >> mr. krikorian, those of the u.s. government have any credible way of distinction between refugees from syria an individual who were posing as syrian refugees? >> they can try. i have no doubt that uscis officials, state department, fbi and the rest are doing their
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best to distinguish between people pretended to be syrian and those who are. but to limit the effect of that can be. there's an extreme lack of data. sometimes i have no doubt they will, in fact, smokeout people who are lying or cheating the uninsured happens all the time. mis-strike said just last month, she said more than 90% of syrian refugees applicants are being approved. that might go down a little bit as this cases that are in limbo our formally decided that the average worldwide is 80%. how stringent really can a vetting process be we more than 90% of people are being approved? >> thank you, mr. chairman. my time has expire.
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>> i ask unanimous consent to submit to the record of the searing 37 statements, including from the christian reformed church, the lutheran immigration services, a southeast asian resource center, and the disciples of christ. >> without objection. the chair will now recognize the ranking member of the full committee, mr. conyers. >> thank you, chairman gowdy. my questions seem to be directed to mark hetfield. and the first one is, and i respect the important testimony of the other four witnesses, but i'm trying to see how much difference there is between the european refugee model and the u.s. refugee resettlement program. is there much of a distinction
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they are, sir? >> there is a very significant distinction which is why it is so surprising to me that the attacks in paris have resulted in even more intense scrutiny of the refugee resettlement program. the refugees who arrived in europe are not vetted in advance. they are asylum seekers. bearbaiting does not begin until after they touch land in greece or injure. and the united states, as director rodriguez testified and as you heard over and over again, refugee applicants are begged right side up, upside down, sideways, every which way you can possibly imagine before the admitted to the united states. and then the process continues after they arrive. they apply for adjustments after a year in the united states. they continue to be under close watch. the risk in the refugee admissions program of admitting
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terrorist is very, very low. >> you know, we are considering h.r. 4038 on the floor today, and conservatives around to argue the bill does nothing more than add a certification process that would ensure no terrorist elements into the country through resettlement. do you think that's the whole story behind this? >> well, it is a very short bill and it does technically add nothing but a certification process. not that process would cripple the system without making it more effective. refugees are already early vetted as we have testified prior to arrival, and having three different high ranking officials certified each and every refugee case is a guarantee that the system will
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come to a screeching halt. it already moves so slowly. the refugee resettlement program is no longer a rescue program. it saves lives it saves lives very, very slowly. that would bring it to an end. >> mr. hetfield, you with the hebrew immigrant aid society. now, are you concerned that refugees will be accepting what pose, from syria and iraq, what pose a specific threat to the jewish community in the united states? >> we are, as anyone else, very concerned about screening people out to want to do is harm, especially those who have a particular ax to grind against the jewish community. but again these refugees are thoroughly vetted.
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what worries as much, much more, because we feel that dating is being done, but what we are also seeing right now is xenophobia, islamophobia driving a further wedge between muslims and the rest of the world. and we are afraid that can do far more damage to muslim jewish relations, to who we are as a country, to our security as a country and make a us even more vulnerable to attack because we basically said syrian muslims are not welcome here, we do not trust them. >> my final question to you is for you to try to explain why our war with isis and other terrorist groups is different, because they do not comprise any states or governments. shouldn't the safety and protection of our people be our
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first concern, even if it means not allowing some refugees into the united states? >> it absolutely should be our paramount concern to keep the united states safe and secure. and i can say with great confidence that the department of homeland security are doing that to a fault. that is their mission. and they that every refugee to make a safe and they really can't imagine what additional protocol that could possibly install to make us any safer. no refugee -- no terrorist in his right mind would use the refugee program as a way to enter the united states. they may find other channels but it's not going to be through the refugee program. it's too intrusive, too invasive, to thorough and the security checks that it does. >> secretary richard, do you have anything to add to that?
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>> the people who we are bringing our, can't do this process but they are also referred to as -- we know the profile of the refugee want to appear so we'll look at people who have been tortured, burn victims from barrel bombs, people who are widows and children, but also the elderly, families that have been ripped apart as members have been murdered in front of their eyes. so of course every single one of us feels that the first priority is the safety of the american people. and if we can't provide for that, we would shut down the program. that we believe strongly that by the time a religious brother we are bringing some of the most vulnerable people, giving them a second chance at life. and we have screened out anyone
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about him with any question. we probably would not even refer to them in the first place which is one have a higher acceptance rate. and i think that the proof is in the success of the program and communities all across the united states. so thank you for the opportunity to provide some information to them also are happy, if given the opportunity, to explain more about the nuts and bolts of the process. we think it can withstand scrutiny. the chair and the ranking member, the subcommittee has spent a lot of time on this already this year, but we're happy to meet with other members to go into the point that, for example, the fbi holding would only tell you a limited amount of information about refugees. for example, if the refugee ever committed a crime in detroit, the fbi could tell you that. they have never been to the
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united states before and that's why we have had many more databases anymore techniques and many more approach is to get the full story, make sure their story also. if it doesn't hold up, if there's any question, they are not included in the program. >> thank you. thank you, mr. chairman. >> the chairman will recognize the man from texas, mr. smith. >> first of all our flight to single out mr. krikorian and thank him for his excellent testimony. i almost don't know how anyone could disagree with one word. but forget the question for ms. richard, mr. chairman, i just have to tell you how to me right now. and that is that the president of the united states says he wants to protect the security of the american people. we have a bill on the house floor where the fbi has to certify that a syrian refugee is not a threat to the united states. and yet the president of the united states is threatening to
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veto a bill that tries to protect the security of the american people. i have no rational explanation for the president's threatened to veto. it's simply astounding to me that a president of the united states would want to veto a bill that tries to protect the security of americans. i just don't get it. but, ms. richard, my question to you is this. this year we have admitted 1700 refugees from syria just in the last several months. how many of those 1700 refugees have been arrested for committing a crime? >> so we have brought 1700 the last fiscal year which ended september 30. 2000 since the beginning of the crisis. as far as i know none of been arrested. >> do you track all the refugees from syria including the 1700s so you would've?
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>> we do not track them after the first three months when it into the united states. i rely on the law enforcement agencies to tell us. >> and so far as you know none of the 17 have been arrested? >> i haven't heard of any. >> as far as stopping after three months are going to stop tracking the 10,000 proposed to be admitted next year after three months, and 20,000 perhaps the year after? when are you going to stop tracking them? >> once refugees are in the united states, after a year of being here, they become legal permanent residents. and after five years they are loud speakers i understand the. i'm talking about -- >> they are treated pretty much like ordinary americans and they are not tracked. >> right. but what i'm saying why they treated any differently than any other refugees? you can send them to be any more of a threat than other refugees,
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or not? >> well, they are not treated differently than other refugees. >> i think most people would consider that syrian refugees about whom we have heard -- >> syrians are less of a threat actually because they fled their country. they voted with their feet. >> let me stop you there will quickly. is a serious or less of a threat even though we've had testimony from the fbi director that of all the core holds -- cohorts, we had less information than the others with the fbi director says he regrets he does have more data on the syrian refugees and he has real concerns and he thinks it's risky. apparently the administration disagrees with the fbi director. but your sink again, i want to make sure, but the syrian refugees are less risky than other refugees? >> well, my point is that syrian
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refugees have been outside the country so we know what they been up to and as a record of the time they've spent outside the country. >> they may not have a record of terrorism. they may be a would be terrorist, a terrorist entity. you say you are less worried about syrian refugees and other refugees? >> i am very worried about terrorists. i think we should focus on terrorist. i think we should prevent terrorists from coming to the united states spin don't you think they might someday become -- >> since the odds of becoming a terrorist i've ever small but that doesn't stop us from focusing on program to make sure nobody comes in who might be a terrorist. >> i appreciate your trying to focus the program that we put we've heard from law enforcement officials actually don't have the data you need to make that determination. let me go on -- >> the fbi has said that a lot of the data from inside syria which makes sense because the fbi has not operated --
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>> exactly. >> and it's also normal for us with most refugees not updated the exception is the iraqis and afghans. >> if you don't have the data on the syrian refugees but it seems to me it would be difficult to get reassurance they're not going to commit terrorist -- >> we do have lots of information. .. if you are an outlier on that you are entitled to your opinion.
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last question is this, if the citizens of a state or city do not want to have syrian refugees resettled within their jurisdiction, state or city, is the state department or administration going to force them to take this refugees? >> well, there is a legal answer and there is the reality answer. >> let's go to the reality. >> federal government program. the federal government has the right to resettle. >> what is the reality? >> this program only functions if we have the support of the american people very much of the level of communities and societies and towns to come forward and help these refugees get jobs. >> i appreciate that. you're saying all the administration might assert it has a legal right won't force the resettlement?
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>> welty five. >> let me finish. let me finish. you are saying the administration, while they have the legal right is not going to exercise that legal right that the local communities oppose the settlement of refugees? >> i have not said that, congressman. it is up to the president to decide that. i certainly would not want to resettle anyone in a hostile community. i don't think we have many of those. >> and would not refer to them as hostile communities. thank you. my time is up. >> the tillman yields back. i would say in light of the fact that both, i will try to do a better job of limiting folks. >> thank you, mr. chairman. to all the witnesses who have come, thank you to the ranking member for her
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valiant effort on trying to strike a compromise with the bill that is being debated on the floor. i was delayed for speaking at the rules committee and trying to find -- excuse me, the rules on the floor trying to find a reason for its moving forward with hr 43 eight. i want to thank the witnesses. let me be sustained, if i might. let me, 1st ofme, 1st of all, asked to put the us refugee admission program overseas process diagram into the record. i ask unanimous consent, mr. chairman. >> without objection. >> and if i can hold this up proudly, it is difficult to see the maze. let me say that the inquiry being made to this legislation through this hearing is a legitimate one. having started on the homeland security committee as the recovery was still occurring, having been to
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ground zero and seeing the angst and feeling that deeply embedded pain, there is no memory that sears the minds of americans as much as september 11th, although we have experienced much such as the bombing of pearl harbor that resulted in the internment of japanese americans. i'm not sure whether it made the nation safer. so this process troubles me, and i'm going to quickly ask mr. richard and rodriguez a scenario. i understand that approximately 23,000 individuals are referred by the united nations from syria. i don't know if they include iraq. out of that he took about 7,000 to interview and about 2,000 came forward in terms of the process. the process last 18 to 24 months. is that correct?
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>> yes, that'syes, that's correct. >> and they include mostly the people who are outside of syria either in the campus -- enough that you directly go in and pull somebody out. >> we don't operate inside syria. >> and the individuals prioritization are women and children, families, 2 percent of them happen to be unmarried men. >> only 2%2 percent are unmarried single men traveling with the family. most our families, women and children and multiple generations. >> mr. rodriguez, have you read hr 4038? >> as it happens to my half. >> very good. it is not one of our tall ones. it is a listed one. >> it was within my attention span, congressman. >> it is not had aa hearing before the homeland security committee which is the basic jurisdiction.
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has not hadhas not had a hearing in front of the prime subcommittee of this committee, though it deals with refugees and issues dealing with terrorism. but you are the technical man, if you will command this process. as you look at it, do you read it as i read it that the elements of certification or the persons engaged in certification must certify every single person, syrian or iraqi? do you read it in that terminology? >> i would not dare right now to opine or -- other than saying i am aware of it. i will talk about what we do right now. >> let me do this. maybe someone else wants to opine. i think you can opine. i need you to understand and to be understood, you can -- everyone in this category as to certify each refugee.
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>> yes. >> our basic position, the process does -- 4038 does not add anything to the already rigorous process in which we engage. >> let me go back to ms. miss richards then. as i read this, each person would have to be independently certified. five -year-old syrian girl, you would have to be certified by the long list of persons that already do it selectively. is that not accurate? >> well,well, i don't know. i would have to spend time looking at the bill. but we do have interviews for cases which are either individuals or families. the individuals that leon rodriguez's us tis carries out, meeting with the whole
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family -- >> let me -- >> well, the gentle lady's time has expired, and i want to give every member a chance, and votes are imminent. >> thank you, i yield back. >> the chair will now recognize the tillman from iowa. >> thank you, mr. chairman. i think the think the witnesses and direct my 1st question to mr. rodriguez. when you do this extensive vetting process, do you take into account the religion of the applicants? >> we do not accept is that being a possible -- in many cases it is basis of persecution. we do not disqualify anybody because of their faith. >> do you ask them what is a religion? >> again, that is part of the basis for the persecution, we do inquire into that. >> even though a lot
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requires whether it is or is not the basis for that, you're required to take that into account, religion? can you explain to me the data out here and what we are seeing happen. and that just came back a week ago i was in the kurdish region. the front lines as close as i can get in into a refugee camp enough to turkey and on over into hungary, croatia, serbia and sweden. and i asked in turkey, take me to the refugee camps where i can talk to persecute christians. they could not do that. i said in kurdistan take me to the refugee camps. they could not do that either. the reason for that is the christians are being taken into the homes of exist in the area. almost turns out to be exclusively muslim. i don't have data. i just have the answers i have. and so can you name for me or identify for me a
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suicidal terrorist that was not a muslim? >> i'm not sure i can answer that question, congressman. what i can talki can talk about, congressman, here today -- >> why can't you answer that question? >> will the gentleman yield? >> no, i wouldn't. i would ask the gentleman if you would also prefer to simply say that the administration policy is not out of his words, we have to walk around the subject rather than directly speak to it, i am willing to accept that answer, too. >> what i can say is, we do our job and that if terrorists are jumping to gain admission to the united states than we do our job to prevent them. >> vetting them. >> that is what the american people are asking. >> are telling me that you are doing a thorough vetting process but you aren't able to tell me that you
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specifically asked him what the religion is, and if you don't specifically asked him neither are you able to quantify the risk to the american society, but i want to move away from that a little bit. having my.is made. we are operating on completely the wrong premise. we are operating on the idea that we can vet potential terrorists no matter how much professionalism we can bring and examine them up, down, sideways and that they come into america then and we will be okay if we do a good job of vetting the refugees that we would allow in. and yet when i look at the situations, for example, here is a daily mail article , america's enemies within the nearly 70 have been erected in america in the last 18 months including refugees who have been given safe haven turned out to be bringing terror against americans. nearly 70. the numbers actually 66. i understand that we cannot be perfect, but some of
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these people are kaman were vetted. i don't i don't think there were terrorists when they got here. they became radicalized. somewhere and got through. some were radicalized. and when i look at this ii think, we are talking about a huge haystack of humanity. and that is benign relatively speaking, but in that haystack of the needles call terrorists. in the proposal coming from the administration is that we are so professional that we can examine all of that and identify any of the needles and it and sort the needles out of the haystack and somehow prevent them from coming into america. we are not putting them down in gitmo where they belong. this haystack will be benign and come become more of our culture and society and assimilate into the broader civilization. that is nuts. furthermore, even if it wasn't, now you have envisioned that we have already purified and clean the needles out of, now that that never ever more into a new.
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but we know even my this article the people are radicalized in this country. they attack us. when i look at the map of europe and the dots of the hot spots. and it is or shall to the populations that they brought in from the middle east and north africa. we cannot stick our heads in the sand and say somehow we are not bringing this up on ourselves. we are watching this. the generation behind europe i have walked out through the no go zones, country after country to see it and sat down and talked to the people that are there. they feel so guilty about political correctness that there willingthey are willing to accept about any kind of violence brought into their country. i will conclude, if we are going to save ourselves we have to also intervene and provide a safe zone, and international safe zone for
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the persecuted religions. i yield back. >> the chair will now recognize the gentleman from illinois. >> thank you so much, mr. chairman. we are all shocked and horrified and deeply saddened. as a member of the intelligence committee is much to hear from our allies and us. i urge my colleagues to keep a cool head and not to react exactly the way they hope we do with fear, chaos, and lashing out. sadly that is what we have seen. republican governors and elected officials and candidates and media figures do. i have been here long enough to know a thing or two about opportunism. maybe it is just too much to resist when you have 15 guys and a lady running for president on the republican side.
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tempted to say whatever they can to get in front of the news cameras and have them pointed at them. the governor of illinois, my home state could not resist saying our state was closed to syrians freeing the terror of isys and the regime. no place in illinois for women, children, elderly, zones fleeing the regime and the isi s terrorists, murder, rape. there is no place for those children. luckily, just as he said that, a wonderful syrian family arrived two days ago and found a safe place. that is the message that destroys the hatred, not the real there going to have a people saying we don't like
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muslims. we can trust muslims. muslims are somehow going to create a cultural system in america that is going to destroy us. every community of people that has come here has strength in this nation. and i just have to say that when you use fear -- and i do remember last year we were here, and the last year that i remember talking about was on the kid showed up the refugees showed up in central america comeau we had doctors, medical doctors saying that those children were bringing ebola to the united states of america. they went to africa, came back across the border and came here with a bola. a year later where is it? remember? i remember governors saying that they were going to close down the state. every time we here this it is about their coming because they are murderers, rapists, coming because their drug dealers.
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it is fear, fear, and fear. people who stood up against fear mongers who traffic in hatred and bigotry and prejudice. that is what i sadly believe holy christian. then it will be fine. that kind of reminds me ofç the irish. they had no allegiance to the pope out in rome. time again. so that they could celebrate that faith, so that they could live in that faith freely.
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look, we used fear during world war ii. boy, did we regret it. sustainable omission on america. we used fear and bigotry to say that those who would flee the prosecution and the persecution in the death of the nazis and the holocaust said,, no, no room in america for you. there is room in america. i understand that there is a terror system out there that wants to hurt us. but i also understand that there are tens of thousands of american men and women, patriots that are out there protecting the homeland every day. and they are not working 100 pe. they are working 200 percent and keeping us safe. they don't willy-nilly let
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anybody go through the screening process. those are americans watching out for americans. we impugn their integrity and do they are in their patriotism. i would just like to say, we say, we made the mistake before. let's not make it again. let us have a system. all we want to do is add an extra layer. there in the, getting vetted i can see it now. >> the gentleman yields back. >> thank you, mr. chairman. i want to tell you about my experience. i was the district attorney in northern colorado. we have between 1,502,000 somali refugees, mostly muslim if not all come to greeley.
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they were hiccups in the process, for the most part they were welcomed and have lived they're happily in a community that is open to them. how many refugees are there around the world that are in a position to come to this country? how many potential individuals are they? >> we have our admission target. there are about 90 -- 19 million. assistant secretary richard can correct me if the numbers off. >> 19 million refugees. why are we -- what is our number that we would allow? >> every year we establish a target. this fiscal year is 85,000.
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>> a drop in the bucket. why would the administration object to a pause on syrian refugees we have 19 million potential refugees that we could take from other countries where we have been successful and to reading those refugees for the most part into communities. >> because a quarter are in fact syria, syrian. the potential for greater number exists with the continued activity. >> 75 percent of 19 million people. again, 85,000,. again, 85,000, we can find 85,000 from the 75 percent. why are we so interested in taking syrian refugees? this is not a matter of religion. there have to be various religions and that 75 percent. >> the situation in syria is devastating to the extent
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that there is no reasonable prospect of return to that country. >> taking 85,000 syrians would not do anything to change that devastation either. >> it would start us on the road. itit is something we are doing alongside our european allies. the germans are expected 1.5 million people. >> there are plenty of other people we could taken, hit the pause button and do research on. director rodriguez, he was surprised that attacks in paris are resulted in more scrutiny for america's refugee program. i you surprised that there is fear in this country over relocating syrians into this country? >> congressman, there are enemies of the united states in syria. >> i was just asking if you are surprised. >> i know that the united states has enemies, whether in europe, syria --
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>> your point does not answer my question.question. are you surprised that americans are fearful over what happened in paris? >> i'm not surprised by the fact that -- am not surprised by that, nor am i surprised bye-bye the fact that many americans want us to be a welcoming country to those who are victims of conflict a more. >> and so let me tell you one of the reasons why americans are distrustful. we havedistrustful. we have a president who after the murder of an ambassador in benghazi and the murder of three heroes in benghazi, four people total told the american people that the attack was the result of a video. we have a secretary of state who immediately identify that it was not the result of a video, that it was the result of a well-planned attack, and then the administration paraded out one official after another to lie to the american public command the american
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public has very little faith in this administration when they assure the american public that somehow they are able to determine that syrians that come to this country are going to be trustworthy and we will be safe. and it is the result of this administration's lack of credibility that has caused the fear and panic among many of the americans in this country. >> i yield back. >> the gentleman yields back. >> thank you, mr. chairman. director rodriguez, flow we go, do you think americans have a right to be fearful today in light of what happened in paris on the threats against new york and washington? >> sure. there are threats to the united states, no question. >> do you think -- i'm going home this afternoon. what should i tell my constituents that we are doing about their fears? >> what we are doing is
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engaging -- and i assume you're talking about syrian refugees because there is a lot more we are doing to protect the united states that goes beyond what we are doing to scrutinize the 10,000 or so people -- >> your assumption is correct. >> what i wouldi would tell them is this is the most rigorous process in the history of refugees screaming. in fact, we have denied people admission. there are hundreds of people on hold because either their stories lack credibility or because there was derogatory information about them. so the work is being done. >> but can you sort of understand the complete lack of confidence that most of my constituents -- let me continue, sir. veterans over the va, seniors over the future of social security, families over the affordability of their health insurance premiums, as i go back to michigan, can you understand why people have apprehension
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about the confidence of the federal government, congress included? >> i do think it is the benefit of this hearing that we have a little bit more of a burden of information with people than i think we perceive. we need to make sure the american people understand what we are doing because what we are doing is rigorous, expensive, redundant, careful. >> and you are 100 percent confident that the process we have in place is going to work just fine going forward? >> that it is a meaningful, rigorous, robust process that we are engaging in as aggressively -- >> in your mind there is no value in just sitting the pause button. many people have made this vote this afternoon into a political vote. it is not political at all. but congress wants to do, and there will be many democrats that join us, hit the pause button and work in a collaborative fashion to
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make sure our homeland is safe. there is no value in considering doing that in your mind? >> again, i stand by what i said about the process. i don't think it is necessary i repeated. we need to think about the cost of inaction. [inaudible conversations] >> of course processes can be improved upon and we are working every day to make sure we refine our understanding about what is going on. we learn more as we screen each and every refugee. a process as it exists is a robust intensive meaningful process. >> i yield back my time. >> thank you, mr. chairman. i had a telephone town hall meeting with the people of
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the 4th congressional district of texas that i represent just two nights ago. it was similar to many of the telephone town hall meetings i have before in the sense of a had about 8,000 people on a wants, as many as three and 400 people and cute asked me questions which is pretty typical. but was not typical was the uniformity and lack of diversity. they did not have a single question about government overreach, not a single question about $18 trillion of debt. three and 400 questions about the syrian refugee issue there is really no exaggeration harper believe what i just related to you. the people in my district and around the country have about this issue and it is particularly relevant for us
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because taxes in the last year has received -- well historically has received the largest percentage of refugees. last year for fiscal year 2014 10 percent of all arrivals were resettled in texas. and ii think or hope that we could all agree that the conflict in syria and the stated and promised efforts to infiltrate the syrian refugee process presents us with a unique challenge. in light of these challenges it is incumbent that we off the assessed with our system is equipped. if it is not, we have got to hit pause. i know some have demonized this opinion, but to the spokes i would emphasize that america is the beacon of freedom to the world in part because it is our
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refuge, because it is a safe place for people to come. and if we sacrifice national security we will weaken one of the very aspects of our country that attracts the weekend the vulnerable to our shores. with. with that, i want to start with you, director rodriguez. i understand that an applicant for refugee status must be cleared or must clear all required security checks prior to final approval of the application. but with respect to this process to readmit individuals unless something negative appears during the screen process are duly admit only for those for whom we have information? ..
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>> we screen for both. we screen for both. in other words, if there is insufficient information come insufficient context for us recovered this person is who they say they are and their them is what they say that it is, then that would be a basis that the minimum for that case. >> let me move on quickly because won't address it from a state and local perspective. understand the current law requires consultation with state and local government officials regarding refugee settlement in
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the community understand the extent to which that consultation actually takes place berries greatly. the consultation is supposed to result in the development of policies and strategies for the placement resettlement of refugees. but as all of you probably know, as of yesterday more than 25 governors including my governor in texas that they would our syrian refugees and settling in their states. i want to ask the question, would consultation take into account the bazaar on the part of a state's governor and residents to decline to accept refugees? >> i think assistant secretary richard will take this question actually. >> all right. >> on the issue of consultation with state and local government you are right that that is an important aspect of this program. we require that the local organizations that are partners with us in carrying out the refugee program, quarterly
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consultation, that they do this with the community leaders. every state has a state refugee coordinator who was reporting to the governor but it works with the department of health and human services to make sure that there is a suitable provision made for the refugees. one of the things that chairman gowdy has reinforced in our discussions is that it's important that our partner organizations talk to people who are the most responsible authority at the community and state level. that they don't just talk to people who are interested in the program but that they go to the police chief, mayor, the school principals, the health care center and make sure they know who is coming, what to expect, and that this then reinforces the community's acceptance and preparedness to welcome the refugees. you're right about texas is the most welcoming state in the
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united states for hosting refugees. i was surprised so many governors spoke up so quickly. i think the what we have to do, we have a folder with all of the governors at the white house arranged the day before yesterday -- a phone call -- we have to get more information at the people so that they understand what this program is, how it operates and why we take such care in making sure it's done in a way that a safer the refugees who have been through so much but especially is run in a way that the security of the american people is not in danger. >> i would love to follow-up of my time is long since expired. i thank the chairman for his indulgence. >> i want to let the witnesses no votes are being called. in fact, the clock is on zero so i am more than likely to miss votes but it do what you think that any of my colleagues left because of disinterest. they have been called to the floor. it's an important issue in my
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district. i'm willing to risk the wrath of missing votes to ask some questions, and i wanted to go less because of wanted to hear everyone else's perspective. and i wrote a number of notes down. and i think i wrote them as accurately as they could be written. this is the father kept going through my head. this past weekend i saw a gentleman in my hometown walking away from a gas station carrying a gas can. so even i could figure out his car ran out of gas, and i take a decision whether not i was going to offer him a ride. and i didn't. offered him a ride. that's a risk, however small, but i was willing to take for myself that i would never ask any fud do that. you have to weigh and balance the risk yourself. i'm willing to get on an airplane today because i want to get home quicker. the risk is very small something that is going to happen. i'm not willing to go bungee jumping even though the risk may
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also be small that something bad is going to happen. so i haven't heard a single one of you say there's a risk. in fact, you can say there's no risk even mr. hetfield, i think you put, he said it is very, very low. i don't know if that warrants to implement it but there is some risk. nobody has said there is zero risk their i think everyone of you would agree that the potential consequences of us getting it wrong are maybe cataclysmic. we have to be right every time. so the risk and still be small, and something bad can happen, and what i'm trying to get hoax to do is wait and balance the risk versus -- way and balance. so let me start here. had ever gotten it wrong in the past? i'm not talking the syrian
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refugees. i'm talking any categories of refugees. have we gotten it wrong? has our bedingfield in the past? is anyone aware of a circumstance where our bedding has failed in the past? not all at once. >> i will take that when. the answer is yes, many times. in earlier this year, an uzbek refugee was convicted of assisting terrorists. a couple years ago, to iraqi refugees who, in kentucky, had been debated. it turned out they had come, thr finger parents turned up later on ieds. so the critics of skeptics, the defenders of bringing syrians, they insist on saying no one has been convicted, no refugee has been convicted of terres, new cereal refugee has been convicted of terrorist
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activities in the united states, but these iraqis killed americans abroad. that doesn't make me feel better. >> the conviction doesn't mean anything to me. that terrorists, attackers will not be convicted because he's dead. so you can't use conviction as a barometer for whether or not somebody has been a threat. they may not be a round to convict. does anybody disagree there have been failures in batting? does anybody take the decision we've made no mistakes speak with chairman gowdy, i agree with you in history of the 3 million refugees have come here, there have been a handful who have been a threat to the united states. and fortunately, they have been stopped before anything bad happen. of the two iraqis in kentucky were the most shocking example. they had done bad things in
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iraq. they had lied to get into the country, and had our current system been in place they would've been caught before they came, before they got here. and that's why the system has been improved since that episode. you have said a few things in life are risk free. i heard the governor of washington state say you take a risk when you get out of bed in the morning. there's a lot of dangers in the world, absolutely, i think the program that we run does as much as humanly possible to reduce the risks of bringing refugees to this country. and we have great confidence in it. we invite members to come out to the field and meet some of the people who interview the refugees and sit through some of the briefings by leon's team tem that i sat through. it's a very impressive, very thorough -- >> ms. richard, that's what makes me hate waste, fraud, and abuse, deception so much, is
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that when anyone engages in it, it also impacts those who would never consider engaging in it because it makes everyone have to stop and think. there is some risk. there's a great reality that if we did it wrong, something bad could happen, and you have to balance the risk with the potentialities of something that happened. and when you do a when you do a people who have used any system, believe it or not, there have been federal judges who undergo rigorous screening, including going back and talking to neighbors from 25 years ago. and they still turned out. we get it wrong with them from time to time. united states attorneys, serious fbi background check with every available database. we still get a wrong from time to time. even members of congress, believe it or not, we get iran from time to time. so that's what i'm trying, we can't do this morning but you
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can't say there's a risk and appreciate the fact that nobody has tried to say that. we all agree we are dealing with an enemy that affirmatively wants to do whatever bad thing they can do to us. i just think it's put the american people in a really, really tough position, particularly given the fact that public safety and national security are debriefing the functions of government. i do want him, ms. richard, i thank you for coming to south carolina and noting that the reason you had to come to south carolina was nothing that you had done. and to mr. hetfield and others in his line of work, you are exactly right. the sheriff needs to be talked to, the superintendents need to be talked to, the committee needs to be talked to. not simply people who may be supported. going to find the truth he got to talk to anybody including those who may not support the program so you can weigh and balance the competing evidence.
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you should not have had to come to dr. linda, quite frankly. you should not have had to get it should have been done well before you and i ever met. i think a lot of the information, the sooner it's shared and the more full it's shared, the better people can make informed decisions. so us only to explain to the majority leader why i missed the boat, this is what i would encourage everyone to do. mr. rodriguez and ms. richard, whatever they wanted to to do if we were not going was to get you to walk the american people through every step of the vetting process. i really do like director of the fbi. but i also acknowledge that the fbi may be experts in this realm of data. you have access to other realms of data. and again people control whatever conclusions you can draw particularly none of my business but until they have all the facts you can go to any conclusions. so to the extent you or someone else can just lay out for the
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american people every single step and every database you can access and every question you can ask and the training of the people doing the questioning, folks are still going to come down a different size at this issue. they just are but a lease they will know what they did it having access to every bit of information. so with that i want to thank all five, i do want to thank the administration witnesses for agreeing to a single panel. i know that that is unusual but given the circumstances of the day, it was a necessity. i thank all of our witnesses, and with that i'm going to head to the floor and we are adjourned. >> thank you, chairman.
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>> [inaudible conversations]
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>> kissinger emerges as a rarity but i think it's what made his contribution distinct and made them stand out from the pack of people. he's edited by karl robert with the council on foreign relations. >> every weekend on american history tv on c-span3, 40 hours of programs and events that tell our nation's story. sunday morning at 10 eastern our
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gosh, maybe 10, 11 months when the cno was struggling to counter i was down in norfolk and he asked to see me and i presume it was about the next up i was going to. and that's we need talk to me about we're looking at you for being a 4-star and there's a couple of different opportunities where we think you would do well and benefit the navy spent vice chief admiral michelle howard talked about becoming the first female 4-star admiral in the history of the navy. she also discusses her career in the navy prior to her current people including rescuing captain richard phillips who was kidnapped in 2009. >> i became head of the counter piracy task force and a few days on the job, captain phillips was kidnapped. and so it was our responsibility as the task force to get him
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back and get them back safely. that was a surprise kind of mission and a challenge and we got hi them back. >> sunday night at eight eastern and pacific on c-span's q&a. >> next the discussion about the israeli-palestinian conflict with remarks from the plo's chief representative to the u.s. he called for end to israeli occupation and palestinian territories ethnic for multilateral international solution to the conflict. this is one hour. >> thank you. i'm so pleased to introduce some members of my panel. we have an excellent group from a variety of backgrounds. to my immediate left is christina nemr, for me from the state department where she worked on developing counter and violent extremism programs that should networks in a private capacity in the same room. to her left is asim hafiz who is
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the islamic religious adviser to the uk ministry of defense, as a long history advising them hitting pastoral care within the uk british military. we are pleased weapon here today given all of that more international flavor to our panel. and then at the end we have humera kahn, executive director of muflehun working in the private sector on early intervention, prevention, risk assessment in the realm of countering violation is as well. very pleased to have my colleagues here with me today to discuss this important issue of radicalization. so i prepared several questions for discussion by the panelists and we are going to star with a very basic question. a wealth of research including that conducted by start indicates there's a single
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pathway to radicalization. people become radicalized in a variety of ways. usually with some combination of push factors in their own personal life making them open to more radical ideas and behavior but also pull factors and recruitment factors drawing them in. i'd like to ask each of the panelists to briefly discuss based on their experience and a work what they see as the most important drivers of radicalization that government and civil society and private sector needs to be concerned about in the current environment. starting with christine and then taking away down the line. >> thank you very much. thank you all. leisure to be here. when it comes to radicalization and what draws individuals, there is no one path. to our image of actor simply indicative the external factors, government corruption, police
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brutality, feelings of marginalization on a more personal level and a lot of individuals are always searching for a sense of self worth. i think that's a common feeling that all humans have, wanting to feel like they mean something and they're contributing something. the role of identity i think plays into this. people want to be able to identify with something that truly relates to them. they want to be part of a group at the same time. and so social dynamics, group dynamics play a part here. if you look at the groups that are committed atrocities, mostly legal and in pairs and before that "charlie hebdo," a lot of these attackers to chip in some form or fashion. they were either familial relation, brothers, friends. so you can't understate the power of your network. you feel marginalized that you might have extreme thoughts by yourself that it's only oftentimes multiple times when you start meeting other like-minded individuals that you
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start sending more and more interviews that come more black and white, more extreme and that you as a group start moving towards a more polarized outlook. i believe there. >> at the very much. very grateful to be the token male on this panel. [laughter] and also the one that provides the uk flavor. i hope you like it. thank you very much for introducing that question, which is an important question because that's the starting point to a lot of the challenges we are facing in the world today. and like honorable john brennan said, we are not comfortable with the new space, and the new space is stateless. a new state doesn't have boundaries or borders.
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and in that environment radicalization is stateless. of radicalization has no borders and radicalization recognizes nobody else space and authority. so it's an important question that needs to be discussed, but at the same time i agree with the previous speaker that there is no one single pathway. if i were to try and put my finger on something, it is definitely the issue of identity which christina mentioned. and i'm mayb may be talking froy perspective, from a uk perspective and the radicalization we are seeing happening there. and it's the question of a sense of belonging, where do i belong? who am i? what am i going? what is my purpose? am i being treated fairly or not being treated fairly? are my people being treated fairly are not being treated fairly? it is the simple questions that
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the path of radicalization startstarted. one thing i've been saying to the uk ministry of defense is keep it simple. we didn't have this idea of looking for something more deep and dark or when isn't there. so let's try and keep understanding where radicalization starts and why it starts and some of the questions i have mentioned here, are in my opinion, a starting point for radicalization. no doubt as the path against them as individual goes further down the path of radicalization, in no doubt becomes very ideologically entrenched. what's really interesting when i look at the uk landscape is that not just ideological extremists and radicals but when i also look at the white working class far right extremists that we've seen in the rise of the uk, those individuals are also asking the same questions. who am i coming where do i belong? things are changing around me. am i being treated fairly, is
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justice being done, are these people a threat to the? you find they are all asking the same question. in order to find a solution to this we need to be able to address these questions both locally, regionally, nationally and internationally. so radicalization starts from a social, emotional, psychologic psychological, disenfranchisement. and i explain this in three strands or three categories. the first one being that when people approach, approach the part of radicalization they're asking for simple questions. the second approach is where those of become radicalized while looking for these individuals. you have a group where they have started this path of radicalization, and if it's not stopped, it will get worse. who intervened first will win.
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and so people go out like in the uk we have an -- who lives in the city, goes out looking for individuals and find that cap and find that space and get it means entrusting them. once these individuals are drawn in, anything can be said to them which can increase and enhance the radicalization that is taking place. and where this radicalization siemens -- siemens is when you can't gcan go to girls come he o to cinema, you can't talk with peoplef other faiths. all of a sudden the world becomes smaller and smaller and smaller and sa same people, same type of people every single day, in the coffee shop at the end of the high street. and then that then leads onto the more extreme form. went initially this is about becoming more religious, this is about becoming more ideological,
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about becoming, you know, taking a kind of an arctic approach to life, all of a sudden that becomes a very strong religious motive. religion and becomes a hook upon which people can hang their thoughts on. they believe to do something it is their duty. when he gets into that realm of it being a religious duty, and anybody else who is religious and devout will know that we want to be devoted to our faith, but when that devotion is twisted and manipulated for other means, then we get on some kind of very dangerous ground. so thank you very much. >> good morning. i'd like to start off, state department and osac and congratulations on your 30th
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anniversary. thank you very much for having me and for everyone who's attending. i'd like to start off with a disclaimer. i'm not a live but i've been in d.c. very long, so i do not speak on the behalf of any government, not the u.s. or otherwise. so with that said let's start with a just radicalization of radicalization in our country is not a crime. via the extremism is a crime. so in other countries of radicalization in and of itself is a crime, but when i'm talking about radicalization i'm only going to be talking about radicalization that leads to violent extremism. because there we are talking about potentially crossing criminal lines which are prosecutable under our laws. it has made my life issues that my panelists have actually mentioned so many of the reasons already. again we agree that there is, though it has been able to find
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a single profile, a single pathway. it doesn't exist. it is extremely contextualized and localized. we know they are doing, sense of belonging, identity. it's coming up in a lot of cases. what we also know is that when we know focusing a little bit more on isis, daesh, right? and a people who are drawn into that space, one of the prime motivators which started for sober years now has been hoping the syrians. so that sense of actually we need to help -- deal with with injustice and get rid of injustice and oppression. it's actually a very strong part of the grievance narrative. those grievance america's also have residents in people's inventors lies for what they might be experiencing locally for various reasons. when we talk about factors which
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might lead to radicalization, to violent extremism can we talk about factors which increase the propensity towards violence. because we talk about countering violent extremism we have to deal of address any and all of those drivers, push and pull, it can reduce propensity towards violence into, from the get-go. we also have to do with issues of ideology but one of the things we have to recognize is that ideology israeli the starting point for most of the journeys. ideology shows up somewhere along the way, but it's almost never the starting point. there's a lot, other issues which increase the vulnerability towards the indoctrinated. so when we talk about responding to it and issues of counter narratives, counter narratives will only work are only designed for a particular intervention space, but they are not
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sufficient for dealing with the pure prevention space because there's a lot of other factors we have to deal with. this by the weight is why many need for having public-private partnerships is huge because they are a part of the space which government cannot and should not be touching. and so hopefully we'll get to some of those as we go along. spirit that is precisely where we are heading next. so given what each of your blog about radicalization process, violent extremism, can each talk a little bit more about what is the space for countering violent extremism? one of the program possibilities? this is a relatively new space for many people. do we have a good sense of things that work versus things that perhaps create backlash for things that don't work at this point in time? are there gaps in our knowledge that need to be filled next this time i will let asim go first.
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>> that's a shame. i was going to try to steal some ideas. [laughter] what works, what doesn't work. i think what's really important is if you want to do prevention work in communities, which really challenging is when it falls under the security banner. we need to try and take, prevention and intervention out of the security space so communities can feel comfortable with it. i think the state must be involved i think the government has to be involved. it has a responsibility to be involved. even though many people don't want it to be involved in the space, but we can't do without the space. we need money from the government to be able to run some of these projects. but we need to definitely give
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communities the lead in this. it's the people at the grassroots level can do prevention the best. we need to stop sometimes some of our politicians coming out and telling people how they should think and how they should feel and what they should do and what they shouldn't do. let communities take responsibility for this and begin to develop programs that will help address some of these, some of these issues. the other thing i think we should bear in mind which can have a counter effect in a sense is sometimes we work with the state or the government or the sector within the government that is dealing with prevention. sometimes by engaging with
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certain groups who have credibility within the community, by engaging with them we damage their credibility. and so we also need to be careful who we work with, how we work with them. we need to protect communities, too. for example, with some of my work in afghanistan we used to engage with particular imams or particular mosques, and what we didn't realize was that second order effect of that engagement. because the following day that imam would be dead of the mosque we people of the. and so how do we ensure that we support these programs and interventions from a distance to ensure that these interventions are successful? and again i go to the issue of keep it simple. we want to look sophisticated. we want to have pie chart.
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we want a big powerpoint presentations. keep it simple. reach out to the human aspect of the being, to be able to really reach out to these people, make it human, humanize the issue. one thing i always talk about is trying to put, trying to get people to meet victims of terrorism, of violent extremism. how can we get the word out into the society come into the community and say look, i have just lost my three year old child, i just lost my wife, or i just lost my son and this is how i feel. how can we get that message out to people? easy continue to be radicalized, even though you might not carry out acts of violent extremism, someone might from hearing what you're saying, might go away unsupervised into something absolutely silly which divide our communities, shatters our communities and this unites our people.
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>> -- disunites our people spent we approach, we have our own framework that we use. so within any policy on strategy landscape because that's the world you work in, we talk about the four sectors which have to be covered. there's prevention which is barriers to entry. there's intervention which a summit is starting to the indoctrinated how do you stop them before they commit a crime? to both prevention and intervention are about protecting individuals. if some has mobilized towards crime you have to have interdiction. at that point it is more important that you protect society than about the individual concerned, and the individual in question. and the last thing which we feel is the importance the process of reading too. we have many young people who are going into prison for short-term, going in for support
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the if we shortly do not do with the idea water in prison or support them when they come back out and they end up going back to environment that created them, we have just delayed the problem. this is a space we're doing a lot of advice reserves and trying to push government to create the legal framework to allow this to happen. so that's the framework that would to a programming. some of the things which are necessary to make any type of program effective is going to have to be local. we talk about national strategies to national policies. those are great and yet they don't translate into anything meaningful unless you don't develop a local strategy and implementation. anything which is worked a give and take the lessons from many other sectors with his gang violence reduction, a pride of other sectors, it's about local
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would have at the local level and have to make the local initiative succeeds. actually one of the sectors we taken away we go programming is, because -- our programs are domestic. what we do internationally is training and training veterans. what we can do, what we can teach others or help others with is actually developing the skills so they create their own program. so we work with youth and with imams or work with women's groups, the objective is how to create your own programs to help you on communities? they know the problem, and other factors involved and also have innovative solutions. i will switch to the part which it would like to talk about, narrative. we don't talk about counter narrative and alternative narratives. thing about narratives is, is there's two aspects to any thought of narrative, right?
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you have the message, that the messenger and the media. you actually have to take all three into account when you're building out a counter narrative space. even the language counter narrative come if you go into the world where we are only responding to the recruiting material which has been put out by terrorist groups, we have already failed. if we use a counter narrative paradigm we have failed because we are now playing by their rules. what we talk about is actually establishing the metanarrative because you have to establish the norms so it's clear what language and what the recruiters are using, that is a deviance and that's the thing which is already wrong by itself. so there is a need for the alternative but to also that space where we need to have the metanarratives which established our norms and our values. we have to establish those and
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pull people towards those from the get-go. it's not just about the language we use but it hasn't to reflect what is happening on the ground. it has to translate into better environments on the ground where people live. thank you. >> anytime you look at a problem and you start proposing solutions to it, i think the first natural or smart starting point would be to look at the numbers are what is the scope of the problem. so in this context radicalization or recruitment is not having -- is not happening en masse, not happen in vast numbers are i think a common mistake is that cve program and especially comes to counter narratives, they are distributed to a mass population. that doesn't work. going back to the individual factors that play into it, someone radicalizing and
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recruiting, and being recruited. in fact, we know that recruitment often happens before radicalization ever does. and using again, not to hate on the counter narratives are using as an example, so many counter narratives put so much emphasis on the ideology, right? trying to promote more moderate strains of islam when, in fact, again it's not reaching the grievances that these individuals hold. which are, might be perceived as sometimes they are real grievances. i think cve programming has to understand that and to acknowledge that. and not to dismiss the population is working with as they're perceived grievances or a lot of times you hear people put them in a group, call them crazy. there are natural factors at play in here. and so humera laid out the
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spectrum of involvemeinvolveme nt in something when i worked in the bureau of we used as well, thank you for that. and a lot of focus has been on the prevention aspect coming in and trying to survive opportunities for individuals, whether it's i think the smallest afterschool program, entrepreneurship opportunities, ways for them to get involved specifically. if, for example, political reasons that they are aggrieved. but then again the magicians are identity. is a provide a duty that they can hold dear and gives them a sense of purpose? this is not necessarily a role for government, i didn't come as my fellow panelists have pointed out. the messenger does not affect the u.s. government doesn't have the best track record and should not be promoting either certain strands of ideology or be seen as intimate thing certain types of programming. so another issue here is as well
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when it comes to governments attempting to promote cve program is everything is so reliant, it's reactive. an attack happens and that everybody wants to know what we're doing to engage? how are we going to respond? radicalization is happening and we need to involve the youth. but the problem is these are all short-term commitments. everybody has a very short attention span. government did as well but they are also responding to their populace. at the end of the day these grievances, the drivers of recruitment and radicalization of violence, they are long-term issues. they are not going to be solved overnight. so i think another major step in putting forth viable sisi options is the need for stakeholders to understand that this has to be a long-term engagement are going to see immediate results. it's something i know our u.s.
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congress the to understand as well. but that also means making stakeholders aware. i would like to also draw on one point that kind one bit about victims, victims voices as a counter narrative. is absolutely right they are one of the most racist which can put out there against terrorism. and a lot of organizations like to put together psas on you for victims. but from my time in government i have seen this lot of good videos out there that use the to and use their stories. sometimes there's never any follow through. those videos are not targeted towards an at risk population. this is something with the private sector needs to come in once you do have a viable counter narrative, how are you ensuring that is getting to the right population? is not enough just putting together a video and leave it at that. >> i've been, i've asked
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permission to add a few words, so thank you very much. i know there's faith-based organizations here in the audience, and i would definitely urge people of different faiths to actually contribute to prevention work. the whole basis of the radicalization we're seeing a it's about dividing committees, is about building, creating barriers. and the more that we can do in the that fashion would they contribute or the international space and organizations that you run, i think they can be nothing more positive and nothing more powerful than a demonstration of unity amongst people of different faiths and different cultures. so don't feel, don't feel not
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capable of being able to engage in this space. just standing side-by-side with another faith leader, someone of another victim having a cup of tea, we had a campaign called cups of tea. what it was about was showing people of different faiths, different cultures sitting together having a cup of tea. that image, that wonderful image of different faiths a different cultures sitting together having a cup of tea and having a chat was so powerful and it resonated with the community. and we also have to understand is we are in it together. one of the most powerful things i heard from an army general one day when he was speaking to an audience which is battling radicalization is, is we are here to help you. what i'm trying to say is we are all in it together. let's not point fingers that you need to do more, where the victims or you are the victims we need to do more.
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i think we need a partner, a triangle partnership where we have communities which are prone to radicalization. those communities which are probably suffering from radicalization in the sense or victims of radicalization. even though you can't define that because everyone suffers from radicalization and violent extremism in the state. this triangle has to exist. once we get over the triangle of cooperation at a triangle of partnership, i think we will be able to move forward. at the moment we're pointing fingers at each other saying is the state job. the state to say no, it's about community. if we can stop pointing fingers at each other and really just get together and say this is a problem that is, between all of us and deal with it. the last thing i would say, it doesn't matter which level we are working, whether local, national, international. the key thing is, this issue is
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global. we have to equip our people go at the prevention stage who are dealing with this issue on the front lines with ability to do with global issues. i'm tired of people saying this is a regional problem, or this affects only this part of the world, and tries to categorize and divide the issue up into different segments. this is a global issue and we need to be equipped to deal with the global narratives which humera was talking about. we need to talk in a globalized world where we can connect it with each other instantaneously. we cannot just say this is a uk edition or this is a u.s. bishop what this is a syrian issue or this is an iraq issue. we are dealing with a global phenomenon which we need to be equipped to deal with.
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>> so that talks in paris are certainly still on everybody's mind, fresh in our memory. could each of you made to respond a little bit as to what is both the power of those attacks as for striving for the radicalization, or the dangers inherent in poorly conceived or poorly implemented responses to those attacks cracks and perhaps crating backlash for further radicalization. and we will start with humera. >> well, one of the realities which we have to deal with is that we are facing a very sophisticated enemy. and one which is quite open and wants to move in this direction and that is part of their own strategy. the reason, one of the first
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responses that we've seen which is post a terrorist attacks has been issue of refugees, right? now, if europe starts shutting its doors refugees it is actually playing right into the hands of what isis, beige has said what they want. in fact, -- isis, daesh. a few months ago and to body of the three year-old child watched take a washed up on the beach and that gained attention, became a big issue, look at this, look what's happened to the refugees. within a week, isis has put up something like 10 different directives telling the syrian people, why are you leaving? you should come to us because we will protect you from aside. and if you leave and every refugee who's leaving syria is actually cumulative the religion and you are now, you should be killed. we have the right to kill you.
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and so they don't want sirius to be leaving syria. that's one of their objectives. that i very put on the. to the extent of those eight attackers, there's one, most of them are french but they said they found one syrian passport. with the french news media was reporting yesterday was that the syrian passport belong to a soldier, part of assad's army was killed six months ago. so the fact he was carrying a passport which is off a dead soldier is perhaps an indicator of the misdirection which is there. so i think at this stage while the investigations are happening we have to be careful to not just respond with fear, but actually make sure that we have a cool head response to what we do. in terms of responses, over all, we have the option of, yeah, everyone has a role to play. is not just government. it's private sector, civil
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society, every role, every sector of society has role to play, whole of government, whole of society. sweettalk about what our city, which is counter violent extremism, cd specific exports as an cve relevant responses. so cve for the responses are things which help change the underlying environment but they might not be directly addressing the issue of extremism head-on. cd specific responses address the issue of extremism head-on. every committee needs both cve specific and cve relevant. private sector especially equipped already or are ready and able to be a platform for cve relevant measures. because we have the ability to work in the world of awareness, of education, of diversity and building conclusion. we talked about belonging, issues of identity. those impact your staff, your
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clients, the people on the ground. every part of your world is impacted by this. and also working on issues of exit. if someone is trying to get outcome how can you help them? there's a lot of responses which private sector has. then we talk about cve specific because especially for the technology platform that the technology governments out there, you have a tremendous role that you can play in cve specific work. >> it's always tough following humera. she makes excellent points. edges develop in which he said, the concept of resilience i think is very important, especially in the aftermath of an attack like the one on parents. we need to understand that these sorts of terrorist attacks will not break has begun an
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existential threats -- terrence. and promoting i think of with promoting the resilience of the population or citizens is very, very import. so that you don't get very conservative responses or responses that end up exacerbating the problem like we are starting to see in terms of the backlash against refugees or the infringement on civil rights as intelligence efforts pick up. a lot of these responses will then end up with intel. and that's where it needs to stay. i think for cve efforts, there are things that can be done come and i will give you an example. and montréal they opened up the center for individuals forces that could have been on the path to radicalization. it's a center that allows their families or friends to report them in a safe space. they've only had a very few
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instances which they had to involve law enforcement, as such a center allows individuals with concerns, or if they themselves feel conflicted or on a path that can come and speak in a safe space. i think those types of programs are integral in this situation. i'm sure you will speak to the uk's prevent and away they handle sensitive issues. it's important to not immediately prosecute all those who might have started down the path but also allow them opportunities to disengage before they engage in any violence. so i believe there. >> having that i want to take advantage of other peoples comments. i'm not used to going left. i'd like to reinforce christian is and humera's point about refugees. between nothing more powerful than ensuring me, at a time like
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this, maintain the values that we hold so dearly and that we show in the face of these atrocities very strong resilience. the attacks in paris can have a variety of effects. and something i said about eight years ago was, it's going to get bad before it gets better but it's going to get worse before it gets better. and no doubt it did come it got worse and it got very worse. i would like it to potentially see the attacks in paris as a turning point where from this point onward things get better, rather than worse. it's unfortunate that so many people have to die for it to get better. it's a bit like in the uk when a
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british soldiers had was, he was beheaded on the streets of london, and it was unfortunate that he had to die for people in our communities to stand up for our armed forces. a lot of people, whether you believe are not, in the uk we potentially maybe don't have the similar relationship with our armed forces that you might do in the u.s., but it was unfortunate that a soldier had to die on the streets of london for people to begin to stand up and support our armed forces and the values and principles for which they stand, which is to defend our country and our people. and at that time one of the most powerful soundbites suffered from uk government was when prime minister david cameron came in front of number 10 downing street with number 10 just above his head and he said this is not a representation of islam. this isn't a true that islam.
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and that soundbite really brought all of our community together. and so i think positive responses, carefully thought through responses by some of our leaders are crucial at this time. and so it appears attacks, i think and they wish and i hope can be a point where people realize the brutality of this ideology and realized that this is not the path we want to follow. and so i hope that they prevent response to this, prevention and response to this which is automatic which nobody has to do anything about in order to dissuade people from joining this ideology whether mentally, emotionally or physically. at the same time we have seen some responses in the uk and around the world which are celebratory where people cheered the attacks, were happy about the attacks. and in a sense encouraged people
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and renewed a sense of confidence in this group of people that this is, this ideology, look what it can do and look where it can get too. so it's a kind of a double edged sword. but one thing i also do fear is a new war on terror, and i say war on terror in comments, with obviously france, you know, carrying out an escalating its raids in northern iraq and syria. and we really need to be careful as to how we present ourselves in the aftermath of these events. we don't want come at a time when we just got over the toxic word of statement of work and terror, i don't think we should be creating another environment
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where people feel that they are now the subject of this war on terror. .. all of a sudden we want to throw 30 or 40 bones onto a nation come onto a community that we were not before. is this revenge? have we lost our sanity and moral compass? how do people view us, all
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of a sudden these images of jets flying out from air bases in the region? how do people view that? and we will also ensure that, yt seen as a kind of a, you know, religious war and the potential for that to happen as well. the last thing i want to say is, alongside the military action that has taken place, what we are dealing with is an ideology, and you cannot bomb and ideology. afghanistan for 1515 years, in the main effort in afghanistan was to destroy the taliban. the taliban aa stronger today than they were 15 years ago. they still exist and are still causing problems. so an ideology cannot be bombed. in ideology cannot be destroyed.
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the only way to destroy this ideology is there a big, global heart and minds campaign and to work together globally being able to win the hearts and minds. the battle out there is not a battle for ground, not a, not a battle for territory. really it is for hearts and minds. unfortunately we are losing the battle at the moment and need to do more. >> we now want to open up the floor to questions, if anybody has questions for our panelists. >> everyone can here and that we can also get the recording of it. thank you. >> thank you very much. thank you for all the work your doing and communities in the uk and here in the united states. the foundation of society is the family. all the problems that we see in the western civilization
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and world starts at the family. whenfamily. when i see those young men in mexico being recruited by cartels to go out there and behead people that are opposite, it reminds me a lot of the radicalization problem. it is taking advantage of disenfranchised youth,youth, but it all starts in the family, if you ask me. today young muslim men are going to mosque, but they don't need to go to mosque to be radicalized. they radicalized. they can pick that up on the internet. and it all starts at the home because the parents do not know with the children are doing because the parents made themselves the prejudicial against western ideas. what do you think communities can do, instead of putting this on imams, society as a whole and families as a whole, the
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muslim community is not exempt of this integration of the family nucleus. in the foundation of society is the family. the muslim families are disintegrating, they are prejudicial, just like many other western families might be, then we need to find a solution.a solution. what do you think the solution to that problem is? >> there are a few points in response. i would start with, i think it is hard to make a generalization that these individuals who are being recruited come from broken families are that the families have not adopted western values. there are lots and lots of examples to the contrary where and they do come from loving homes for the parents have been present. so you cannot make that broad generalization.
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also, there are many times when law enforcement has attempted to involve parents in helping to de- radicalized individuals and it does not work and for a whole host of reasons. to set on the radicalization, adolescents by nature will hide what they can from the parents. so i would start with that assumption. i think that the role of friends and networks is infinitely more important. not to say that family is not,not, but there should be bigger roles for the friends network. >> we need to get -- >> we need to get -- >> cyber imams. yes. you could join in. well, i think i agree with your point about the mosque
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not necessarily being a place where people, individuals are radicalized. it has never been the case apart from a few that apart from a few known mosques and charismatic imams, mosques and places of worship, they pray, worship, and go home. but in the last 15 years definitely the cyberspace, the social media environment has become extremely powerful. all the radicalization, a lot of it has happened online. that is where we definitely need to look. i have been working with schools in the uk.
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what i have been talking about, social media and what i have said is, we need to create a new word which describes how quickly we communicate on social media because instantaneously is not just good enough. what is also important is that young people are so savvy with these things, so extremely savvy. the three muslim young innocent girls from the uk who decided to pack their bags up and go to syria, the didthey did not have a clue. they just did not have a clue. the family was fine. they just did not have a clue. the young people are so savvy and sophisticated. thethe family is important, i agree. i have young children. i here, you know, one day my
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daughter will come home because she is left the country. that is how scary the environment is. so family is important command i think the family has a role to play. but like the honorable man says,men says, this knew digital space, this knew digital world, this virtual world that we have created can do amazing things and at the same time can do horrible things as well. the last thing i would say going in terms of sophistication savvy, my son is a great example of that because he has this online account where he has to do his homework. many of you probably know about it, butit, but he is able to hack into the website and changes scores
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to show that he is completing his homework when he actually hasn't. you know,know, these are the kind of mines we are dealing with. >> intelligence analysts are estimating that in north america about 90 percent of the radicalization is happening online. in europe the numbers are about 5050, and only 50 percent online, and the numbers drop more when you talking about the middle east, north africa, asia. this is a representation of infiltration and how communities and societies engage, how technology is used. this is not a surprise because every young person
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you know has at least one. it is also the age when we talk about 14 to 25 where wherever study says that they are listening to their peers. they are most impacted by their peers and friends network and a lot less impacted by authority figures. but let me ask you, anyone of you, how many of you are going to say, i volunteer or encourage to go talk to a stranger online to convince them not too to syria? how many of us are willing to have our kids actually join the battle knowing what they are up against is the whole isis machinery. the moment you try to tap into it and engage and deal with people who are online or workers, you can't talk
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to just one of them. you get attacked by teams of them for monitoring from the station and go back in and change what has been said in the text. for every individual being recruited, there are handlers managing the social media presence, and not just on the public side. the issue is bigger. multi- leverage is a most vulnerable population. you talked about instantaneous. let me give you an example. last year the senate put out a report at midnight. guess how long it took before isis supporters were
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actually tweeting excerpts from that? thirty seconds. from when it went on the website. we'll be ready for response? no. dono. do we know the report was coming? of course. for weeks. there are cases where we can do something proactively, but we are not geared up to work in this world which was much faster than most of us are used to. >> thank you. >> okay. i will allow one more question, but i have to caveat that as the secretary arrives i have no options. >> it might be a take away. and i ami am going to phrase it with a little bit of context. my name is don command thank you. whatyou. what you did in the panel discussion was interesting and informative. there are many pathways to addressing being radicalized , and it sounds like change can only happen
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if people are aligned on this globally. not working in silos and not focusing on one approach but focusing on a variety of approaches. another point was made that when something happens people often have a knee-jerk reaction and seek short-term knee jerk solutions which may focus on symptoms rather than a root cause and pointed out how this is global without borders. my question and thought, has anyone considered the value of intersectoral partnership between government agencies, ngos are nonprofits in the private sector and obviously you can't always do this and one big massive intersectoral partnership. maybe networks that would then have various roles and responsibilities and a variety of approaches so that they are working in silos and there is more of a collaborative.
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different approaches for the holistic approach to work on this. two you think that is even feasible? if so, how could it be assembled? >> i will start with my take on this one. it will be great to have this. the cd summit which has happened starting call worked on exactly this. when you have the side meetings, new initiative just started. connecting from different cities around the world to deal with exchanging information and knowledge so that they can learn from each other. i talked to a mayor, town in norway.
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the network is great, but great, but i'm still waiting for america to tell us what to do. and then you look and say, say, this is a network. supposed to be everyone contributing. expectations, some will need more than others. and so the sense of partnership comeau we recognize the need for it, but it has not happened yet. the other huge obstacle we are facing, something which everyone is working toward, the sector has always belonged to other law enforcement or military. this is one of the 1st times in history where we are seeing, a civil society, you will step up and be part of our counterterrorism responses. we know nothing about the subject. law enforcement is having a hard time in how you share information. we have to give everyone space to make mistakes.
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everyone will step on each other's toes. it is not a static balance. that has to be dynamic and fluid and shift. but we have to allow the state to have -- there is no failsafe. learn and take the learning and integrate. >> ii apologize. i have to and the panel at this time. i want to thank you tremendously for your panel and panel members. >> one thing that i have experienced over the past 18 months, the choir therequire the audience the more focused and receptive they are to your discussions. we could here a pin drop today.
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>> here is a look at our prime time schedule. a briefing from the state department. secret service director testifies in front of the house and senate members on recent conduct issues. remarks formercer massachusetts senator elizabeth warren ways to improve the us corporate tax code. tomorrow on washington journal associated press reporter alicia caldwell discussing the vetting process. then human rights watch looks at the causes of the european migrant crisis in with the united states and united nations are doing to provide aid and relief.
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france's efforts to build an alliance to defeat isis and whether terrorist group attack the country. >> it is called the crossroads of new york state this weekend are c-span cities tour joinedto are joined by our time warner cable partners explore the history and literary life of syracuse, new york. we will visit the special collections library at syracuse university and learn about the anti-slavery movement inantislavery movement in the area to the papers of abolitionist cara smith, local author marsha wiseman discusses her book prelude to prison which explores the link between school suspensions and incarcerations in the us. then we will talk with jeff tinsley about his book going viral which looks at why events go viral online.
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>> when something goes viral there is a process of social sharing. we tends to think of viral like a viral video is a video they got a million views, but it is more the process by which that happens. :-( is what happens when people share content, usually into their own networks. often times someone with a lot of following, a lot of followers were people paying attention, like an important blog also spreads content. when it reaches a wide audience -- >> on american history tv we will visit the erie canal museum to learn how the canal influence the growth of syracuse, central new york state and the nation. then it is onto harriet tubman but he antislavery abolitionist acted as aa conductor and caregiver to numerous people as part of the underground railroad. our trip toour trip to syracuse also takes us to the matilda joslyn gage home and, one of the nations 1st woman rights champions. her speech at a women's
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rights convention foster international prominence. travel to syracuse bringing her oldest daughter with her. now, had not contacted any of the organizers. she just shows up. when there is a quiet moment she marches up on stage and trembling takes the podium and begins to speak. and she gives this incredibly moving speech. from that moment she goes on
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to become a leader in the women's movement. >> this weekend watch c-span cities tour beginning saturday at 8:00 p.m. eastern on c-span2 book tv and sunday afternoon at 2:00 o'n history tv on c-span three. working with our cable affiliates and visiting cities across the country.
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>> thank you for being here this morning. we were waiting until the documents were circulated. the same we will now come to order. sen. mccaskill and i have called this hearing to address the difficult but important subject of sex trafficking. over the past seven months the subcommittee has conducted a bipartisan investigation into how sex traffickers increasingly use the internet to advance trade and evade detection. the aim of this investigation straightforward. we want to understand how lawmakers, lawlawmakers, law enforcement, even private businesses can more effectively combat the serious crime that thrives on this online market. someone who represents a state that is experiencing some porn sex trafficking
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networks and most importantly as a father this is an issue spent time with those dedicated to fighting this crime in those victimized by. for victims the toll of sex trafficking is measured in stolen childhood and long lasting trauma. forfor traffickers it is measured in dollars, often a lot of dollars. a problem that i believe congress should pay more attention to. precise data is hard to come by because this market exists in the shadows. about eight of every ten suspectedten suspected incidents of human trafficking involves sex trafficking, 80 percent. sex traffickers prey on the
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vulnerable. the department of justice has reported more than half of sex trafficking victims are minors, and the problem appears to be getting worse. over last five years leading authority we will hear from later today reported an 876 percent increase in reports of suspected child sex trafficking. that increase is directly correlated to the increased use of the internet. that is what this hearing is all about. with the way out in 2138 out
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of every $10 spent on online commercial much of it is illegal. a federal court in chicago noted this year that back pages adult services section overwhelmingly contains advertisements for prostitution including prostitution of minors. the public record indicates the back page sits at the center of this online black market for sex trafficking. back pages linked to 71 percent of all suspected child sex trafficking reports the receives from the general public. 71 percent of all the suspected child sex trafficking reports that the
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center gets are related. service providers working with sex trafficking victims and reported that between 80 pet of the clients a recent study reveals that serious crimes a link to back page. and they have identified at least 13 reported cases of child sex trafficking. on this record they saw a
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compelling need to better understand the business practices. we thought it might be simple enough because back page holds itself out as a critical ally. it leads the industry in his review and screening of advertisements. the moderation process as the key tool for disrupting and eventually ending human trafficking. but back page has refused to turn over documents about this key moderation process that it touts. as well as other or relevant aspects. specifically the company refused to comply with an initial subpoena saying that it was overbroad. sen. mccaskill and ii agreed
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to withdraw that subpoena and issue a new more targeted subpoena. but the company again refused to comply. defiance of a congressional subpoena is rare and serious. noncompliance based on constitutional privilege. the argument is vaguely can be summed up this way. shields it from the investigation because it also publishes advertisements that are protected speech. in a detaileda detailed ruling on behalf of the subcommittee senator mccaskill and i explained why the legal argument is without merit. i encourage you to take a look. after overruling the
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objections sen. mccaskill andsenator mccaskill and i ordered the company and ceo to produce the documents we asked for the last thursday, november 12. that day came and went with no response. the next day back page again informed esi that would not comply. at the same time they made quite a show of producing certain cherry picked documents along with the 16,000 page pile of material at the subcommittee does not need and is not seeking. we don't think the response to the subpoena has been in good faith. constitutional privileges or the appropriateness of particular requests. we treat these objections seriously. back page has done more than just raise legal objection. the company had not even bother to look for the documents and had not even bother to look for the
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documents responsive to the subpoena. which means that case is not even know what all is refusing to produce. disappointed with the noncompliance and were not deterred. other sources including the contractor, we sought to learn more about the issues under investigation. in a bipartisan staff report released we have outlined luminary findings and questions that need answers. the report reveals the back pages at a practice of editing advertisements by deleting words and images before publication. anyway, this is important because changing the appearance of a public at obviously does not change the advertised transaction. these editing practices likely serve to conceal evidence of the illegality of the underlying transaction. that finding raises some
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very serious questions. we want to know more about the purpose and effect of these editing practices to tell us whether and how to tell us whether and how texts or images that can alert law enforcement about a crime being advertised. when that failed the subcommittee tried to take the testimony of two employees in charge of his moderation practices but they refused to testify on the grounds that it might incriminate them. nevertheless we continue to see documents that would allow us to understand this and other aspects of the screening process. in a momentsa moment senator mccaskill will discover other findings in greater detail. at the close of today's hearing will address the next steps the subcommittee plans take to enforce the subpoena that back pages violated. i'm grateful to our ranking member for the work on this bipartisan investigation.
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>> thank you for the strong working relationship we have. four months ago 15 -year-old girl locked in and st. louis missouri and asked for help. along with four of their girls between the ages of 12 and 18 she had been sold for sex at truck stops across missouri, florida, texas, new mexico for almost two months. she was lucky to be alive. according to her police report another girl traveling with her during those months had died in her arms. the 15-year-old girl who walked into cardinal glinted like the majority of children who were sold for sex in the united states today was trafficked using back page. throughout the subcommittee's investigation we have received information indicating that they have built a hugely successful business in part by posting
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advertisements for children and other victims of human trafficking on his website. and despite knowing that it's website has hosted advertisements of children being sold for sex back page has apparently signaled to its moderators that those ads should remain on the site. inin april 2012, for example, back page initially told it's outside moderators that they should fail or remove ads containing references to certain sex acts and words including schoolgirl, teen, human trafficking, and why you in g. two days later back page reverse the policy. the employee responsible for
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moderation issued clarification regarding the band words. instructed that moderator should no longer delete ads that use young or misspellings of young. those were capturing too much volume, he explained. there were too many legitimate uses of the word to warrant a removal every time. instead of deleting advertisements for services with young the back page employee instructed moderators to send they had to him for additional review. we don't know how many if any ads were removed following additional review. we do know that back page instructed its moderators to be very cautious about deleting ads. according to the manager of the moderator the definition of underage is anyone under the age of 18. for the purposes of making reports we err on the side of caution and try to report
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anyone elects under the age 21. importantly guidance emphasized if in doubt about underage the process should now be to accept the ad. if in doubt about underage the process for now should be to accept the ad and only delete if you are really very sure he thought only delete if you are sure person is under age. only underage. only delete if you really very sure person is underage. that was an all caps. the result of the guidance is the site contains innumerable advertisements for sexual transactions with children. the national center for missing and exploited children child sex
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trafficking reports involve ads posted on back page. and according to shared hope international service providers working with child sex trafficking victims have reported between 80 percent and 100 percent of their clients have been bought and sold on back page. we have also learned that back pages failed to preserve information that would help law enforcement and other entities located victims and put pants and traffickers in jail. free widely available technologies that would help law enforcement build cases against. moreover, back page representatives and third-party consultants have informed the subcommittee that back page moderators edit and delete content and ads in ways that make men
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feel evidence of illegal activity from law enforcement. the subcommittee has also found that back page business model has been highly profitable. based on information obtained by the subcommittee back page had net revenue of $135 million in 2014. they are expected to net more than $153 million this year. nearly all of it profit. the company fair market value taking into account its lack of marketability is approximately 430 million. as a formera former sexpot prosecutor i know that behind these cold financial statistics are survivors traumatized from abuse and family suffering through years of terror and uncertainty concerning the fate of their loved ones. today i hopei hope to hear from our 1st witnesses about the impact of back page on the efforts of law
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enforcement officials and advocacy groups to curb sex trafficking in the united states. i am confident that their testimony will make clear the importance of subcommittee efforts to press back page for information on its operations and procedures. i also hope that we will at some future date finally have the opportunity to question back page ceo carl herrera. who received a subpoena to appear before the subcommittee today but has refused to attend. i have many questions for him. i think the witnesses for being here and look forward to the testimony. >> thank you, senator casco. mentioned thementioned the report without objection the staff report and associated correspondence ordered to become part of the record.
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we are pleased to be joined by senior vice president and general counsel of the national center for missing and exploited children. the nation's leading authority on issues related to missing and sexually exploited children. for over 30 years have provided valuable services to law enforcement and criminal justice committee with the goal of limiting child sexual exportation and reuniting families. it has assisted law enforcement and recovering over 200,000 missing children including assisting with the refuge of a missing child in cleveland ohio just earlier this month. i am also honored to have with us today the founder. many of you know john walsh who is here with us in the room this morning who has been a good advisor to me and to the subcommittee. we are pleased to be joined by darwin roberts, deputy attorney general with the
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washington state atty.state attorney general's office for a supervised the criminal justice division among other units. the student washington has been recognized as a leader due in large part to the work of the state ag's office. a highly regarded national anti- trafficking organization they washington the highest-ranking for its anti- trafficking efforts last year. mr. roberts served as an assistant us attorney. appreciate you being here. look forward to your testimony. the director of ohio attorney general crimes against children initiative. also going to make record the testimony of the chief assistant. to the witnesses, it witnesses, it is a custom
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of the subcommittee to swearing all witnesses. do you swear that the testimony you are about to give will be the truth, whole truth, and nothing but the truth so help you got? >> i do. >> let the record reflect the witnesses answered in the affirmative. we ask you try to limit your oral testimony. we will hear from you 1st. >> chairman, ranking member, members of the subcommittee, i am pleased to be here on behalf of the national center for missing and exploited children. let me take a moment to thank you for your efforts to investigate the crime of child sex trafficking and potential solutions to combat this horrible crime. i am joined today by our cofounder and incoming ceo,
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former director of the us marshals who are here with me to underscore the support for the committee's work and a dedication to preventing child sex trafficking and assisting survivors and their families. we are here to talk about the online lucrative sale of america's children for sex which in our experience occurs most prominently on the website backpage.com. every year in the united states thousands of children are sold for sex and repeatedly raped. boys, transgender children girls. we see victims as young as 11 years old with an average age of 15.15. many of these children are moved constantly from city to city, sold for sex up to ten timesten times a day and tattooed by their traffickers, literally branded for life. child sex trafficking is the rape of a child in exchange for something of value.
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buying, selling, or facilitating the sale of a child for sex is always illegal. child sex trafficking is not prostitution and it has no relation to illegal sexual activity between consenting adults. we are talking about illegal activity that is not protected by the first amendment. technology has fundamentally changed how children are trafficked. today an adult can shop from their home, office tomorrowhome, office, hotel room, even on a cell phone to buy a child for sex. they are advertising websites notably back page that are online marketplaces to buy and sell sexual experiences. some may be legal, but most are not. they operate the cyber tip line, the nations reporting mechanism for suspected child sexual exhortation. since 1998 we received over 45 thousand reports relating
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to child sex trafficking. child sex trafficking often begins with a child. because there are so many child sex trafficking ads, when a missing child is at risk of being trafficked. make sure their websites are not misused. they voluntarily report some ads they publicly represented that they wanted to do everything possible to
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stop child sexual exportation on its website. at our last meeting in 2013 they were frustrated for not promoting there asserted efforts to curb child sex trafficking. trying to publicly claim a partnership is that she was rather than on their website. the recommended many steps to reduce the possibility children will be sold for sex on the website. they declined to adopt most recommended. they do not consistently remove ads. reported by a family member begging for assistance. your website featuring our 16 -year-old daughter posing
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as an escort, pimped out by her old boyfriend. using the website but have gotten no response. we raise this issue repeatedly during misses but were never told why some remain on site. more stringent rules to post a motorcycle. part of a verified phone number, even though back page is the site is used for child sex trafficking and after a repeat of recommendation back pagepay still has not implemented any form of verification some child sex trafficking ads, but they have not taken basic measures.
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there is no reason to believe suspected child sex trafficking ads has increased. sean to less than half of reports from 2013. this is both an amicus brief in support of child sex victims. before ivictims. before i close i would like to acknowledge the tremendous efforts of many other advocacy groups many of which are here in the room today and the attorneys working on several court cases in massachusetts to end the devastating online business of selling children for sex on websites like back page. i thank you for the chance
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to share this information regarding child sex trafficking and back page and i am happy to answer any questions you may have. >> thank you. >> thank you for the opportunity to appear today. now appearing on behalf of attorney general bob ferguson. i am proud to be here representing washington state which has been recognized as aa leader among the states and fighting human trafficking at the state level. we were the 1st day to make it a crime to commit human trafficking. and of course our state definition of human trafficking matches the federal and at the use of force, fraud, or coercion for forced labor and voluntary servitude for commercial sex acts is classified as human trafficking. and of course the commercial sexual abuse of a minor is any use of a minor in a commercial sex act because mine is a recognized as not being able to consent
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legally to engage in any sort of sex act with an adult much less a commercial one. while we appreciate the chairman's credit to the atty. gen.'s office for the work we have done, i would be remiss if i did not emphasize that we have an entire community of folks who really good work in washington state, and if it weren't for every one all of our partners in law enforcement, the nonprofit community, and other government agencies they would not be close to where we are today. washington has had the experience of becoming involved in litigation with backpage.com in the course of our efforts to prevent the use of the internet for human trafficking and sexual exportation of children. in 2012 the state of washington passed a law that aims to criminally punish any person who using the
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internet knowingly publishes, disseminates whore displays or causes directly or indirectly to be published, disseminated comeau displayed any advertisement for commercial sex act which is to take place in the state of washington and that includes the depiction of a minor. backpage.com, the atty. gen.'s office attempted attempted to defend the line court, but the us district court in seattle ruled that the law would be enjoined on the grounds that it was unconstitutionally vague under the first amendment and also lightly preempted by the communication of decency act. alsoact. also simultaneously with this ruling by the us district court,, a lawsuit was filed in washington superior court in pierce county tacoma alleging that the page had done more than just be a site that hosted the posting of ads as they
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claimed in order to invoke their immunity under the communications decency act. in that case several miners whominors who alleged that they were in fact prostituted using backpage.com sued alleging that back page had essentially by several means, including making themselves a market leader, in other words they go to site r online prostitution ads by using terms like escorts, euphemisms widely recognized as being -- telling consumers the prostitution is the kind of service that could purchase on this website and by using what the plaintiffs term sham efforts at self policing to allegedly tried to keep ads for underage individuals off the site.
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that by doing this backpage.com had moved beyond the mere facilitation hosting of the ads and itself was materially contributing to the use of its site to sell minors for sex. our atty. gen.'s office filed an amicus brief in support of these plaintiffs win their case went to the washington supreme court, and on the posture of the back pages initial motion to dismiss we argued that in fact the plaintiff should be allowed to conduct discovery to determine whether back page was materially contributing as the plaintiffs allege. the washington supreme court this fall ruled in favor of the plaintiffs in that case is now proceeding to discovery. we are aware that in the course of litigation backpage.com has repeatedly asserted that law
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enforcement is best helped it back page remains open as a website for the posting of adult services type ads and works with law enforcement as they put it to try to prevent minors from being trafficked using our site. these commitments sound positive, as stated by back page. but the washington state attorney general's office and others is not at all certain whether these commitments are at all sufficient to do the kind of work necessary to prevent individuals from being trafficked on the site. during this entire period even is back page has said this they have been repeated numerous instances of children being trafficked on back page. so the question for the attorney general's office is , what is back page doing? what are there goals?
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how effective are there techniques? are they doing everything that they can? is the more they could be doing? what is the cost of compliance internally relative to the significant revenues as the subcommittee cited that they are making? so for all of those reasons the washington state attorney general's office hopes that backpage.com will respond to the subcommittee subpoena and will shed more light on how exactly it claims working to prevent the sex trafficking of minors. thank you, and i'm happy to answer any questions. >> thank you and appreciate you for your testimony. your perspective is valuable to the subcommittee. it will begin with five-minute question rounds. we will gowe will go as many rounds as is necessary to get the questions answered. i would like to start by making the statement that it
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appears that technology has fundamentally changed the way children can be victimized. that is the fundamental truth. you can see that in our report. let me start with you. iyou. i have deep concerns about the notion of editing advertisements. we have had in our report as you will see some evidence of that. let me ask you how prevalent are advertisements for sexual exportation of minors? >> mr. chairman, as i testified to a few moments ago, back pages the 1st place that is certainly have a missing child case where there is suspicion the child is being trafficked because even though the child may also have a trafficking at another site they will always have a trafficking at a trafficking at him back page if they are being trafficked. so between that and the
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numbers of reports that we received, as i mentioned, thousand reports of child sex trafficking with the predominant number of those either from the public or otherwise being reported on back page ads, it is clear that back page really is the primary marketplace for these ads. >> you said that over 70% of all suspected child sex trafficking reports are received, that you receive on your server to plan a related. >> from the public. >> public. >> amazing. >> on the subject of underage victims, this email is from a company that back page used to outsource the job of screening advertisements from a process that is called moderation. in the email that company instructs moderators who had the job of reviewing and editing ads including how to handle ads for victims a look underage, the ad instructs moderators. you can find it on page 122.
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the. the e-mail instructs moderators that if they are in doubt about underage the process should be to accept the head. it also cautions moderators that they should only delete ads if you're really sure the person is underage. it seems to me there is a bias. let me ask you, does it sound like instructions the company would give if it was concerned to keep kids off the internet? >> absolutely not. if the company has a sincere interest in deterring and removing exportation then than it will undertake a number of preventative measures early on and will deal with ads that we will likely be picturing children are minors not allowing
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content and report the content. it will not take a half measure. i will say, while this is similar to a back page has told knickknack. >> when you edit and add and change its wording, change the underlying transaction, you don't change the potential for the underlying crime being committed. ..
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and there is this kind of editing editing was concerned that the practice give you? >> it's incredibly troubling as you noted on a number of grounds one is that it definitely off to skate the illegal activity that is the intent of the ad if someone is posting an ad saying this is a 15-year-old or providing other information that is a minor who is being sold for an act and that merely strips the age component out or whatever it might become a being a child. that is definitely as you noted hiding the crime before it goes public. also from a legal standpoint, it could very much create concerns about if the page is still in the publisher category.
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when you get this version rather that the complete record of the ad ad including what was existing prior to the editing which would help you to think that were difficult for you to rescue the case is that accurate? >> that is correct if we were able to receive all the photographs involve attacks the additional information whether it is a photo that includes the face of a child that could greatly increase the identification of the child or a phone number or e-mail address that in the original ad that might have been stripped by the back page moderator that information is crucial to rescue the child and also to pursue the individual. >> thank you. senator mccaskill. >> can you explain coming and it
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defies logic, could you explain your testimony that there is more stringent rules for selling a motorcycle than selling a 12-year-old? spinnaker i really have no explanation for that, senator. it is what we were told when we met with them and is what is the reality of how you go about posting the ad currently. during our meetings between 2010-2013, we constantly asked there to be some form of know your customer. at least know who the individual is in that ad, numbing the high incidence of child sex trafficking ads on the website. we pointed out the fact that they are able to do another section such as the motor vehicles and we did ask why they couldn't incorporate the element as well. we never received a satisfactory answer. >> what was their answer?
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>> what excuse do they have? >> they said they would look into it and discuss it at the next meeting and it would be raised at the next meeting as if it were the first time we were raising the issue. it was never a satisfactory response. >> said the ads are the only place they don't require verification. >> i have not looked at all the other categories. we have done obviously a lot of research and noted variations but there are many categories of items for sale, apartments to rent jobs etc. so i can't answer that with specificity. >> have you all done the math and maybe the staff is busy working on this versus the other kind of advertisement that they pretend that they are interested in great >> they have not. i know that other groups have done research on the ad on the back page and it is responsive to the cases.
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so, when we receive a child sex trafficking report and exploitation report, we go to back page on the report. similarly when they have a missing child case where the child may be trafficked we go to the page for that child. >> it appears they are engaging in here trying to figure out if that's what this is about it appears that this is a very important part of their business model because i don't think anyone could say that this isn't high risk so if you are engaging in high-risk activities it's usually because it has a great deal of impact on the bottom line is. let me ask you as i said this hearing is not about reaching conclusions about back page about what they have or haven't done exhibits about affirming the legitimacy of the investigation and the legitimacy
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of the questions we're asking in that we demand answers to as the united states senate in fact in your amicus brief that you filed with the supreme court of washington both in your amick is brief and the amick is brief you explain the importance of receiving much of the same information that we are seeking. you stress the records of the protocols for creating the ad screening for and rejecting ads offering children and flagging the repeat offenders. can you explain why it's so critical for the anti-trafficking efforts to produce this kind of material and why our efforts to get this material is so essential and why we should spare no procedural efforts to get at these facts? >> absolutely, senator. and thank you again for making this effort.
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without understanding what's going on, we can't understand whether they are putting a sufficient efforts to solve the problem and began because back page continually invokes their own efforts to block children from being advertised on their site as the reason they should be allowed to continue operating freely in this area even as they litigate vigorously to protect themselves from the law and lawsuits that might hold them accountable, and attempt to hold them accountable for having trafficked children on their website and they invoke these protections so we need to know precisely what these protections are, what are they doing, how significant are they relative to the overall volume of back page's business. i think it's important for regulators and members of the public to assess how much is
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back page putting into compliance? i mean if this is a tremendously profitable business for them, what is an appropriate amount for them to spend trying to keep children from being sold for sex? >> they are claiming protection under the law while refusing to give the people who represents the law the facts that would impact support their claim. they are basically saying you should trust us. we are not going to give you any information. has back page ever produced the documents of the national association of attorney general requested of them in 2011 and 2012? as that information ever been produced? >> i don't believe so, senator. >> enqueue mr. chair. >> i want to thank all members for their involvement in this
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distasteful issue, one of transcendent importance. i would like to especially thank the senator for her significant involvement and advocacy for the children on this really unsavory unpleasant aspect of america that seems to have grown over time with the ability to use technology. as mr. chairman i finished up finished finished updating commander of the subcommittee for years and i've never known of a witness to refuse a subpoena and i'm sure that you'll take the necessary action to ensure that its not done with impunity and i applaud you for your actions. this is all about money, isn't it, mr. roberts? 80% of the revenue for back page can be directly derived from the commercial sex advertising?
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we are talking about money aren't we? >> it appears so, senator, yes. >> this is the most egregious example of that but it goes on with other websites around the country. this is just the most egregious. in fact, two federal courts have reached the conclusion that they are in violation of the law. what do we need to do about the whole situation which is to some degree the result of increased to technology and means of communication? what do we need to do? >> is a very competitive question. i can tell you about some of the efforts that are taking place. the king county prosecuting attorney's office which is the prosecuting attorney for seattle, the largest office in the state of washington is doing some real cutting-edge work in this area. >> what about the u.s. attorney
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general? >> it's been a couple years since i was with the justice department. i know that at least in washington state, the department -- >> you don't know of any federal active engagements? do you? >> do you know of any? >> no sir i don't. >> so you don't know of any priority with the attorney attorney general of the united states. >> i'm not aware of any at this time. >> you know mr. chairman, maybe one of the results of the hearing could be to increase the priority of this issue since it is a national issue. please proceed, mr. roberts. >> senator, i was just going to mention that the local prosecuting attorney's office is working on a project that seeks to inhibit the online demand for persons seeking sex particularly
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with minors by placing targeted advertisements online in the same way that back page apparently seeks to become the first search result when someone searches for an adult service type of ad online. the prosecuting prosecuting attorney's office is placing ads that ask people do you really want to be buying sex and try to expose them to some of the negative effects that take place when they participate in the commercial economy describing that women often often aren't there willingly that there's a great deal of exploitation, violence, harm, trauma that comes from these efforts and that's been supported in part by grants from private sources and we believe it's got some potential to hopefully make some impact. >> so the fact that this has such a devastating impact is the hook that we should speak to
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every attempt being made to stop this evil? >> yes. >> thank you mr. chairman and i hope that maybe we could all of us in this committee maybe send a message to the united states attorney general that we need some priorities on this issue. >> thank you senator mccain and good point. >> thank you mr. chairman and ranking member for this very important hearing and in the halls of congress we frequently represent some of them to talk about some of the most powerful people in america what we are going to do with the large banks and today we are talking of the most vulnerable people in america, small children basically being exploited, being captured and being sold as sex
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slaves. what could be more horrific than that and we are told by an organization like the back page.com that they are doing everything. they are trying as hard as they can to prevent this horrible thing from happening to children. i think today we are saying you need to try harder. and if you are trying as hard as you could come if you truly cared, you would be in this room with us talking about how we could in fact attack this problem. they are not in this room because they are not in this fight with the rest of us. they are not here to protect children. they're here to make money as senator mccain talked about. and i want to just kind of told you what we are seeing in north dakota because a lot of people think that this is something that's removed, that's a city issue, something big cities experience. but in north dakota, this issue has hit us and it has hit us
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hard because back page allows it to be invisible. there's nobody walking the street corners. it's invisible. just yesterday, to give you a sense of where we are. just yesterday, 69 new ads for escorts posted on back page in north dakota alone. and i want to tell you a story earlier this year a 14-year-old las vegas runaway was rescued from traffickers. after her mother's got e-mails from her inbox basically advertising her answering an ad that had been posted. last summer right across from fargo dakota and moore had minnesota the local law enforcement officials responded to a posting on back page and found a 13-year-old runaway from minneapolis who had been trafficked for sex. now are we to assume that these
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are the only minors who ever appeared in north dakota on back page.com backs you would have to be quite naïve and foolish to assume that is the fact and to believe that we have a partner in solving this problem page. we don't have a partner there. we have somebody who is i believe not participating in solving this problem and capitalizing it becoming filthy rich and i use the word filthy honestly, filthy rich on a backpage.com. basically the issue of metadata because we don't have the
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writing the ads but it's my understanding that the metadata is being scrubbed off the ads which then became an innate some opportunities for actually tracing back to the source. this is the opportunity to explain how it is being treated on back page as it relates to escort advertising. >> senator, your understanding is correct. when there's an ad that has been reported that there isn't the metadata and back. like other types of electronic information is incredibly relevant and important as far as identifying location, geographic and other types of information that may be pertinent to connecting the individual who took the photograph with the actual photograph and the location of that individual. without the information it is
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difficult for law enforcement to start to connect the child to the photo. >> did you see it being removed from a car or anything else on back page can be picked metadata often sounds? >> that would be a difficult question for me to answer. >> it can be especially important in the trafficking prosecutions because what a lot of people don't realize . >> i think we understand how important it is. would there be any legitimate purpose for removing the metadata from the advertisement? >> there is an investment that might be required. >> and storage is so expensive these days.
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let's not pretend that this is about storage quite honestly. i know i'm out of time but i want to give a shout out to a great partner whose reputation and has been a great partner to the national center for missing and exploited people and that is senator mccain's wife who's been a champion and i think has done more to raise the issue than almost anyone else in the country and so she's a great partner to have and a fierce champion for children in this country and so we are grateful for the cushy spot at the dais she's definitely here with us today as we address this issue. >> when i asked senator mccain whether he could come by today, he immediately said of course i'm going to come. he's been great in raising awareness for this issue and spoke with her at conferences
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and spent a lot of time and effort internationally as well as here in this country on this issue. >> it's as important to me as it is to everyone in the nation. this is an issue that has to be confronted. this is a dark spot in the country that we have to be able to shine a light on and two deal with in the days ahead. so i appreciate what you're doing because i can only imagine it's very difficult hard work and it's painful to see the images and people to walk us through what a lot of families so thank you for what you're doing for a lot of families around the country. what is the cost of one of these ads on the back page, how much is it to run an ad? >> back page calibrates as a preventative geographic location
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so in some cities like manhattan and new york, an ad can go for upwards of $18 a smaller county will calibrates lower to satisfy the customer to a few dollars. >> to be able to put this up and get the service online. >> that's correct. >> so it's obviously not the first is told that has told with this. other locations have. >> how have other websites built with this and responded once they learn that child sex trafficking is happening on the site how have others responded? >> goes to deal with the issue as we know almost anything can go up on the internet. so, everyone is subjected to this thread. however when a responsible corporate entity does is it takes to run this preventative measures. so it has real moderation. it has real review.
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>> give me an example of that, but have other sites done to say we want to make sure that this doesn't happen here so we are not going to do this. >> they often use other types of technologies such as photo dna which is a micro product and it enables someone to take basically a digital fingerprint of an image so that you can screen screen you could definitely get the hint of hint and hint of an ad that immediately comes out and it doesn't get posted today at the also have the trained moderation staff. it's not the type of instructions that again are responsible moderators that are utilized. q-quebec how expensive is the software? is that millions of dollars to purchase software like that?
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give me a ballpark figure. >> generally it is a very low-cost and no-cost. there is cost implement of course and accompanied systems. >> with the relative cost you might be interested to know the local law enforcement has been involved in placing ads on sites including back page that appeared to be advertisements for young persons who could be bought and in response to these ads that might cost $18 or so, law-enforcement within a few hours of it being posted, which would give you some impression of why it is lucrative. >> knowing all of that help you measure success? how do you measure progress that we are achieving progress because we are seeing this and what metrics are you looking
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for? >> we don't have great statistics greater statistics as to what's going on and that's one of the things that we as a state have been emphasizing is that we need to do better study what the problem is. our indication based on the most recent study from about 2008 locally was that we delete we have something in the neighborhood of 300 to 500 being trafficked on an annual basis in the greater seattle area. so come if we could improve upon those numbers, the next time we took a survey we would know we were making progress in the meantime we just have to intercept as many victims as law enforcement has the resources to do. >> so you are on a ship that is taking it on a lot of water and you are taking it afloat.
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i assume as you mentioned before you have a lot of partners on this, nonprofits, churches, other agencies. the question from senator mccain at the u.s. that the u.s. attorney and the department of justice i would hope they are stepping in for four summits as well so it sounds like it was unknown what role they are playing and we could ask them obviously they could tell us what they are giving further partners that are missing in missing industry obviously has to be one of those partners that we are asking to take on something that is clearly illegal away from their business model. what partners are you missing? >> industry is improving quite a bit. there've been efforts in the hospitality industry to train staff members on recognition of trafficking situations. we would like to see the organizations like back page. i would say in the seattle area, there is a very strong presence but by the local u.s. attorney's office and there has been granted funding by the
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department of justice for that effort. the washington coalition against trafficking into the anti-trafficking response network both have significant federal funding of significant participation from federal law enforcement including the fbi and homeland security investigations. so, we feel that the federal government and the justice department are a valuable partner in washington. >> as they should be in this area. >> thank you mr. chairman. i wanted to ask about the communications decency act and as i understand back page pages trying to hide behind this act and i want to understand as we look at it very glad by the way
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i think it is incredibly important that i want to understand how under that particular act back page can shield itself from the activities that in mind you seem to be very clearly facilitating trafficking in children and other illegal activities. >> so you are a lawyer. i want to get your thoughts on that. >> thank you, senator. back page has been used as a shield against the current lawsuits and threats of prosecution that may have arisen from time to time. the basic argument under the cpa is that they are a publisher so they are are a bulletin board that someone might put up in a supermarket. they are not responsible for the notecards that people put on the bulletin board selling certain items. that seems very unrealistic when you're thinking the item for
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sale as is a human being and potentially a child. but that is the basic component under the language which is a fairly old statute created to serve a tremendous importance in that regard seeks to protect internet providers from let's say rampant defamation suits and things of that sort because there is so much public content going onto some of the sites. so back page takes advantage of that and says we are a publisher we did provide a mechanism where not responsible for what people put on. that's why some of this information is coming out of the committees investigation regarding the editing that is crucial and i think will be an area that many attorneys and prosecutors will be focusing on after this hearing. >> in other words, information they themselves may be editing so therefore quite aware of the content of the fact that what
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they are posting is involving the illegal solicitation of children and other illegal like these and other trafficking activities that are against the law. >> absolutely and also crossing the boundary between the publisher and the participating creation of the ad through added through the editing. >> so you've mentioned they are using as a shield. obviously as i understand the testimony that other providers are using it in a way that back page is. do you think that we need to revisit or look at this to see how it is being used in light of current to the current state of
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the internet even though that is an older statute and given that we have this back page using the statute in a way that they are posting the ads of trafficking of children which is just appalling. >> i know there's been tremendous discussion on the hill and in the house regarding the cpa especially with a focus on the anti-trafficking measures. it's been very involved in speaking with a number of members and staff regarding the cda and how they are brought up to date a little bit or they are altered a little bit so that unique site who are not kind to undertake the usual corporate protections couldn't see that as a defense for them. >> i'm a strong proponent of the internet and the entrepreneurship and great things we have seen from it, but i can't believe that when they were enacted that the lawmakers passed it could have been
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envisioned envisioned a website like that page and they are using this as a shield for discussing types of illegal activity being posted. so i hope that we will look at that issue as well as a committee to make sure they can't use this statute in an improper way as a shield. thank you. >> thank you senator. we will move onto another round of that's okay. i know there are members that are still here and i certainly have questions and we appreciate the testimony so far and it's been troubling in the sense that this technology is a risk to our kids and you're not getting the cooperation of you certainly thought which is what the experience has been in a subcommittee and a lack of cooperation. you did testify that over the course of three years, you
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worked re: sex trafficking on the website and provided a number of specific regulations of how they could utilize the available technology to do it in a way that would reduce child sexual exploitation. i think you mentioned a couple of those today but i would like you to tell us specifically what recommendations did you make but chose not to adopt? >> they do not remove and add even after they have reported it for child sex trafficking and even if a person writes an answer to this is my child. and the failure to introduce a variety of again to know your customer or the verification models we are all on the internet and we know if we go to a cooking site for a recipe we will be required to authenticate
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ourselves in some way to put in an e-mail or mobile number and get a text to verify back that we are who we are and that we can proceed to use that content on the internet. very simple mechanisms used for innocuous content. as the senator mentioned this is very high risk of content you're talking about escort ads and its misuse. it's one thing so one thing we've recommended is the validation of a telephone number and e-mail address of some sort. the capture and reporting through the ip address when you do not have the data and its crucial to try to locate the geographical location of that ad especially for trafficking crime when a child is moved from city to city they could enable you to better track where the child is being trafficked. again as i mentioned before the use of a variety of different
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types of technologies, voter dna or other commercial technologies but really utilizing and simply hashing or hashing your suggested keeping them dormant. you must utilize these if you are really going to have a successful prevention mechanism to screen the ads to try to prevent content that you know has been reported as child sex trafficking from ever going up. so making the call isn't really too young or not in the words of the back page managers. so again, just flagging the various identifiers in and had it come if you have a cell phone location, path name of some sort coming e-mail address, these are important identifiers. traffickers often are marketing various girls or boys on the website for trafficking. by capturing the information from one advantage using it to scream through the gutters on
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the system they would be able to link the ads that might all be connected to one trafficker. another suggestion that was made that our knowledge they have not adopted and told us it wouldn't adopt. there are a few others. those are some of the primary ones. >> all of those would go towards you being able to rescue these kids and being able to rescue our children. they also go to law enforcement. >> earlier you said a mother finally sent an e-mail saying for god sakes she's only 16. so for all of us are parents or grandparents, think about that. for god sakes, she's only 16 and get the refused to pull the ad. with regards to finding these children, again you've all been helpful to us in ohio we
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appreciate that to help find exploited children. not being able to provide that information to law enforcement needs you can't find many children who otherwise could have been able to be found and again the heartbreak of knowing that information is out there somewhere and get a supposedly legitimate commercial concern won't provide you the information were provided to law enforcement to be able to find your child. to me that's what this hearing is really all about. it's about these kids and about this practice that keeps you from doing your job at the national center but also keeps so many parents, grandparents from being able to save their children and rescue their children. with that, senator mccaskill?
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>> mr. roberts, could you briefly outline for the record why you belief back page operates outside the immunity of the communications decency act? >> well, senator i don't have enough information yet to definitively say one way or the other but the concern that we expressed our amicus brief is that they are exceeding the bounds of the exemption in other words, by actually participating in drafting the ads by making themselves a go to location for the sites for ads, advertising on such sites and crafting the message that is being sent to try to keep it so that it doesn't involve it doesn't appear to involve childish
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thinking. so the engagement in shaping the content is at this point we are fromitting walls in terms of all hitting walls in terf back page is the reason. so, assuming that we eventually through legal processes get the information. i'm assuming that this is the kind of factual scenario that could impact way an adequate foundation would you agree with that? >> i think that is a possibility. >> because this is an enterprise. this is not one activity. this is an enterprise of activity. i wanted to give a shout out to you come your colleagues and i literally hundreds and hundreds of prosecutors across the country prosecuting against
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traffickers and pimps. i appreciate senator mccain that i know there are many u.s. attorneys offices that are actively engaged in a cooperative fashion with local law enforcement and bringing these cases. the case i referenced my statement was in fact filed by the u.s. attorneys office against traffickers for taking these young girls from truck stops to truck stops. by the way, the stops that take these girls from truck to truck or cold waters are for the record which is distasteful as the underlying practice. one of the things that's interesting is how many stings go on back page. it's the go to go to place for law enforcement to place ads and there are literally thousands of
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cases moving through the kernel justice system right now where customers have been caught. have you all tried to place an ad in the section of a back page essay in people that are interested in escort you should know this site is a number one location for activity and you have a i could have likelihood of being prosecuted has anyone tried to place the ad because it seems to me that the two problems here. we have the back page problem kernel element of traffickers problems and then the demand problem and too many people think they can do this in anonymity that the country to access them children through the internet. what are the various organizations trying to do good
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in this area over informing would-be customers that the chances that they are responding to an ad that has a law-enforcement officer on the other side goes dramatically off when they think that they are going to be successful at being anonymous. spend time away some of my nonprofit colleagues at other organizations to engage in that kind of advocacy or attempt to. it's my understanding that some of the organizations that have tried to place messages such as you just detailed and have been blocked have been blocked from the section or removed at some point so it's very difficult for for the nonprofit organization to place an ad of the message or public awareness message for a potential buyer on back page. that is my understanding. >> been meaning to make sure that as we try to get information from back page we include that question. how many times have you blocked an ad informing would-be customers that there is a likelihood that the ad you may be responding to maybe law-enforcement.
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>> i'm happy to refer the committee to some of the nonprofits. >> that would be to take because actually targeted because actually i think that the prosecutor would be important to the case i was trying to bring. >> senator, placing ads of that type is one of the office the one in the office however i believe they've been focusing on purchasing an ad results from search engines like google and microsoft. >> i know there's lots of different avenues to try to get at this incredible problem. i think that you all have made a very powerful case to why it is important that we be tenacious and refuse to get up and let me just say for the record that i know how dedicated the chairman us to this issue and i know how dedicated i am to this issue. i know how dedicated the senator heitkamp is to this issue and if back page thinks that they are going to go quietly into the
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night, they are sadly mistaken. i want to get to give a shout out to an organization called truckers against trafficking. they are working to deal with the kind of culture that needs to change within the subset into their doing terrific work in terms of educating and hopefully making strides along with the rest of you in addressing the problem because we don't even -- as reprehensible as all of this is, there is come as long as there's there is a demand, we are going to find the next iteration, the next generation and so we need to be on top of that as well. senator ayotte and i think the chairman and ranking member, as we look kind of going forward you are looking at things we can do today. we can continue to be as tenacious as what we possibly
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can on this investigation. but i want to talk about maybe a couple of ideas that could add to the effort here legislatively. you mentioned current federal law requires entities defined as a electronic service provider report instances of child pornography that they are being made aware of the same doesn't scene doesn't exist for. instances of child sex trafficking. why do you think that is and do you think that would make a difference if the law were changed to include child sex trafficking and has this issue ever been raised before congress and has there ever been a broader discussion? is this an additional tool that we could be using it being at? >> we think it would be a tremendous additional tool. one thing it is not in the
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initial statutory requirement that you referenced. perhaps for a number of reasons. perhaps the focus wasn't on online trafficking instances as it was on child thermography at the time and it has done wonders to address the problem. i also think that the child trafficking as a content or somewhat inherently more difficult to identify than the image where you simply have a photo and if it is a parent child poverty or not, a child sex trafficking add the content would contents would be a mixture as well. we've had discussions regarding the that small gap in the reporting statute. if it is a change that would welcome participating in the belief there is a requirement to report the content that is to be made aware of.
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if they did serve according it would only increase the ability to provide that information and insist families and victims in the process. also i think that would go very far to assist in the prevention measures. we would see there at the content to develop the prevention measures that would address the content that we are seeing. hispanic and legitimate actors would err on the side of advancing that kind of content. >> people who really cared about this problem would in fact welcome an opportunity to have someone who is a partner to stop this from happening. i want to thank all of the advocacy groups and all of you that have been on the front end of this would have been toiling and we know this isn't just a problem of our country but as we look through these as a defender of the first amendment and as we work through that balance the work that we do here is work
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that will have repercussions not just in our country but across the world and so i really want to thank the chairman and ranking member for the ranking member for making this a priori for the committee. it's been great to see it again and if there is anything more that we can do what you think of, i hope that you will reach out either to the committee or individual members have been working on these issues. thank you for your leadership on this and as you can see all of my colleagues on the committee have passion for this issue and attention. i think that what we have been able to find today are some very specific ways to deal with the online issue and the laundry list of things that they've not done certainly would help in terms of finding this as we say
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prevention as you say in terms of law enforcement prosecutions. there's also other things you can and should do with regards to sex trafficking. we did test the decision as you know them congress signed into law earlier this year you involved in that it worked on the missing children issues who are the most formidable trafficking and also the demand side issue to make some progress at the federal level in 15 years. and then finally, were able to change some of the federal dais in the legislation to say that these young men, women and girls and boys involved in this are victims and shouldn't be treated as criminals but rather as victims so we can't deal with it, which as you said earlier its long-term so it's not just important to talk about back page of the obvious disappointment while this happened but their ability to the uk but the willingness to cooperate with this issue but
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it's also a chance to talk about efforts we can take going forward to combat sex trafficking. as we thank you for your testimony this morning. thank you for your hard work i know that he will keep it up working with all of the attorney general's. at the national center thank you for your leadership on this and to all of the groups that are out there in the trenches working on this issue every day and particular shout out to those who are embracing these victims and helping them to get through this, having met with victims in ohio who were only recently going into treatment and recovery process and others that have been added for years this is the most heartbreaking and difficult part of this whole process of things to all of
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those groups that are involved and individuals. we are now going to cope the second panel. >> i would like to call the ceo. we had hoped he would appear that he has refused to come. >> we talked about about the undermining sex trafficking issue here this morning. terrific practice. it goes on sadly. one of the great human rights causes of the century.
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we also talked about the fact we haven't received cooperation from back page looking at it. coach of the questions raised in the report lays out enough evidence to make it clear why we need the information. at this point in the hearing, we plan to hear testimony from the ceo. he's been under a legal obligation to appear before the subcommittee since october 1 and the subcommittee notified by letter on november 3 for his appearance was scheduled for this morning. >> the same day we sent a letter to the subcommittee staff called mr. frères lawyers to confirm that he should plan to appear and that he couldn't accept logistical excuses for not showing up. the lawyers didn't mention any conflict of interest. last friday was then a week ago
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his lawyers asked us to excuse his appearance because he was traveling and that is if called to testify he would plead the fifth amendment. they didn't say that it would be impossible for him to appear. the subcommittee denied the request on monday. the witness has the right to refuse to answer questions that may incriminate him that he wants to do with the stop his lawyers. it's appropriate to require you it was essential to appear and hear the questions put to him and exercise his constitutional right not to answer any questions he believes in good faith may tend to incriminate him. again as i said earlier the subcommittee would respect any valid assertion of the fifth amendment privilege. but there is no privilege not to show up. yesterday around noon however his lawyers wrote to senator mccaskill and myself informing us that he wouldn't appear today because he's on an international business trip. this is truly extraordinary.
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we heard from the senator who said in his many years of the subcommittee he has never seen a situation they would simply refuse to do that here. it's not acceptable for a witness under subpoena to wait until the day before his appearance to announce unilaterally that he will be out of the country and refuse to appear. senator mccaskill and i are covering it up next steps. but we both consider his refusal to appear here a clear act of contempt. i would now like to turn to senator mccaskill and she would like to add a few words on this point. >> well, i -- the wall in law and the country should apply to everyone and we should take all steps necessary to make sure that the people to our obligations under the law and under the law the senate is entitled to ask witnesses to appear before it entered into answer questions and provide
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information. so i think it's important that we be steadfast in our resolve to get the information that we need to make sure the public policy in this country is effective when it comes to children being victims. this is an exercise in having a hearing. this is an exercise in making sure that we have done everything in the law to protect children. >> it's not any more complicated than that. and any witness who refuses to answer the lawful requirement of testimony and providing information must be held accountable for that. so we will be careful and cautious using the procedures
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available to us but we will use them to ensure that this effort is robust and informed and ultimately the result is that more children and more families took comfort that their government is doing everything it can under the law to protect them. >> i think the ranking member and as you see we are partners in this effort and we will not be detoured. i would also like to thank the chairman of the committee of the homeland security and governmental ranking member for help to senator thompson and senator carper and not just support his efforts this morning they released a joint statement which commends the efforts in this regard and i would now like the statements to be made for the record. they are supporting us not just
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on the important work that we are doing to combat trafficking but also with regards to any actions we might take with regards to the unwillingness to cooperate. we began this bipartisan investigation with a very simple goal better informing congress about the issue of sex trafficking to kind of combat it through smart reforms in the state of actions. we will be detoured from that inquiry if they fail to change course the appropriate next step is to consume proceedings. this is a step the senate hasn't taken in 20 years. as i said earlier this is extraordinary and they haven't taken it for more than 30 years. but regrettably the contact, the conduct has invited this unusual
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action. when dealing with a party pretty acting in good faith with the inclined for simple content involves the resolution authorizing the senate legal counsel to bring a lawsuit to compel them to comply but i think i speak for the senator and myself when i say this case appears to be more serious. it's not about questions of privilege. as i noted with the lawyers told me inside the company hasn't even bothered to search for and identify the document responsive to the subpoena and with no lawful excuse the ceo default on his obligation to appear for the subcommittee today. these are not actions of the pretty acting in good faith. he could have come into plead the fifth. he chose not to even come. rather it is evidence of willful defiance of the senate process. for those reasons, after consulting with our staff and legal counsel to the senator and i believe casey justified
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believe the case to justify the referral to the department of justice for criminal contempt. we will consider the appropriate course of the next few days. >> i would like to thank the witnesses and michael meeks for their participation today for this very important hearing. the record will remain open for questions or comments of the subcommittee members and with that, the hearing is adjourned. >> [inaudible conversations]
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[inaudible conversations]
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.. we look back at the 1988 political campaign and george herbert walker bush. at four the last two days the color film of president john f. kennedy's fabled trip to texas in november, 1963. at 5:00 p.m. we are live for p.m. we are like for the radio program back story with the american history guys. the university of virginia
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professor history emeritus peter , they discuss the 1915 film, the birth of a nation and its significance. american history tv, all weekend, all weekend, every weekend, on c-span three. >> tonight on c-span u.s. secret service director joseph clancy testified at congressional hearing about misconduct by secret service employees. then part of a conference on housing market beginning with white house economic advisor mark furman, followed by a discussion on economic well-being of consumers and buyers. >> secret service director testifies before a subcommittee about secret service employment's contact in football the leaking of personal records

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