mcveigh lewis, director of trade craft innovation at the institute for the study of war, and also on the far left is howard jatts, whose latest publication is called foundations of the islamic state. and we're going to, rather than have sort of set, prepared speeches today, we're going to have this more of a discussion format about current related events related to the islamic state, but also building upon that a lot of the history, its foundations, where it came from and what we can learn from that for perhaps future policy operations for the next american administration after the election. so i think it's actually best to start with hassan and jessica as we look forward, as we start here. obviously, in the news we have the battle for mosul going on. it began, i believe, about two weeks ago.

and i -- for me personally, it's going faster than i thought. it seems to be going pretty well, but i am not an expert, so i'd like to start with you. how would you judge the current battle? and what do you think it portends about the current war against the islamic state? >> well, i i think this is, you know, iraqis recognize this is the most important offensive not only against the islamic state, but conducted by iraqis. president barzani be, for example, he told iraqi officials in baghdad that this is the first time that the iraqis and the kurdish potential her or georgia fighting on -- peshmerga fighting on the same side for probably 50 years. so it's a very important offensive, and it's, i think so far it's been going very impressively, very well. it's gone, certainly, on schedule. this is the second day iraqi

forces are inside mosul. they are on the outskirts of mosul. i think so far it's going very well. the composition of the forces that are supposed to go inside mosul are the right forces, they are professional iraqi forces, the counterterrorism force and the federal police with tribal fighters from sunni fighters. so i think so far there's cause for on optimism. there are problems we can discuss when we, you know, in the conversation later on. there are programs that are starting to appear and emerge in the first few weeks. this is third week of the campaign. >> certainly. well, i would just like to echo, first, that the coalition that is attacking isis in mosul is impressive. isis is expert at trying to exploit seams among enemy to coalitions, and this coalition is going to outlast isis' efforts.

i do think they're going to take the city center. one of the challenges we're going to face is that there are neighborhoods in mosul from which aqi was likely never cleared, so the clearing operation for the full extent of the city is a measure of success beyond with taking the government buildingses and the base back. isis' defensives have been formed in rings. when forces began to approach on the south, the east and the north of the city, they ran into some defends. one of the measures in defeating isis' measures is to interdict, but, say, 90% of those. but one of the challenges is that means 10% get through or, those are elaborate car bombs that inflict a lot of damage, killing a number of forces on advance are.

so the casualties for coalition forces on the advance are still very high because the volume of isis' defensive measures are intense. isis has blocked roads, we're uncovering tunnels. the momentum of the offensive is very impressive despite these obstacles. i do expect isis is also expert in urban warfare and they have also prepared the city to be a very long and protracted fight. but i also agree that while their defenses are excellent, the offensive is better. and mosul will be cleared, but there will, of course, be challenges not only where spoilers such as iranian-backed shia militias are trying to take key terrain such as the west side of mosul which can induce a number of sectarian and ethnic challenges not only at a local level, but at a regional one. also isis' counteroffensive

measures in kirkuk, in sinjar, isis is still executing its standard explosives campaign inside of baghdad. there have been anomalous attacks not only in the vicinity of tikrit, but in diyala. so there are places throughout isis' depths where i suspect we will see hem try to to divert attention and try to achieve some gains that gives the message that the coalition is going to achieve durable gains. >> howard, i think this is a good place for you to jump into the conversation because jessica brought up isis' predecessor organization, and i think for most people in this room it's not a secret that we've seen this building before, building an offensive against mosul. can you talk about the origins of this particular threat, the islamic state? its bureaucratic structures in this area and why, you know, why

it's such an interesting case study about the group itself and its predecessors? >> the islamic state grew out originally of a group founded bilal zarqawi from jordan. zarqawi moved into iraq before the united states led an international coalition invading iraq, and then he formed a group that, in 2004, swore allegiance to al-qaeda x. they became known in english as al-qaeda in iraq. now, if we go back to the 2004-2006 period, the center of their power was really anbar province. finish and even there they had already organization organized into an effective bureaucracy. the bureaucracy was built on the model of al-qaeda. but then it was changed a bit to really be designed to take can and hold territory.

so what we saw in anbar in 2004-2006 was the province was divided into six al-qaeda in iraq sectors. each of those sectors had a leader, an emir, had a well defined bureaucracy, an administrative emir, military emir, other positions like that. and there was coordination between the center and the different sectors. so the sectors would raise money and send money up to the center, the headquarters of anbar province. anbar province would reallocate that money and send it down. each of the sectors was fundraising on its own and had operational autonomy. now, even at that period, the anbar province was sending money up to the iraq level. so 2006, zarqawi was killed, and two new leaders took over,

al-masri and al-baghdadi. and just to give you a sense, we're going to be talking about iraq and syria after isis. we're looking forward, so there's great uncertainty. in 2006, 2007, 2008, what was the uncertainty? the big uncertainty was we didn't even know if al-baghdadi existed and who was in charge. it was assumed that al-masri was in charge. but we have the surge. the surge started late '06, actually, it started 2007, but the uprising, the pushback by the sunni forces in anbar started in 2006. and we then see the violence migrating through iraq. the peak of violence in anbar was around 2006. it dose -- it goes to diyala, and the peak there is sometime in june 2007. and it migrates finally up to mosul which is a key node for

bringing foreign fighters in and for raising money. and the peak of combat violence in mosul was early 2008. i believe. so that's the first element of the importance of mosul. the second part of the importance of mosul was in the 2008-2010 period al-qaeda in iraq renamed islamic state of iraq in 2006 never went away. so they had sleeper cells all around the country, and there was, again, the same kind of financing that i talked about. the local areas would send their money up to mosul, send 20% up. mosul would rehall allocate -- reallocate. and at that time, 2008 certainly, mosul and the desert areas south of mosul, jazeera, were the only net plus areas in terms of fundraising. so very important. where did that fundraising come from?

it came from skimming contracts, reconstruction contracts which, to fast forward, is something we should be concerned about going on. it came from shaking down a cell phone company. it came from oil sales. all the things we see today. so the other thing is that we knew that some of the leadership had sought refuge in the desert areas south of mosul. so they had cells in the cities, and then leadership was somewhat off the grid both in terms of their records and in terms of location. the other element when i said that there were sleeper cells all over is when we look at the financial reallocations, we have a point in time, we have money coming up from anbar, from baghdad, from diyala. we have money going out to those same places, money going down to basra, and to this day i don't know whether there was a sell --

a cell in basra or to money going to the big prison camp in basra are. and we had money going into syria. so that's another thing to take account of is this was a multi-national group, rest and relaxation in syria, fighters coming in through syria. so that's where mosul sits in kind of the importance for this group, and that hasn't really changed. >> yeah. it's something that you all touched on sort of indirectly, and i'll bring it up here is the battle for the city itself, you know, seems from a military standpoint relatively straightforward. and people you've talked to say it's hard to defend, but the difficult part will be the road that leads out, you know, the one that leads through -- i mean, i guess out into syria. can you, and this is also where you run into some of those problems, i think, that you were alluding to, but i'm going to put my thing finger on it.

so let's open it up to all three. one of the problems you see, you both brought it up, and the importance to that road maybe historically for the islamic state -- howard, if you want to jump in at the end, and be all three can address. >> it's a good way to start to talk about the bad things happening in mosul. i remember back when the offensive in fallujah was taking place, i was saying that mosul is going to be a much bigger problem not because it's a big city, not because it's a military challenge, but also because it's a political, it's a political flashpoint. it's a potential political flashpoint. at the time, many people were saying, no, mosul is going to be easier than fallujah because for a long time, fallujah was a problem for iraq whether it was the saddam hussein regime or when the americans were there, they resisted anti-political oater in baghdad. they didn't want to be

dominated, and so on and so forth. but mosul is a problem for many reasons. one is that i think we've reached a point in the fight against isis in both iraq and syria, and we're going to get into syria in a little bit, where with politics matters more than the military challenge against isis. and mosul is a perfect example because there's so many stakeholders are involved in mosul, and many people want a piece of the pie be in mosul. unlike fallujah. fallujah was a military challenge, probably be also political challenge, but it was more of a political than a mill care one. it was up -- military one. but in mosul it's not up to the iraqi government or the americans to sort out what's best there. there are the kurds involved there, there are different curds involved -- different kurds involved in there. the krg, the kurdish regional

government doesn't have the support of everyone inside kurdistan to back certain political agendas in mosul. for example, you know, you're an expert on this, the turkish involvement inside iraq is a perfect, is a good example because while president barzani supports it, the involvement in one way or another, other political oppositionists within kurdistan opposed it. and you have also the pkk is a major concern for turkey near, the ela finishing o russian -- telafer. it's west of, northwest of mosul. it's a turk-dominated area. turkey said that the shia militia should not be there, but real estate the turks are also probably more concerned about

the pkk rise in sinjar near there. so mosul is really, i think, the american is take some of these fault lines for now and think they're going very well for now, but i think isis will try to destroy the current strategy which is actually very promising by trying to fight in mosul for, say, four months. and if it does that, i think many of these alliances would collapse. there are already signs of tension between different factions fighting outside mosul, and i think these tensions will increase, will intensify, and we will see in a few months that the situation on the ground is going to be completely different. i think isis will be able to hold onto the city for quite a while. i think there was, there has been a lot of wishful thinking

about the city collapsing. somehow that isis members will choose to go to raqqa, that's why we have confused reports coming from, you know, out of washington. some say fight is coming from raqqa into mosul, and be some say fighters are actually moving from mosul outside. so the ethnic, sectarian, geopolitical and i think this will emerge and become even more intense in the coming weeks and months. >> pick up on that, jessica? >> just to agree that the longer the battle for mosul goes, the more vulnerable the coalition will become. the broader the operation becomes with follow-on operations or supporting operations. the more diffuse the operation will become as well which also leaves room for coalition members to become delinked. the road from mosul to sinjar to

syria is perhaps more important for members of the coalition who have disparate interests in those places than it is for isis tactically. the jazeera desert that is beneath that road to the south and southwest of mosul is traversebl, and the winter season makes the biggest constraint upon isis' movement and the jazeera are air cover constrained from visibility as well. so there are ways for isis to escape this operation and reset elsewhere. but i would say also say that isis has been preparing for battle in mosul for a very long time in that its troop movements and preparation have already occurred. so we're going to see other responses from isis, as i mentioned before, elsewhere in iraq where it has established positions already. the if i may just add one finish. >> please. >> -- one other point and perhaps just to mention it now and we can discuss it more

perhaps during question and answer. there are other threats that stem from the grievances of sunni arabs and elsewhere in iraq that could also produce spoilers to the coalition if the grievances are not addressed which they're not likely to be addressed quickly. there are other elements who are seeking to be champions of iraq's sunni population. not only the neo-baathist organization that was trying to capture the national sunni protest movement before isis decided to come in and start controlling cities in 2014, but also al-qaeda. al-qaeda in syria, the affiliate al-nusra which has reflagged itself is already conducting outreach to tribes in anbar. al-qaeda is going to headache a play to become a -- make a play to become a silent vanguard of a sunni insurgency in iraq. and if the preefnses are not addressed, the vulnerability will remain open.

and in the vacuum of control by isis, you could see mobilization of sign thinks under a different -- of sunnies under a different flag. so put that under the list of challenges we're facing. >> anything to add, perhaps, howard? does it fit into your role about both the economic importance to the transnational movement of the group and maybe efforts of the coalition to attack that at the moment? are they putting pressure on that, and do you see that as linked into the broader struggle now with our current focus on mosul? >> your talking about the iraq-syria link? >> the link. >> yeah. so a couple things. so i think it's actually very important to think about movement being possible through the desert, through the jazeera. because we're going to see movement back and forth. we've seen -- let me credit the citations, and i think as i talk you should just assume i'm probably citing somewhere hassan and jessica and aaron without saying it.

we might end up doing a circular citation atom point, but i want to cite very good work by iraq oil report now which is showing islamic state fighters leaving the city, going towards syria. so stopping those routes or at least being able to track those fighters is going to be important. the islamic state is very cognizant of issues of air cover. as far back as 2007-2008, we have a strategy document from them where they talked specifically of, oh, what to do, of how effective coalition air forces were, of how they were able to move soldiers and what the group should do to stop air forces from seeing their operations. so they are, whatever they do, they're going to be quite cog cognizant of that. those routes, is so those routes

have been historically important moving people. the real first very strong evidence we had of how predecessor or groups moved their fighters were known as the sin very jock -- sinjar documents, a cache of documents found in sinjar describing, detailing fighter flows in and out. the other issue about this area, telefar, you know, i don't know how much symbolic importance it has now. it was one of the first battlefields where the u.s. really tested and succeeded at a counterinsurgency fight against isis. many of the current -- some of the current islamic state leaders come from. so, you know, it's going to be a bit of a flashpoint. and as hassan said, you know, and jessica said, the shia pmus coming in, right? very diverse. i don't want to characterize

them as all one way or another. it's always a mistake to group the pmus as one, as one mass. but how they, how they handle civilians, how much of a fight islamic state decides to put up is going to to be very important. >> and just to pick up on some of my own work, my work focuses mainly on the islamic state's network in turkey, and sinjar and that road leading through, you know, we conceptualize it here and, i think most people do, as the turkish problem with isis emerged late because it was the primary transit route for foreign fighters that came into the current conflict, say beginning 2014. but if you look back historically, obviously, syria was the main entry point into iraq, but you had to get to syria. so one of the ways through was exactly the routes that are now being leveraged, although less so, which is to move through southeastern turkey to smuggle yourself across the boarder and to go across.

so this brings us back into how, you know, isis should not be thought of as simply, and a lot of howard's work as well and both hasan and jessica as sort of a boots on the ground military force that can be beaten back, but it has these tentacles of bureaucracies that have outlived significant pressure being put upon them, and they ebbs tend out into the region -- extend out into the region. it's not just a battle in mosul and telefar on the road. that road stops someplace, and in this town, in washington, there's a lot of talk now of putting simultaneous pressure on the islamic sate. so we have -- state. so we have the pressure on mosul, put pressure on them at the same point in raqqa. but a lot of -- and i would say whereas the coalition in iraq is stitched together, and i would say it's stitched together pretty well, the syrian case provides a lot of -- for now. syrian case provides a lot of complications because the

primary force poised to go are something we call here the syrian democratic forces. let's say the majority of which are the, they call themselves the democratic union party, the pyd, who have a militia, ypg, kurdish alphabet soup, primarily kurds who are poised to go -- well, they, there are suggestions that they could go. and be this raises those same ethnic tensions that isis feeds on. intra-kurdish, intra-arab, arab-kurdish tensions at this other flashpoint now of raqqa. >> i mean, this is going to be a big problem in raqqa. for a long time, i think it was recognized that isis' presence many syria is much shallower than the one in iraq. there is a leg is i in iraq. there are -- legacy in iraq. there are alternatives in syria, to isis. sunni insurgent groups. that's why i think raqqa's going to be, that's going to be -- i mean, the challenging in raqqa's going to be different.

again, it's not a military challenge just like i said earlier. the challenge in the fight against isis today is really concentrated in the northern parts of both iraq and syria. raqqa, there is -- and i feel this time and again here in washington, they underestimate how much not hated, but feared and suspected their suspicion about the kurdish force inside syria when it comes to the syrian rebels, to the local populations there. this is because the syrian democratic forces -- and here we're tall really about the ypd rather than arab components within the sdf -- that they, there's a perception that you saw these guys are, they want to dominate in northern syria, and they want to cleanse and kind of depopulate some of these areas

to put back some of the kurdish families that were displaced back in the '70s by the baathist party many syria. so there is this fear that they have an agenda, and this agenda is directly involving the population in there. i think washington politicians here underplay that, and they say, you know, let's deal with isis, let's expel isis from raqqa, and then we will deal with the political mess afterwards. and we promise you that the kurds will leave raqqa. they're not going to stay in raqqa. this is the kind of the cliche. and i, for a long time i think until recently, until probably the past one month or two months, there was a debate about really are there alternatives? can we work with someone else other than the sdf? but recently i think because the current administration is running out of time, they are becoming more unequivocal about

who's going to go there. they want the kurds to go there. and this is going to be a problem because we know that if raqqa is retaken by the kurds, even if isis is expelled from there and there's good news in that in and of itself, i think the sentiments, the local sentiments is going to be seized by al-qaeda and other extremist forces who are local. many of them, many fighters who are fighting now in aleppo and even southern syria who are -- [inaudible] to extremist forces, they were driven by isis from raqqa. these guys are going to go back x. there's a concern about a void that they will exploit, and that void is going to be the kurdish-arab tension. i think that's a big selling point for them, and they're already kind of utilizing that

to say the kurds have an agenda, separatist agenda, and they are -- they have also an ethnic cleansing agenda there. so i think raqqa's going to be a problem in that sense. and i don't think there are arab forces, on the other hand, who are capable of going in to raqqa, so there's a dilemma. do you delay raqqa so much that isis will entrench itself there and delay, and kind of go past the momentum in mosul? or you rush into raqqa by sending these ypg forces in there. >> maybe you want to pick up on that dilemma too? i think that's an important thing to put your finger on. i think there's a recognition it's problematic, but there's an inherent desire or to keep up to offensive because isis is, you have to -- from a political standpoint here and a military standpoint, you want the house -- [inaudible] so they can't congregate and plan attacks against the west. >> wonderful. i'm going to echo two of the

points and then speak to that dilemma. the kurdish dynamic inside of syria, want to give an example of how this has played out before. when the fds, in conjunction with our coalition, drove isis out of she daddy in 20 15, that is between mosul and raqqa just on the syria side of the border, the syrian population fled south into isis-held territory. that's how they felt about the idea of being liberated by a predominantly kurdish force. that dynamic is still a vulnerability and a risk when it comes to the raqqa operation. and it's one of the reasons why the dilemma exists. on the other side, it is not only the concern about the lack of capacity of turkish-backed opposition forces who also want to go to raqqa largely to head off a kurdish-led operation, but it's also the fact that al-qaeda is a part of that

coalition of opposition groups. so to have all al qaeda-linked groups take raqqa from isis is to enable al-qaeda. to me, the reason why the dilemma is becoming so complicated and so sharp inside syria is because a lot of our options to deal with isis in the context of so many sectarian and ethnic fault lines and scenes that have played out so violently over the course of these last years in syria, it's the fact that our anti-isis policy does not address al-qaeda. ..

>> even though much of our focus on the fund-raising is about oil, current estimates coming midyear, our most credible source at this point, are that they are getting high level of revenue from taxation and extortion. that takes place with population centers. so they have all manner of fines. you would be fine for not having the right -- for wearing your pants below your ankle. you would be charged for parking space. all diversified ways to raise money. if you have a city like raqqa, 150-300,000 people, we don't have a current census, all of a sudden those are people who can pay fines and fees and help the

group raise money. so you want to always reduce their territory. the difficulty as my colleagues it is much we does that. and here i'm going to divide this into two stages. one is who does the deliberating and who does the holding, so two stages. the kurds, the ypg forces, largely kurds, arabs come are probably best placed militarily to do that liberating right now. that's the calculation of the coalition. they are not in the best place as we set to do the holding because of ethnic issues. the other thing that makes it a little more complicated is i think that this year unique kurds really have no interest in staying in raqqa. it's not there historic

territory. they were not displaced from there. it's too far south. they do want old kurdish territory. they already been an autonomous administration and so that come if they don't want to hold it but they are the liberating force that leads to the next question, what's the bargain? what other going to demand in return or what can be used in other force upon them to leave if we can push them to leave? part of that market is going to be upgraded with turkey, primarily with turkey who has the biggest concern about them. so that we all these issues that enter into raqqa liberation. >> i'll add, you have the turkish intervention across the border, operation euphrates shia. it succeeded in what i would call it primary object of which was to push isis off up the border. in doing so some the things we don't about him directly and i addressed directly in my

previous comments was it blocked, it would block the foreign fighter entry points into syria any longer. there really are no areas in which suddenly wanting to join isis can get into syria any longer. certainly there's a ways they can get them. it's not anything like it was when i was living there in 2013 and slightly after that. but it raises a whole other host of -- double down on the problems. i promise we will give the audience something hopeful at the before turned to lessons. and that is, it's like another flashpoint, which now is isis obits it's about 10-15 kilometers rogue regime territory which is south. it's on either side of the kurds hold either side anywhere from 15-25 kilometers depend on the day. now you turkish backed forces above it, about 20 kilometers.

they can all converge. all of the threads of the disparate war inside of syria can come together with any means of escalation. turkey, syria. turkey-russia. resuming that can be managed. but more importantly of the ethnic cleavage is isis praise upon, you now have a race between kurds and turks more or less for a town that isis is the holding. so i'm going to ask and it's clearly provocative question before we move to the positive and uplifting notes of policy recommendations, and then before questions, the most important part of the presentation. obama i would argue, isis is a stabilizing force at the moment. said without you have an incentive to try and stave off the type of insurgency that would come after isis by kind of focus on the political challenges of raqqa first?

>> it's a tough question because at the top territory. it's one of the areas where locals were involved in the jihad in iraq so there are some routes for isis in the area. it's good to be much tougher than elsewhere. we thought it would be tough and it was. across the kurdish forces. one of the highest casualties after kobani. al-bab will be a whole different level. and there is different forces at outskirts i want to go in, or don't want to because i think some secret want the regime to go into al-bab because that would say the americans a lot of treasure, and also save american

forces backed by the americans. and turkey, there's no evidence to this but i can imagine the turks would like the regime to take al-bab because that would be between the kurds and their different parts in aleppo or in raqqa. nobody has an answer to that, and i think the syrian rebels did not have the capacity to go there. if the kurds go the it's going to cost a lot of blood and treasure as well. it will be a protracted war, and it's a different, difficult terrain. >> anybody else? >> the broader point that the dynamics of the syrian war are independent of isis. isis strength from the conflict.

so to me a question about al-bab is a microcosm of a bigger question, and that is can you defeat isis while the syrian war is still raging? which does by all means draw in not just neighboring states but regional states, and put them in conflict such that the movement of tactical engagements can stoke regional vulnerabilities. it's a great question. i would not wish to call it a stabilizing force, but i do think, i also think it is possible to design operations and campaigns with, it has a necessary condition that the hold force will neither be asked or what it will be something else that will perpetuate a stable moment. now, the hold force that has taken hold throughout many of

the places, have not necessarily met that criteria. so the hold force is perhaps the key element of the campaign, such that getting to claim a victory tactically against isis taking back a small town or a very large city is going to stick to the tune of isis that having a chance to come back. >> this is great in diagnosing problems but he can't treat the problems, what point is it having everyone coming and happens listen to? >> it's an immense challenge, and we talked a little bit about the inherent conflicts of being pushed out of territory to increase the revenue base but also to disrupt the plots potential against the west which is what we care about most. and so how would you treat these

two conflicts? what policy recommendations would you put in place for the next of administration, whether it be donald kettl hillary clinton? >> easy. [laughter] i'll start from like december, the previous one because i think you are afraid stabilize force makes sense. i don't think syria is ready for the demise of isis yet. i don't think we should talk about the after yet. because there are two things happening. isis is a threat to the west and the way it operates in secret there's a question about that. that's a consideration. do you keep isis as a governing body in serious or not? i think it has to be weighed against something else. i think it's a very important one. if you expel isis today from rock and elsewhere it's going to open a new conflict in syria.

many low intensity but very dangerous complex in these trees. that's not to say keep isis but to say that the necessary forces that unfortunately washington was not ready to engage and work with, the forces that dispel isis from eastern aleppo. these forces are the only forces that, if they expel isis in a very trained way to fill the void, i think this is a phrase i will keep repeating, fill the te void because that's the only way we talk about isis, filling the void will be the key factor for the defeat isis. in syria you demolish isis in raqqa and will be a massive thank you. who's going to fill not? the regime? occurred to? the air force's? -- the arabs?

i think the curtain should be supported in their areas, should be supported and turkey should not go after them if they operate in their areas. also recognizing the other kurdish forces that are legitimate actors in their areas, the kurds were with the syrian opposition who are now expelled and not allowed to go to their areas by the ypg. so i think in that sense i think the policy recommendation will be to really double down on preparing the right forces, sunni, arab forces. i'm not talking sectarian i'm not talking sectarian sense but in a demographic sense, local forces who are the people who would be welcome in raqqa, welcomed in eastern aleppo. some of the forces that turkey is now supporting. in iraq, you know, it's a long story because the iraq there are

causes, there are a few factors that make you optimistic about iraq. i think the fact that everyone is working together today to find isis, the fact that some sunnis are fed up with isis and then see no isis rules. they don't want to isis to go back to their areas, ma not everyone the effective many sunnis have actually already working with iraqi government on a local level to build and rebuild their territory, willing to create in fallujah and elsewhere, there still problems but i think from segments and some sectors of sunnis are working their. some politicians are already involving iraqi government. there are still problems with what iraqi government, what iraqis call rejection, people who rejected the current system, because they think it is inherently favorable to the kurds and to the shia. so they will always supposedly they are a powerful force

because they can be effective destructors to the situation. and i think according to the chief of the popular mobilization of forces, the chief himself went to jordan and went to dubai and the united arab emirates and he met with the rejectionists, what many call the neo-baathists. we don't know exactly what could happen. a national coalition with coalition of different shia forces and, shia forces in baghdad. they're also preparing to engage the sunnis, but i think it's a temporary thing. it's an opportunity. i want to conclude by saying that most of, present historical opportunity for iraq to resolve and heal the wounds but i'm not optimistic about whether iraq is capable of doing that. there is an opportunity. if the u.s. is really serious about resolving the iraq problems, they can do a lot with

time. >> wonderful. i think i have two points. one, i alluded to already there's a huge gap between the anti-isis strategy and our counterterrorism strategy, which is generally how we imagined we are containing the al-qaeda threat globally, and that gap is leaving a lot of room for the al-qaeda movement to research. al-qaeda and isis despite their differences in the competition, when one makes gains, all the ships rise and the movement global is doing very well right now in the place to do better what policy do you do need to reconfigure approach to al-qaeda as we did with isis. and iraq i very much agree that the threat that a rejectionists movement, leave a lot of room for engagement politically. i've been looking at elections upcoming as potentially a way to engage but there are some negative indicators leading up

to it that though they interested in the competition that could impact go the other way and produce some real opportunities from globalization against the state. in anbar i believe the provincial council to ask the governor, and i think i read the anbar provincial court just put out an arrest warrant for the later of the font law. there are some big cleavages moving out and so long as we're talking to now and i could engage those issues now, i think we can help iraq stay on the path to a positive future in the wake of isis conflict cities. in syria i would sit at the challenge is still very much that al-qaeda has penetrated and is on a track to succeed in leading large portions of the opposition, and that is a disincentive to disengage them. but how bad or no matter how confident that situation looks

acknowledge get worse and it is getting worse because we are admiring that problem rather than engaging in more aggressively than we are. so we do have to defeat al-qaeda in syria in order to establish conditions wherein neither isis nor al-qaeda will gain permanent not only sanctuary but genuine control of populations and land. >> great. iraq in syria are close -- they can begin to a certain extent the ouster with iraq. i think there's grounds for hope in iraq. let me give some history of what we might have those grounds and then go policy applications going forward. first, really consistently ever since 2003 and even today, most iraqi arabs want a unified iraq. they may identify as sunnis or shiites but they identify as iraqis. what the form of a unified iraq

is, strongly federal iraq versus some type of decentralized iraq and that's up for grabs. number one, they view themselves as iraqi. second, in 2010 or so when we were preparing for u.s. withdrawal the big concern or a dickens was the kurdish arab flashpoint. it was a point but it never flashed. there was small disagreements but nothing terrible ever happened between the kurds and the arabs. in any of the disputed territories. the third historical grounds our accommodation can be reached is if you think back to win when kurdistan region was on its rampage with independent all contracts and add the coup of getting six different exploration blocks exxon, through which were in disputed territories including --

initially than in a law political class was just outraged. and then within six months made a year, less than a year some of the reached accommodation. what happened, discussed behind closed doors i don't know that i want to know. at the was an accommodation reached. setup and for all sides one of the grants rope and this sounds a little counterintuitive, which is the collapse of iraqi finances and oil prices. historically we see in oil countries that when their budgets are destroyed, the institute good reforms. so the poster child of that was mexico in 1982 after a debt crisis. because of that we can independent central bank. we got to move outward oriented economic policies, entry into the gap. so iraq is facing that issue now and it's kind of under, a little

bit out of the conservatorship of imf and world bank. there will be pressure good government reforms. there is a long way to go. this is a government that from 2005 until 2014 doubled its employment and doubled it again, and probably added ghost employees that it's a government that even today has done very little for real private sector development, other than saying the private sector development is important but there have been some reforms. so the kind of -- that says that the international community should remain certainly engaged in the governments aspect to this is not a character is an exercise. this is an exercise of helping the iraqis they got the best constitutional arrangement, maybe mediating between communities, helping with legal

reform. and, of course, naturally all the different groups in iraq will have to agree to those reforms but there needs to be quite intensive engagement this time around. the second aspect, and then looking forward, and now let me draw on the terrific work by craig whiteside. we saw in 2007-2013 the last time aqi and isi were defeated water sleeper cells remained -- were sleeper cells remained. it was quite a terrific strategy that fall. assassination of leaders first have enough legitimate authorities, police and army. during that period it was actually very little assassination until 2010-2011. very few attacks against coalition forces are the target was undermine the legitimate iraqi government. so policy indication number two, again this is not just a

character is an exercise. this is policing. this is policing and politics. this is making the population feel confident that they will be protected by the government. this is creating a police force and security services that don't prey on the population and are able to monitor criminal activity. in some ways it's an anti-mafia exercise at this point. the police training, better police, better internal security, very important for the future of iraq. so iraq is simple, i think was the word. syria, syria i tell you, it's really hard. for all the reasons we said. you want to remove isis so they can't continue to raise money and that's going to be, it's a mistake to talk about mosul as being the last. we have the entire western euphrates river valley. we have all the way to the oil

fields, lots of good revenue raising potential. so you want them out. al-qaeda is gaining strength. they are rebranded. i don't know, they will claim they are not al-qaeda but we are all considering them to be al-qaeda. because the international community did not fully engage early on in training opposition forces, they have become an important part of those opposition forces. the third element with syria is i don't really think that we settled the issue as long as, serve as long as assad is in the power and it's debatable whether we can settle this issue if his regime is still in power. i'm not enough of a syria expert to go that far. so it's actually a very tough case to come and because it's a very tough case, the international coalition is doing what it is focusing on its interest, which is counter islamic state, thinking about raqqa.

but that is going to breed further problems in that we settled that. i don't have good ideas. >> i will add one more people return overdue questions, is i don't think you can unlock a lot of the things in syria undergrad independent of the regime while use of turks and kurds shooting at each other. so the interlocking on top of this, the turkish-kurdish cleavage and insurgency as one now that bleeds over into turkish actions inside syria. you can't unlock what would make sense to probably a lot of people on this panel to try to facilitate a local cease-fire between arabs and kurds, cooperation and joint governing of various and complex while the main backer of one side will prevent that. and so unique as the united states is trying to expand the scope of your own responsibilities, to try and take upon what is a strand, a thread, a long old thread of this conflict, the pkk, turkish

government fight that is actually raging at the moment. on that happy note, with those easy policy recommendations to implement, it's, we have about 25 minutes left and i think it would be great if we can turn it over to like the audience here for questions with the caveat that i'm the moderator and apple use the prerogative to try to limit the questions to one or two sentences and actually and in a question mark. i'm sure there were a lot of things said about things that you are interested in but obviously would like to get as many as we can. so with that i open the floor. right here. and maybe you can introduce yourself as well. >> i'm harmon allman with the atlantic council. i'd like to kabul but the panel for a very, very thorough and comprehensive talk. my question is this. could you comment on the casualties that all sides are

taking that we know about, coalition, civilians, al-qaeda, and i should say the islamic state, and the command and control that is being used on the coalition side and the involvement of the united states? it seems to me that if they very, very rickety. >> i don't have good numbers on casualties, but iraqis forces at one point a week in africa were complaining about a lack of airstrikes because they were taking so many in a way that metabolize that is to recognize when they were for another five or six advances on the city, that's a lot of firepower heading towards mosul, coming into any contact with isis, and that their loved airstrikes been called in and most of them are getting covered and yet they casualties on the coalition side are still very high. isis is also executing a lot of

suicide operations so it is also taking a lot of casualties. i have not encountered that many reports yet. these to look like explosives and either mobile or static defenses, and i would assume isis involved that positioned isis is trying to move the human shields and it is executing those who resist. among the people are being executed who are resisting our retired iraqi army officers. whenever i had a phrase attached to mosul, i think that this congress and to think about those who might be in a position to launch an armed resistance not only to the state but to isis. so the civilian and retired military demographic inside of mosul is i would say of the three the one that is taking the most casualties. when it comes to the coalition, i was skeptical about how well they would come together and it is performing very well.

i do think the operation of mosul has been well-designed and all partisan operatives they have signed onto it. the spoilers are not at this time the kurdish and iraqi force coalition elements or even a tribal forces fighting alongside shia forces. it is the independent spinoff operations that could break apart the plan. >> and c2 with the audience speak with command and control. speak about the americans -- [inaudible] >> so the question is american of all the, who's engaged in who is in control on our side. well, operation inherent resolve is the command i would point you. to our special forces missions. there are air component nations and do our part of capacity building efforts. all of them are engaged, partner capacity building forces are, i

think i'm tracking the lowest ashland at the battalion level, so i can't necessarily speak to whether or not u.s. forces actually on the axis advance, i don't know. but we are heavily integrated into the indigenous forces are actually the ground element. >> anything to add? >> i would just add a couple things on casualties. we should expect very high islamic state casualties. historically when we look out their rosters, they continue to pay families of fighters who've been killed. so we are able to identify from the rosters how many are killed. we saw in anbar in 2005-2006 about a third have been killed. we saw comparing mosul rosters from 2007-2009 even a higher proportion have been killed. they are almost expendable to their leadership. we are also seeing casualties inside mosul from resistance

movements being executed. then we should expect some residual casualties because i sold has been wiring cities -- isil has been wiring cities as you leave. people want to go home, even if they are told they should not go home, they will go home. they will open a refrigerator or pick up an object and it will be an explosion. i haven't tracked at all casualties on iraq or other coalition forces. >> i can address one aspect outside of the iraq operation, which was largely a kurdish affair with american special operations. there were hundreds of kurdish casualties, i think any upwards of 300, 300-400, with injuries well over a thousand. it's unknown how many of the islamic state the. they don't advertise this. the documents that we can use to

track will probably be out in the next 10 years we can look back and get a better sense but it usually sends out let's take raqqa is sort of a model -- as what rock would look like. this will require a significant amount of ypg forces to do it. and then willingness to take casualties to do it. so when you get back to that sort of my policy recognition, in addition to words about the political tensions between arab-kurd is how to turn around a double ypg you have to live it down where you just lost a large amount of your people? and so it becomes politically problematic even if the ypg don't want to stay, it will put allies in there and then try to control the city. and not without reason, because what we're asking them to do. so next question from the obvious. in the back.

>> hello. you all spoke on the problems with having isis have actual ground control with taxation, and also problems with having foreign fighters have avenues to enter syria through. what about the foreign funding that's involved? what do we do after isis is routed and defeated, after isis is removed from their positions with a celeb hunting? do we expect that as the international committee seize defeat they will lose funding implicitly, or that they will still be a funded terrace or position with serious capabilities? >> if i could ask you, maybe expand upon how we can begin to trade up local forces to do the things needed to how to isil finance. >> sure. so far as financing something that we really didn't, having had away that much because they

historically and even today have not raised a lot of money from foreign donors. the al-qaeda model, the wealthy gulf arabs following money to afghanistan and into pakistan, doesn't really apply to the islamic state. let me again refer to documents. what we saw, i'll go through different periods. i'll start with anbar, 2005-2006. they were very meticulous at recording and villages where the revenues come from. approximately 5% of the revenues were marked as the donations. that didn't differentiate between foreign and domestic so we assume those are mostly domestic. if we look at their ledgers from mosul, the peak, the second because the power in iraq and the headquarters in 2008-2000 we get about the same proportion from donations, certainly less. and then if we fast forward to

the islamic state, 2014 to the present, we can break other sources of revenues into money they held from banks and territories they captured. that was the largest single injection. and then oil revenues. that's local. and that's originally from smuggling out through turkey and rethink kurdistan, that that's stopped early on as the most other oil revenues has since come from internal sales in their own market and also pollution with the assad regime comics changes. so oil revenues and i then taxation and extortion. and a much smaller amount kidnapped for ransom and sale of archaeological artifacts. they did get money from overseas fighters who would bring money, and of other scams they would use but really compared to the bulk of the revenues, very small. the one of the questions that's

been raised as a can of think about what is the future of islamic state look like after it's rejected is does it then turned to foreign funders. can't predict the future but their doctrine is don't raise money from foreign governments because they will tend to control you. so my guess is that we still will not have to worry that much about foreign governments. that's the first thing. the second thing is, thinking from a purely kind of very cynical view, i think it is in the interest of golf coaches and other potential donors to make sure that whoever is donating money isn't donating to the islamic state. they overtly, they are member of the counter isil finance group which is a multinational group that looks at finances but it's hard for them to justify support for islamic state. it's easier for them to justify

support to al-qaeda. they can always say al-qaeda is, -- no longer part of al-qaeda, it's a legitimate part of the anti-assad coalition and we support that. you could see them saying that. it's much harder to see them not cooperating in the counter isil fight. so don't think will have a problem with foreign donations in a large-scale. >> just want to agree. even al-qaeda in syria resists foreign support. able to look, i'm not going to look, you can put in my pocket but i'm a quick is a funding pressure unlikely to take funds from outside because they worry a lot about infiltration, about people within other groups. they will be imposed by donors. i agree. isis it is even more extreme of

the. even within the organization that have deep pockets. >> speaking from the turkish perspective, one of the successes of the coalition that doesn't get mentioned a lot because a lot of the fall of military day today has been the counter financing task force. something juicy and turkey in addition to the border been cut off with the euphrates shield, and even before the efforts to block the border was efforts to try and control establishment of local bank accounts along the border to prevent somebody who was not, a fighter to the intentionally to local bank account, get that bank account, get the money ago across the islamic state take something from them. so it's one of the things in the coalition that doesn't get a lot of credit but the counter financing task force is quite important. here in the front.

>> thank you very much. great panel. i heard hassan hassan talk about own scheduling. heard all the government officials talk about own schedule. later he talked about fighting for four months, if i got that right. my question is, on schedule that assumes there is a schedule from beginning to end. so what would be the schedule for planting the flag in mosul? i mean, i'm just curious. what's it going to look like? for jessica, you mentioned -- i'm just carries what happened? they fled but that was 2015. what happened later? i think, is the still empty? it might shed light into how it might play in other places. thank you.

>> this is what the iraqis and the americans are saying your it's been a little bit i think two or three days, more than two weeks into the fighting, and i think the americans were saying most of the forces did their job on schedule, meaning the peshmerga has reached eastern frontier include some of the important areas. the counterinsurgency force was expected overly difficult terrain along the southern frontier, but they have done a great job in that area. for example, it was most be a very difficult, tough fight but thit took i think it was a coupe of days. the problem is, and this is, this relates to the problem of

the casualties. i think there's a problem, a point to be made about transparency, fbos obviously i'd iraqis wanted to show this is a very clean fight and they want to go in there as smooth as possible and they want to control some of the reporting. not in the sense that, they utilize the fact the reporters cannot go so far into the front lines. so i think there's that problem. that once they reached the center of mosul of they say they've reached the center of mosul and to try to deescalate or reduce the media coverage in that area, and it seemed like mosul is going very well, i think that's a problem. because we always have to be attentive to the local dynamics in order to get what's happening inside, whether people are agitated by the forces coming into mosul or their welcoming the forces. we've seen a lot of disinformation throughout the

fight. i always don't pay attention to them but because i think the us exaggerates the numbers, isis also does exaggerate the numbers from the other side. there is a lot of disinformation. a lot of reporting, i could start just not checking the reporting about isis. there's so much already happen. there for building within mosul. that never happened. just a lie because that's the isis work. although some of the porting echo some of the reports a few years ago. always take this reporting with a pinch of salt. i think so far so good. spent my answer is fairly short. that's a wonderful question what's happened over the horse of the last you. i haven't looked but for exactly the reason that you framed that it could tell us about how does situate will play out a year later, i'm goin going to go do i

will be happy to share with you. >> anything to add? >> i do have the itch to do. >> in the back corner. behind the column. there you go. >> i'm with the arab american institute. my question is, currently there is a record of about 64 million refugees worldwide with a significant portion coming from syria and iraq. how should the international security support iraq and syria neighbor in states including lebanon and jordan? in achieving stability with a high number of refugees after isis is defeated. >> that's a great question. does anybody have thoughts on the refugee issue? >> it's a great question, a very

difficult question. let me throw out some ideas. i don't think there's one coherent answer. there's been, so it will start going in stage some kind of immediate assistance to kind of longer-range. immediate assistance, there's a lot of pressure on lebanon, jordan, turkey, especially the main receiving countries. they didn't ask for this burden. they happened to be in the neighborhood and they received the burden. so for the immediate, i think international assistance in terms of shelter, food, especially schools, education for children is merited. i don't think that that international assistance has been at the level that it should be. and we can be very cold and say the adults come it's better to that what happened to them, but we have an entire generation of young middle easterners who

could be the doctors, engineers anarchists of tomorrow and are instead the refugees of today with a very uncertain tomorrow. so that's the immediate issue at second, i'm going to assume, based on fact, that most refugees want to go home, but we also know the refugees came to stay refugees for much longer than they think they will. so now we face a difficult issue, which is that the we try to love jordan and lebanon and turkey integrate those refugees, kind of make sure that work permits, allow them to fully take part in society? that would be very good for the refugees. they could be in the long run or even medium run good for those economies because they have more workers, especially young people so could be growth but at the same kind of cultural issues and social issues. so that is one decision point we have to consider.

if we don't help them integrate, then the question is where do they go? well, europe has decided it had enough, at least it's had enough this quickly. and the united states is slowly taking the middle eastern refugees. we take of the refugees. so that kind is -- the only other option is to, to bring stability and security back to their home regions. and so that is somewhat happening in iraq. that goes back to the policy applications i said and iraq, better governance, reconstruction, idps and refugees, most of them wanting to go back if they have been a way to long. syria i think if you want to put in those humanitarian terms, we have a very strong argument for greater international involvement in the war to the

extent they can bring stability parts of syria. it will be very hard to put syria back together. so the question is are there areas that we can stabilize in syria? more cooperation with arab forces, and opposition forces, more cooperation with the kurds. we can stabilize the people who want to go back to it as i think, i mean, i think that's way above all of our pay grade i think. but those are the dilemmas that governments have to look at within. such as talked about the middle eastern or talk about the other 50 million, is attending display some syria, three to 4 million displaced in iraq? that's enough to deal with for now. >> there seems to be a very interesting -- refocusing that question of refugees particularly from syria. i want to point to two items.

when i believe lebanon's new political leadership this week, and the feeling about syria and refugees is quite contrary to the constructive argument you made about options that could be pursued to the benefit within their adopted countries. i think lebanon is very much headed in a direction right now that could make that problem more acute. so i am refocusing right now actually up on regional hubs where refugees are collecting and less upon europe which i have been focusing on recent much. the other place i would point is morocco. morocco is having a weird protest movement right now that if it also speaks to the fact that one of the original arteries for syria and refugees escaping was actually to algeria. it from algeria where they couldn't stay on their visas from a five which are generally

easy to get, they just went to morocco. so those are two places where the refugee issue that has sort of been stable is becoming unstable and therefore i want to highlight that they can potentially be more than just a broad brush statement about how to help them though i very much agree getting to back to a vital position at home country is the ideal i think in the immediate term, we'll have to do with some places we have been talking about lately. >> and i think the final question, you've been very patient and then we can begin to wrap up because we have about five minutes left. final question from this woman right here. >> thank you. so the question is about al-qaeda's movements. traditionally, his predecessor bin laden were mostly focused on establishment of the state, the caliphate as a distant promise,

a unifying force for our ultimate goal which is some kind of globalized insurgency movement. so given recent movements in syria is that changing? is al-qaeda trying to become more of a zarqawi model state presence, ethics and tearing conflict? like water al-qaeda's ultimate goals in the syrian conflict? >> we have about four minutes and then i will wrap up. >> they will abandon the al-qaeda name of the than public. based on the philosophy of al-qaeda, the original one, which is their mission is to popularize the idea of jihad. you need to make normalize -- encourage people to join jihad and enforce some kind of governing body on them. so they rely a lot, they focus a lot on consensus.

unlike al-qaeda, i'm sorry, unlike isis and zarqawi. although the idea of a state and how zarqawi pursued in iraq actually goes back to -- in 2006 when he congratulated him on the formation of the mujahideen council which was an al-qaeda group joining of the iraqi forces look more iraqis. and he said this test should be to establish a state in the sunni arabs under areas and iraq and that should develop into a caliphate and then you expand the jihad you wave it is worked into secular countries iran, the region to after that confrontation with israel. so the four steps that al-zawahiri pursued with, sorry, laid out, were pursued by

isa. so i think it's a hybrid between the two of them want to stub some sort of governing body but they do want to establish a state yet. >> just adding to point. first come it is interesting also because we put out a statement directed at members of isis who mike leavitt towards al-qaeda as isis loses strength. zarqawi was fabulous, was a very pro-zarqawi message, really capturing the idea that iraqis can be part of al-qaeda again. so just to juxtapose those two in relationship, that is how zawahiri is handling the legacy of zarqawi now. that had been a part of al-qaeda's military the other reinforcing, al-qaeda doesn't imagine is held to be the governing entity. it imagines itself to be the silent vanguard, but its affiliates by another name can be governing entities.

so it would be consistent with the current program for an affiliate of the dozen or the al-qaeda name to govern. i do think that's ultimately the direction in which they will head. >> so i think with that we get it right on time so everybody can get back to work today, including uzbek some want to thank the panel is. please join me in thanking them, and thank you, everybody, for attending. [applause] [inaudible conversations]

>> republicans are beatin meetiy to discuss how they're going to proceed under a joint republican government. at 12:30 p.m. easter eastern weg you live coverage of the republican national committee's chief of staff, chief strategist and others talk to reporters about the rnc's role. >> today homeland security secretary jeh johnson joint state and local government officials and private industry representatives to talk about u.s. infrastructure needs. that's hosted by bloomberg government. watch live at noon eastern on c-span. later on c-span2 a look at u.s. trade policy with congressman kevin brady and u.s. trade representative michael from. they will talk about a trade was a big issue when the 2016 election and what to expect from a trump administration. that's live at 5 p.m. eastern.

>> republican donald trump is elected as the next president of the united states and the nation and let republican-controlled house and senator follow the transition of government on c-span aired will take you to keep events as they happen without interruption. watch live on c-span. watch on demand at c-span.org or listen on our free c-span radio app your. >> now a look at the 2008 financial crisis, policy experts on the lessons learned and whether other economic downturns are possible in the future. from george washington university law school, this is just under two hours. >> good afternoon.

i'm neil ruiz, executive director here at gw law school. is said at a think tank designed to be a focal point in d.c. for the study and debate the big issues and economic policy. we are excited about today's program. we have the best comes on the best experts come from different perspective to discuss views housing cost 50,000 financial crisis, what is the right policy for the future? for all audience members were actually live right now on c-span2, such as we know so to ask questions, you will be broadcast to the world. before we continue like to issue to dean alan morrison. >> thank you. i'll be very brief. i just want to express my thanks to michael and different peter wallison with the i agree on many things but disagree on many others. i bought his book.

i read it is very interesting and very challenging and i'm sure we'll have a wonderful day today. peter, thank you again today for coming. thank you. >> and now the moderator, the real moderator, professor arthur wilmarth. >> welcome everybody. we are delighted to have you here. i think the very interesting discussion of two issues, i guess like the god janus were looking backwards and looking forward. sober looking for sweet looking backwards at a financial crisis and passing the question of whether u.s. housing policy before the crisis played an important role in essentially sowing the seeds for the crisis. and then secondly, we agreed asking the question of what should be viewed as housing policy going forward. i'm not going to anticipate the commentators remarks but obviously all of you are aware

that fannie mae and freddie mac are in a quasi-limbo state at the moment. they are essentially controlled by the federal government through conservatorships and there is periodic continued debate about what the future of those organizations should be, or what any alternative organization might be in terms of federal dissipation in the mortgage market. i would like to introduce our three speakers as being morrison mention. we are indeed really privileged to have all three of these speakers are today. they are nationally recognized experts on the mortgage market and our financial regulation more generally. i'm also delighted to welcome all three of them acted gw law school. all of them have been here for some of our prior programs and we are very grateful that they have come back once again. so our first speaker will be

peter wallison. peter kassig codirector the american enterprise institute's program of financial policy studies. and he is a longtime expert, analyst and commentator on financial regulatory matters generally. he was general counsel of use of treasury department under president reagan and then served as white house counsel under president reagan. earlier this year he published his book which dean morrison made reference to, hidden in plain sight, what really caused the world's worst financial crisis and why it could happen again. he is also the author of five previous books. is good about arises in part of the work he did as one of the commissioners on the financial crisis inquiry commission, which was a commission established by congress to analyze and comment

on the cause of the financial crisis. our second speaker is damon silvers. he is director policy a special counsel at the afl-cio. he joined afl-cio as associate counsel in 1997. he served in a pro bono basis as special assistant attorney general for new york. as a member of the advisory committee of the fcc, patricia departments research advisory committee, the public company accounting oversight board stand and advisory group and his investor buys recruit. a also served as deputy chair of the congressional oversight panel for the troubled asset, is it -- relief program. troubled asset relief program to everyone knows it is hard. publisher is going to be repurchased. troubled asset relief program from 2008-2011, and so we also

had an important role in analyzing and commenting on the cause of the financial crisis. before joining the afl-cio he worked for two different unions, and also clerked for to judge of the delaware court for chancellor our third speaker is professor kenneth snowden, a professor of economics at the university of north carolina greensboro and also research associate at the national bureau of economic research. he's published extensively on the history of the u.s. mortgage market. indeed, i would see as the preeminent historian of the u.s. mortgage market from his its or his origins in the 19th century your. ..

let's, when we go to q&a, please allow the assistant with the microphone to reach you before you ask your question. without further ado, peter, please start us off. >> thank you very much but i also want to thank evan larson for working to set this up. i've been talking for quite a a while to see if i can get an opportunity to speak at george washington and this is it. i'm going to talk mostly about my book, and if we talk about

other things afterward, i would would be happy to participate in that conversation. hidden in plain sight is the name of the book. it grew out of my dissent from the national crisis inquiry commission. it may surprise many of you to know that much of the material that the commission had assembled was not actually made available to the commissioners, like me, and so i wrote my dissent without that. when i finally did see much of the material that the commission had assembled, i was able to write a book which fully supported what i had put in my dissent, but with a lot more, i thought, useful material. let's start on the whole point of this, why did we have a financial crisis? everybody can agree that the financial crisis was caused by the fact that we had, in our financial system, too many

low-quality subprime or otherwise week loans, mortgage loans, loans, residential mortgage loans. that is what we all agree on. the question is, why did we have so many loans in our financial system like that? i will now, i hope, if this works, i will try to explain why this happened. what you see on your screen now is where things stood on june 30, 2008, just before the financial crisis if we assume it begin with the default of bankruptcy of lehman brothers in september 2008. in june 30, 2008, this is what the situation look like for subprime and other high-risk loans. on the left, the federal

government had 76% of all of those loans. the blue is fannie mae and freddie mac, above that the red is fha and above that, a number of other government agencies like veteran affairs and so forth, all of which participate in some degree in the mortgage market. on the right is the private sector. what you see immediately when you look at this is that the government had a major role in buying these local daschle low-quality and risky mortgages. you might say the government created the market for those mortgages. they were the principal buyer and the holder of it. how serious were these mortgages ? in terms of their effect on the holders? this is an excerpt from a credit

profile published by fannie mae in june 2009, about a year later. they had a chance at that point to take a look at what their losses came from, and this will show you they had 838 billion subprime dollars in subprime or otherwise week or high risk mortgages. if you look at the line below, it shows in 2008, 81.3% of their losses came from these mortgages that shows two things. first, the government was a major buyer, in fact fact i believe created the market for these mortgages, and secondly, these mortgages, when they when they were held by the government, were the principal source of the losses that

occurred in our financial system. why is all of this important? it's important because the response to the way the financial crisis has been perceived produced some very significant legislation, the dodd frank act. the way the financial crisis inquiry commission described the financial crisis was that it was the fault of the private sector, banks and other financial institutions, according to them, were insufficiently regulated and had insufficient risk management and as a result, for reasons that we are not actually fully explains, but for whatever reason, they were the ones who caused the financial crisis.

the government was really not involved at all. if you look at the report on the financial crisis inquiry commission, you will see they say fannie mae and freddie. >> , to major government mortgage companies were sidelights. they were really not important. the real substance of the crisis came from the fact that these banks and other financial institutions essentially went crazy. they began to make mortgages that they had never made before, and as a result they failed and that was the substance. after all, the taxpayers prepare their losses. if that's an understanding of how the mortgage system works, to the extent that a mortgage

fails, in any community, it drives down the prices of housing throughout the community and as a result, even if the loss suffered by the taxpayers because of fannie mae and freddie. >> or some other government agency that bought this mortgage and was holding it, the failure of the any, the failure of the mortgage is the one that causes prices of homes all throughout the community to be defined. once you have these failures throughout the system, we will have many more losses as a result of these very weak and high-risk mortgages. when you blame the financial crisis on the private sector, because they have not been adequately regulated, which was the fcic view and the view of

congress, what you get is some significant regulation of the financial system, the so-called dodd frank act. what you are looking at now is a comparison of recoveries from recession in all years since the mid- 1960s, as compared to the report and recovery from the recession we have had since the one that followed the financial crisis. you can see that the red line, which is the current recovery, eight years old now, is much below, far below the average recovery which is the blackline of all recession. an incorrect diagnosis of the financial crisis, blaming it on the private sector rather than on what the government did, produce legislation that has

punished all of us through the economy because of the very strict regulations that have been put in place. as a result, how did this happen? fannie mae and freddie. >> were two very large government-backed mortgage companies. they were, by the year 2000, and even before that, the dominant players in the u.s. mortgage market. they were buying about 50% of all mortgages in the united states. in 1992, 92, congress adopted something called the affordable housing goals. the blackline and what you are looking at here are the goals as they increase over time. initially, they require that when fannie and freddie bought mortgages, 30% of all the mortgages they bought had to be made to people who were at or

below the median income in the places where they lived. however, the department of housing and urban development was given authority to increase those requirements. what you see here on the blackline are the increases over time. it went from 30%, 40% and by 2000 was 50% and by 2856%, which meant that anytime fannie and freddie bought mortgages, 56% of all the mortgages they bought in any year had to be made to people who are at or below the median income. now fannie and freddie were known for one thing before 1992 and that is they would only accept prime mortgages. what's a prime mortgage? that is a mortgage with a down payment of ten or 20% made to a person with a credit score which is at least 50, which is not a

great credit score, but it's a solid credit score. that means they have been paying his or her obligations over time. the third element was what was called the debt to income ratio and the debt to income ratio is when the mortgage closed, your your debt was no more than 38% of your income. if you had no more than 38% of your income of all your debts including your mortgage, that was part of a prime mortgage. up until 1992, that is how fannie and freddie conducted their business. the by 1992, they persuaded that this was keeping many people in the united states from buying homes. especially low-income people. for that reason, the the affordable housing goals were adopted, requiring fannie and freddie to buy mortgages made to people who were out of or below

median income. they found, over time, time, they found was very difficult for them to continue to buy prime mortgages when they were required to by increasing numbers of mortgages made to people who were below median income. it is very hard to find prime mortgages when more than 50% of all of the loans you are buying have to be made to people below median income. the obvious result was that fannie and freddie started to reduce their underwriting standards. they started in the mid- 1990s to reduce their down payment requirement and as they proceeded through the years, they reduced their credit scores, the increased the debt to income ratios because otherwise they couldn't meet these government requirements.

so, as we see, by 2008, 56% of all of all the mortgages in the top line here had to be made to people who were at or below median income and fannie and freddie were reducing their underwriting standards substantially. the two other categories below that have to do with very low income people and underserved areas which are largely minority areas. we will just focus on the top level, and that shows a very substantial increase over time in the mortgages that had to be purchased from originators and others, but were made to people who were at or below medium median income, where they live. how will a reduction in underwriting standards have an effect on the economy? well, if you think about in terms of down payment, if the

requirement to buy a home a 10% down payment, and a person has $10000 a he or she can buy a $100,000 home. but if the underwriting requirement is reduced to 5%, then the same $10000 can buy a $200,000 home. what does that do? it puts upward pressure on home prices, and that is what happened over time. in addition, a person who is going to buy a hundred thousand dollars home with a $10000 down payment is now a much weaker credit because he or she has now bought a $200,000 home with the same $10000 down payment, which means that instead of powering $90000, he or she has borrowed $190,000 it's a much weaker

credit for all his or her other obligations, including the mortgage. the most important thing is to look at this chart and see what the effect of this upward pressure on housing prices was, because this is prepared by professor robert schiller at yale, and what it shows is that we had, between 1997 and about 2007, the biggest housing price bubble we have ever had in our history. when, in 2007, that bubble began to deflate, we had the financial crisis. there comes a point in any housing bubble, where no matter how concessionary the loans get, people can't afford to buy a new house so people stop buying houses and the bubble reaches the top, declines and you have a

serious downturn and losses throughout the economy. this particular chart shows the extent to which those losses occurred and how quickly they occurred. this happens to be a chart that shows what was happening in the mortgage backed securities market but this is a pretty good representation of what was happening to mortgage prices throughout the country. and so, what we see happening here is that the government had policies which required fannie and freddie to reduce their underwriting standards over time. as they reduce those standards, that created pressures, upward pressures on home prices greeting the bubble and eventually the bubble came to an end and we had a financial crisis. it's on the strength of that

that i believe the financial crisis that we suffered in 2008 was the result of government housing policies. it was not the result of the private sector going crazy, because because if you think about it, fannie and freddie were the key buyers in this market. they were buying at least 50% of all mortgages that were made in the united states, and when a principled buyer in any market reduces the quality of the product it is looking for, the market will supply that. now, you could say ethically the banks and others should not have responded to the request of fannie and freddie for these low quality mortgages. they should have said no, i will not make these mortgages even though you're willing to buy them from me and i'll make a profit from them. that is a little bit too much to expect.

in any market, when the major buyer is looking for a low-quality asset, that asset will be. [inaudible] by the people who create that asset and that is mortgage originators. in 1992, there were very few high-risk subprime, low quality mortgages being made in the united states. it was about a 10% market at the time simply because there were no buyers. fannie and freddie would not buy those mortgages so people didn't make them. as fannie and freddie became willing to buy those mortgages, people started to make them and as their underwriting standards declined further, more and more of those mortgages were made over time. it was driving up housing prices and resulting in the crash of 2008. thank you very much. [applause]

>> good afternoon. as you were told, i am damon silvers, the policy director, that's not really why i'm here. i was involved in the oversight as the deputy chair of this panel that had the mighty power of the pen which meant, in this case, we got to say things about the bailout but we didn't get to actually do anything. peter and i have been engaged on and often this argument since probably tarp began. peter has the edge on me because he has written a book and i haven't.

let me begin by saying that i deeply disagree with the framing of the question. as you will see by the way i want to frame the question, there is a different way of looking at this than the question of, is the private sector at fault or is the public sector at fault. if you are engaged in public policymaking in washington, you quickly learn that there are no boundaries that are meaningful in many respects between the private and public sector. this was particularly true in the area of financial markets and financial making. to say was this just the private sector's fault or the public sector's fault is like saying which what do you walk with your left foot or your right foot? it is not a meaningful question.

the second thing, so my view is in the era of financial deregulation, the public sector, the regulators, fannie and freddie behaved, acted in conjunction with the private sector to produce the financial crisis. they did so by executing a model of the financial markets and the housing markets that all the major actors had in mind that soon, the capital markets, it assumed that the capital market should make the decision in the financial markets should support those decisions. the second thing i want to say about peter's framing is, the first thing, it's the wrong question. the second thing thing is, you really have to pay attention to what happens over time.

trying to answer this question by looking at a snapshot, particularly the snapshot at the end of the bubble in 2008 or 2009, we are given a fundamentally misleading picture of what happened. you have to ask the question, who moved first, and why? i'm going to go through this very briefly in a sketchy manner, but if you are interested, there is a chart and i don't have it on the slide, but this is the age of smart devices and all that. you can probably find it. there is a chart that shows fannie and freddie's buying of subprime and credit during the financial crisis. it is in this book. peter probably marked the page. here it is. it is on page 124 of the financial in crisis and it shows the purchases by the gse by year

the narrative that goes along with it is the key narrative to understand. it is true that the gse, as peter said, had policies that were ancient. they went back to the new deal of buying only essentially prime loans or what the gse called conforming loans. these policies were in place substantially until the early 2000. they were not removed at the time that the goals for purchasing low and moderate loans were put in place in the '90s. they were not removed when those goals were increased. they were removed in 2004 and 2005. the gse went on a buying spree in 2004 and four and 2005. what did they buy? they did not buy whole loans.

they bought securitized, interest and securitized pools. it's very importantly to look at peter slide. i'm not sure if you can go back to it, but if you look at that key slide that peter was arguing about, the slide the composition of who held the creditors, understand its who held the credit risk, not who held the loans. the loans were in previously secure type pools. the subprime market exploded, in the sense of grew, not collapsed the subprime market exploded in the early 2000's. what drove what drove the explosion of the subprime market? the key thing was that a, credit was cheap, and you can argue if that was a good thing or a bad thing, bad thing, we were in a recession, alan greenspan and the people he was talking to thought that this would be better than its financial policy

and people can argue about that. the second thing was the people who were responsible for keeping an eye on the terms of loans being made to low income folks, making sure they were not going to explode in that other sense, that they weren't essentially doomed to fail, they stopped watching. the key people who are responsible for that decision were at the federal reserve. there are other places that other people should've, could've said and done something but the key actors were the federal reserve between the fed governor and alan greenspan and his staff. greenspan and the staff took the view that we should just follow what the markets are doing and they are self-correcting and he said no, you have to actually do the job you are statutorily required to do which is to look at whether the terms of these loans are exploited.

with the regulators looking the other way and the bush administration actively encouraging the use of private credit markets as a form of economic stimulus because it fit their ideological frame, then we saw, not surprisingly, wall street step into the breach. that breach. that is what those people do. they like to make money. so they started moving, they started selling the two and 20 loans. they started selling loans that have low interest rates for short time and then exploded. these have a technical term, they're called sucker loans. they started selling those loans at large volumes and they started making a lot of money by doing that. they were selling them using a cutout like stripmall vendors,

those loans came back to the banks and the banks sold them into the markets. this was very profitable. the banks began to take market share by doing this. subprime lending began to dominate the mortgage markets in 2003 and 2004 before fannie and freddie are in the market. now i come to the other piece of puzzle. back when when fannie and freddie were responsible, as peter puts it, they have this characteristic that people don't talk about a lot which is they were essentially qualified government. they were not owned by private stockholders. their management have a job to make sure the bill got paid.

in the 1990s they were privatized, meaning, meaning they return from a quasi- government agency into privately held, private corporations with a public policy mandate. their executives were incentivize based on equity measures. i don't know the details but i'm sure they paid a great deal of money for consultants to do that those executives, in 2003 and 2004 were losing, were running companies. at this point they're running companies that are losing market share and are not as profitable as their competitors in the large banks. not surprisingly, with their personal fortunes on the line, the executive those firms became extremely are eager to get into the subprime market. the way they did that was they bought the securities that were

already in the market. by doing so, here's where peter and i agree, by doing so, they certainly contributed to the further growth of those markets in 2005, six and seven. fannie and freddie were accelerants at the end game of crisis. there was no question as institutions they bear some responsibility for the ultimate scale of the crisis. they are not the prime movers. the problem with them, the the reason they acted like accelerants was because they were given the government guarantee and a public mission and they were structured to act like private entities and private parties benefited from them. as all of us learned in some way or another, if you say to somebody, you have an implicit government guarantee, now go make as much money as you can for yourself, that person with that set of incentives is likely to take some very large