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 risks

because there is effectively no downside. no meaningful downside. now, this is a story not of the private sector versus the public sector, but of what happens when you essentially take financial markets and financial market regulators and deregulate subs gently but leave implicit guarantees in place. this has implications, huge implications for the future course of housing policy. properly understanding this has implications. before i get to those, i guess i'm supposed to say something about dodd frank, given that my friend peter did. the reason why the 2008 and

eight and 2009 crisis was so terrible was partly because the u.s. housing market was the biggest market in the world. if you mess up that market, it is going to ripple through everything. all kinds of accelerants existed that were the consequence of regulatory failure or the lack of regulatory jurisdiction. some examples, i just mention the fed and the fed's lack of interest in consumer protection. this is the fundamental motivator behind the consumer protection bureau, you want people doing that to actually believe in it and to be focused on it. the fed has a few other jobs. you make a mistake as big as alan greenspan and his staff made, maybe you don't get another shot. that is part of dodd frank, but

a lot of the rest of dodd frank was about trying to plug the regulatory holes that led to the situation that we've been discussing and have greater leverage on the economy than it would have anyway. the problem of the lack of regulation and derivatives, the basic problem we've been discussing was multiplied severalfold by the existence of the markets which is now the subject of many movies. the aig problem revealed that it was possible for something that was technically a thrift to set up a mortgage, a giant mortgage insurance business in london without anybody asking if there was capital behind it. that led to the abolishment of the ots. the pieces of dodd frank all trace back to these kinds of accelerants. they are as much a judgment on

the deficiencies of captured government as they are of judgment on the behavior of the private sector. in a funny kind of way, what this this is about is no one should be under any illusion that people try to act in ways for themselves. that's kind of what we want them to do. it's that if you understand that, then the question is, what is the government's role in ensuring that in a world of imperfect markets, imperfect information and imperfect balances of power, that that impulse doesn't run amok in our society. finally, what are the implications for the housing market going forward? we are currently in a debate that is largely incomprehensible about the future of the gse, despite the fact that peter has made how many public appearances about describing the four of the gse, they are in place, more or

less as they were the first time we had this debate. there is this debate about what to do with them that has been going on for a long time. children have been born and grown up while this debate is going on, and nobody knows, outside of a handful, nobody knows what this debate is about. it's conducted in language that's completely incomprehensible. here's what it's about. it's very difficult without some kind of guarantee to maintain a large-scale market for a 30 year fixed rate mortgage. who is willing to take the duration risk associated with that? there aren't enough people willing to do that on a naked basis, to support the u.s. mortgage market as the american people have come to demand it. so then the question is, who gives the guarantee?

who pays for it, who benefits benefits from it, how is it managed? the dse in the two thousands were set up with the government as the guarantor, the beneficiary of the financial markets not paying anything, and in a sense, the general public not paying anything. then governed as if they were up private country fully at risk in the marketplace. nobody, nobody believes this is a good way of doing this. at least nobody is willing to say so publicly. what are some of the choices? oh, there's one other thing. you have to understand that since the gse's are still with us and pretty much the same form in terms of governance and financial structure that they existed and after the treasury took over in the fall 2008, they are still with us.

this problem is not come up on a blank slate. it comes up again with the fact that here they are, the gse's with's with a full government guarantee and yet private stockholders, there are people who own stock in fannie and freddie today and that stock has sorta been worthless for ten years. who owns it? people are willing to make a wild bet that somehow, the same people who are willing to buy more bonds in the hope that they might be paid off sometime have bought the stuff. now, i make that remark, argentine bonds, that's actually better example because of the use of political muscle to get them paid off. i picked that consciously because they were paid as. [inaudible] we get this stub equity which only existed as an accounting device. it was necessary to keep the

government from having to integrate its accounting with the gse. we get the stub equity. those equity holders who have a certain amount of money in their pockets are busy trying to persuade everybody in washington that somehow they have got to be paid off here. fannie and freddie have to recapitalize in a way that they get money. that's absurd. it is not just absurd in terms of the equity of this matter so to speak, it's absurd because it is a door back to exactly the governance problems that caused fannie and freddie to be an accelerant in the financial market. the other idea that's out there, is the idea that fannie and freddie ought to be restructured to be the provider of a free guarantee to the large banks and their mortgage businesses and that guarantee, that the banks ought to control fannie and freddie and they also offer this guarantee kind of with government support.

that's also bad idea. just think about it for a second, who's involved in that. there is a right way to do this. a lot of hoops are being jumped through in order to avoid the right way. the right way to do this is to have essentially a heavily regulated utility that is run in the interest of its own credit worthiness that does not have equity holders, and that charges mortgage mortgage lenders a fee for bearing the risk. there is no question that ultimately the federal government is going to stand behind that guarantee. that's the point. therefore, it can't be a private company. it can't be run in the interest of equity holders it has to be run as a public entity whose

purpose is to pay its debt and to ensure the mortgage market. and, the hedge funds on the one hand, and the and the big banks on the other hand have to be escorted out of the room. otherwise, we are going to repeat this experience in some form or fashion. i would just conclude by saying that the chart, the thing i love about peter's presentation is that each of the slides is a door into a timeline that's not initially there. it gives me a lot to talk about. if you go back to peter's slide, the key thing about that slide is that the rate of recovery from recessions has gotten worse over time so the 1981 recession which was a postwar recession driven by rising interest rates and inventories and all that kind of stuff, the 88 recession

was more like that, driven by s&ls and other financial issues, the 2001 recession, the dot-coms and all that, more financially driven and an even longer slope of recovery. this last one, the most financial in the recession have a longer slope. it has nothing to do with dodd frank. that has to do with the way in which we've allowed the structure of our economy to change and the extent to which these recessions have been driven by the kinds of financial dynamics that drove what we used to call panics in the 19th century. if we repeat these mistakes, if we can go back to a regulated economy where people get to take private profits by taking public risk, the next one will almost certainly be far worse. as we sit here today, we week from the national election, we should ponder how serious the consequences of that might be. thank you.

[applause] >> can. >> thank you hello. thank you for inviting me, we've already heard from peter and dana and that was very interesting. for it change of pace, i'm going to go back to ancient times, the 1930s, but the intention of this talk is to kind of this topic in a little more historical perspective than ordinarily it has, and hopefully we will learn something. that's that's always our hope as historians. so to do that, i'm i'm going to talk about three things. one is long-term development of the mortgage market and how what we have just experienced fits into that chronology. then i will try to convince you

that it makes sense to look back at how we reformed our mortgage markets in the 1930s as an example of mistakes or maybe successes that we can have an reorganization, and finally looking at that 1930s reform, look, look at some of the legacies that contributed to the events that peter and damon referred to. when i'm talking about long-term development of the mortgage market, i really have three things in mind for the drivers of development, the key features of development ended up dynamics of development. let me not waste a lot of time on that and just get to the point. drivers of development, i see see these as coming from the demand side. this is what commanders of mortgage credit, and not to be for residential housing or performers or commercial reasons , these three things keep showing up, at least i think they show up in what i've read

in the past 150 years, first of all, they want to market but integrated across national boundaries. they are not happy with big differences in mortgage lending terms across regions or sectors of the economy. second, as referred to today, the liberalization of lower contract terms, lower down payments, lower terms, lower maturities, lower rates are more favorable repayment schedules. this is a constant theme that shows up in our development of the mortgage market. finally, there is an emphasis on improving and even equalizing access to the market among people who are very different in their risk of providing mortgage credits. these are very familiar things to us. now, the key features of development that i want to emphasize a really a function of how the supply side in markets respond to the characteristics with which it has responded over time. here there are really two key features that i want to

emphasize. one is that we do go through periods of severe instability and that's not, those are not lonely episodes, but they are infrequent, think goodness. second there's a lot of institutional disruption and change. let's go ahead and look at the videotape. we see here, in the top panel of this diagram, what i've what i've shown here is kind of the growth rate of mortgage debt deflated by the cpi over a tenure ._ you can see, see, one this is just a measure of volume of activity and you can see three clear peaks in the past 90 years. 1930 is a peek, 1955 is a peak and of course 2007 which we just experienced, is a peek. the the low is an indicator of the impacts of the mortgage lending volume we see with single housing. the 1930s 30s was a bit of a disaster in terms of construction and you can see

that here. you can also see 2007 had tremendous real impact as peter talked about during this crisis. the 1950s is a little different. we don't see that kind of crisis and will come back to that a little bit later in the talk. we talk about institutional disruption and you've just gotten the flavor of a here, but this goes over 90 years. we can talk about private versus public, publicly financed and sponsored mortgage lending channels, and there's been tremendous change in the wait for the shares of those in total mortgage debt, but within each of those categories there are differences between portfolio lenders that buy and hold mortgages delays engine securitization, but this is not a static market. a response in an institutional

way. this brings us to the dynamics of development. this is what i'm talking about it because i think there's a pay off your pet i see this as a five-step process and i thank you very much, you will be reminisces of the things that peter emphasized and damon talked about. first we had innovation pit in my mind, innovation can be from public entities or can be from private entities. it is just a new way of doing things, new way of organizing things. it leads to an expansion of mortgage debt and then pressures on underwriting which frequently occur during these kinds of episodes. it's followed by crisis, resolutions which are generally very distasteful, very lengthy, and very debilitating, and finally we get to the reform stage. the way i like to kind of think about history for today is to think about, i'm i'm not going to worry too much about the first three bullet points. that is fear and damon has given you a different view of the most recent ones. what i most concerned about here

is during crisis and resolution, and importantly during structural reform of the market after crisis, how do we react? how do we act and what kind of forsyth do we show and how wives have we been? i personally think there are four episodes at the bottom of the side. i think these are key in what i would call structural development. as you can see, we are in one which makes this interesting. it hasn't ended and we are going on. i could pick any of them but why not pick the 1930s because it's the one that has the most to do with the residential issues that were looking at today. what i would like to do is look at crisis and reform during the 30s and i want to look at four components of this that define what we can call federalization of the mortgage market in the

1930s which occurred. the fhlb act or home loan bank act, an emergency program called the homeowners loan organization, fha which has been talked about here, and then the early version of fannie mae and those of the ones that i would like to talk about the most. first there's a little more background, the 1930s housing crisis was bad. peter is correct in terms of real housing crisis, the housing prices weren't as severe as it was in our most recent, but in terms of the impact on construction activity and home ownership, they are of equal magnitude. the homeownership rate was just under 46% but then they fell to under 41% in a tenure. there was substantial disruption in the market during this time period. you can also see that in the institutional structure of the market.

i give you some more counting level for those who are interested in those such things for the first thing i do is give this observation that was made in january 1953. this was about 20 years after years after the reforms of the 1930s had been enacted. i'm going to read it because of the way i am. since the fhlb act, nice national housing act was passed, there was was very little thinking about the mortgage system. we proceeded on a crisis to crisis basis, improvising until we went along until our sense of direction was blurred if not actually lost. that was said by a guy name miles : who may not be familiar to many of you but for those of you who have read up on the history of the market, he's the guy who helped draft and implement the original fha legislation of a prolific housing researcher, he coined the phrase in the 1950s urban renewal and served as the chairman of the president's

urban renewal tax sports in 1969. this was a man who man who was there, who sought and this is not a great appraisal of where we sat 20 years later. but i would like to do is give you some idea of perhaps went what wrong or what went different than expected at the time. first of all the fhlb. to understand the fhlb act which was a 19 32, prior to prior to roosevelt, this was hoover, you have to understand the industry of the building and loans in the united states. in 1930, there was almost 12000 building and loan acts in the united states. these were strange organizations jimmy stewart, unfortunately they get the contract wrong, but other than that it's a perfectly good movie. they were the dominant home

mortgage lender in 1930. 40% of the institutional residential mortgage debt, they held. they operated in every state and in cities of all sizes. they were very vocal in their orientation. they had a trade group called the united states building and loan. they were big, active and they threw their weight around. in 1931, when one, when hoover called a housing conference because this crisis was unfolding, he, as he had done in the 1928 campaign, endorsed their call for a home loan discount bank. they want the federal government to establish further building and loan association, to act like a federal is her intent reserve and provide discount liquidity for building and loans. well, hoover sees this as an opportunity to kind of give emergency recovery to all lenders in the housing market so he endorses it. the problem is, the representatives from the u.s.

bll, they draft the act, the fhlb act in the disproportionately in charge and they go about business that they are very much committed to which is creating a modern saving and loan industry. instead of 12,000 association we are are down to below 4000. they are larger managerial oriented but the most important thing is the small number of savings and loans him a what they wanted to do was create a dominant and protected network of local lenders and they did. they were very effective in that. so, the bottom line of fhlb is regardless of what they thought it would be, it was industry driven and exclusive to s and l's. president roosevelt takes office at the end of the first 100 days, hundred days, one of the last act they passed, the home owner loan act which establishes a remarkable corporation corporation that some have written about and the hh lc, and

a time of just three years, refinanced a million distressed mortgage loans on 10% of the housing stock in the united states. by 1936, they held 20% of the total mortgage debt in the nation. what's even more remarkable is they stopped lending in the 1936 and they simply serviced these loans and actually dissolved in 1951. now there is a federal federal program for you to think about. i think, just a second. the research that has been done shows that when you look at it across counties, what they did is they ameliorated the fall and decline of home value but they did not stimulate new construction across and this leads us to fha. fha comes along, and national housing act of 1934, a very important act and it's very hard to read the testimony or any of the argument about the fha act when it was passed about

understanding that the main thrust of a legislative boost is to stimulate construction. emulate motivation and construction to the rebuilding of homes in certain titles and financial new construction as well. builders wanted this, the the banks and the life insurance companies who were shut out of the agents wanted this. the at hlb opposed it completely, but it was passed. what i want to emphasizes this in the original fha legislation, there is a a sunset on the federal guarantee of fha which is the way they paid off claims on the front. if it went into default or foreclosure and they had to compensate the lender for that, they would enter their own. those had guarantees originally but only for a three-year period. that is until july 1937 came along at which point the guarantee was extended. then the guarantee was extended

four more times and finally made permanent in the 1946. this is part of what they're thinking about because the fha administrators, we never intended this thing to have a federal guarantee but it ended up with one. that's what i want to say about fha. let's move on. i personally am a great fan of the housing act. this was one of the most ambitious pieces of legislation ever passed in the united states. what it did was set up auto chartered mortgage banks. there's a similar set up in europe. they had to be financed with $5 million of capital and once they were organized they couldn't originate but they could purchase, sell and issue debentures on the basis of collateral they would buy. what this really was was a model of a mortgage banking system

that was designed for a secondary market for fha had a very difficult time to try to stimulate mortgage lending and especially construction activity through this mechanism. well, over over the next three years, nobody showed up with $5 million of p to to very interesting story that i don't i don't think has been totally told, although i know they have certainly known about this and have discussed it, but in any case, in 1938, finally the government supposedly to show how experimental these charters might work, they organize and finance one of these national mortgage associations. strangely enough, after that, new charter applications really are suspended. it's hard to find out any information about what goes on but what we know is nobody else's chartered.

what this means is in terms of the fha, what we got was a system with public guarantees and public fund chosen instead of a mutual private insurance program which is where it was supposed to go. fannie mae, no i have to be careful, this is fm and a and it gave us a limited secondary market and as we found out, it was used for specific purpose as well. instead of a broader market facility. given that, here are some of the legacies, here are three stories i would like to leave you with. it doesn't mean they're the only legacies that can come out.

i'm in academia and i have to write lots of articles. don't want to give it all away right now. here are three. maybe there something we can talk about. first of all, the new deal system that really was not a well-designed or system by design, it was an unexpected outcome and it had a heavy local orientation. they dominate by the early 1960s of the mortgage market and the fhlb provides them with acquitted he a secondary market. life insurance companies, commercial banks, they all are engaged in local lending too, but the first two they get into enter regional lending and this is what they are really used for

because these interregional lenders formed relationships with mortgage correspondence in various areas of the world and they specify fha lending and use the fma facilities to try to finance. the secondary facilities, both both the fhlb and on the other side of the market, they really were only used to finance temporary imbalances. these could be regional imbalances or aggregate imbalances over time, but they were very limited function given what a secondary mortgage could do. they did not try to create new instruments, market credit risk or market interest rate risk. that is not what they were about finally, i think this this is important, throughout the system, whether it's local

lenders, there is a tight connection between origination and servicing throughout the system. : represent 40% of all mortgage debt. this is a huge expansion of federally underwritten markets. as you can see at the same time a we have is an increase in homeownership rates. from the low-end at the beginning, at the end of the 1940s -- the 1930s up to

over 60% in the 1960s. are these connected? here i'm really relying on recent research. when you look, of course, and i'm sure many of you know this, but fha and va loans relative to conventional at the time had higher loan-to-value ratio's, sometimes very low, sometimes zero, had longer maturities and lower interest rates. and eventually they even pushed invention of mortgage loans into those more liberal terms. and what been shows in his analysis is that this is probably responsible about 40% increase in homeownership after world war ii. but the mechanism is people buy home sooner. exorbitant ownership. it doesn't change to end up with ill. it simply accelerates it. so like it or not this happened

and happen without crisis. i'm not saying peter, that's not arguing against you. it's just to say that's part of the background warehousing goals are very important in any kind of federal program. finally, the way look at the history after 1970 in this system is that we went through a period what i would call piecemeal renovations from 1970-2000. by late '60s, early '70s this postwar system, it's in flexibilities in terms of deposit rates and inflation, the story has been told many, many ways about what goes wrong within the system but it begins to fray. what we begin to see is step-by-step a big change in fundamental structures but these are not really automated. these are not played. the first of course is the definition of fhlb and fnma and

to freddie and fannie, these gses, privatize fire after 35 years of maybe trying to be privatized. their function and the methods are broadened as well. 1980-85 is important period. it is at the epicenter of the saving and loan crisis. we talk about why that happened, moral hazard. whewe look at these diagrams wht you see is a very large fall on of the importance of savings and loans as originators of mortgage loans and as funders of mortgage loans through the acquisition. the major change is to become active in the origination, independent mortgage companies into the cell to our gses of a variety of different kinds. subsequent to this 1985 on, if you read the mortgage banking literature this industry is going through incredible changes and destruction. what we see is a development of

wholesale underwriting and markets for servicing rights on portfolios of loans where people make loans and there was no servicing rights, taking care of them for the next 10 years. this on bundles two functions are very narrow conjoined the system. we end up in 2000-2008 the system fails to go to court to be able to resolve credit risk. we are left with no want of a going to do next? hopefully these legacies will have some indication. thank you. [applause] >> okay. i would not ask the panelists whether they would like to make any brief comments are would like to go right to question and answer some the audience. yes, peter?

>> do you want to go back to -- >> no your. >> i'd like to respond all of it because damon told a story, about the fact that fannie mae and freddie mac as i recall correctly were privatized in 2000 that a government guarantee and they were able to make great profits by using a government guarantee, and they raced into the subprime loans because they're going to be very profitable with this government guarantee. the trouble is that fannie and freddie were, in fact, privatized if you want to call it that in 1970. between 1970-1992, they were the same firms. they had the same abilities. they had the government support. they could buy mortgages and hold mortgages and they could securitize mortgages. they did everything the same

way, but they insisted during the period between 1970-1992 on prime mortgages. why did they change? my point originally was simply that in 1992 the affordable housing goals were impose on them. damon was correct in this, that is that fannie mae and freddie mac did go into the mortgage-backed securities market. they began to buy private mortgage-backed securities. why? because in 1995, hud said the mortgage-backed securities that you bought were backed by subprime loans, or loans that qualified for the afford housing goals, another way to put it, backed by mortgages that qualified for the affordable housing goals and you got credit for those mortgages. one of the wonderful things i fannie mae and freddie mac is

that vacant by these mortgage-backed securities and saved themselves a lot of risk because they bought only the top tranches, the aaa tranches. most of the real risks were taken by the lower tranches in mortgage-backed securities. so they became very enthusiastic in the early 2000s for buying mortgage-backed securities. why? because they were giving credit then founded the affordable housing goals, which without having to take the risks of the mortgages which were at that point extremely high risk mortgages because the underwriting standards have been reduced so substantially that the mortgages were dangerous. so they began to go into the affordable housing goals, or by the purchase of mortgage privately issued mortgage-backed securities. a huge market been developed

because of what fannie and freddie were doing. why is that? that's because as housing prices go up and as there is a bundle, defaults go down. it's kind of maybe counterintuitive. but the reason is simple, and that is if your house values going up, you could always refinance you can't mutual mortgage obligations because now you have more equity in the home. that's what people were doing all during the 2000s, as housing prices continue to rise at that extreme high rate that i showed you before. people were able to refinance. what happened at the end as they could refinance anymore because the market had reached the top and begin to decline. that's what all of the defaults cannot because people who couldn't meet their mortgage

obligations were unable to refinance. so all of those very high risk mortgages been begin to fail. so that's why we have to look at what the government did go to understand exactly what happened in a financial crisis. fannie and freddie with the same firms that were in 1970, in 1992, except they were requiring up to 1992 prime loans. one of the important things to understand is that for 30 years between 1965-1995, the homeownership rate in the united states was about 64% or 65%, right in that range. never changed. between 1992-2008 it went up almost to 70%. so the was a real increase in homeownership. the trouble is as george bush actually said in his

autobiography, we didn't really understand the risks we were creating by forcing this kind of growth in the housing market. so what should we do? when we get to some of the things other people talking about the what should we do? we have fannie and freddie, we have a whole series of government programs. we know what happened with fannie and freddie, and that government program and what's happening with fha which is also, had to be recapitalized a few years ago, it has to be recapitalized again because it's lined these very low-quality mortgages. they are failing and the taxpayers have to pick it up. what is the problem? the problem is the housing is such an important part of the u.s. economy that the government has a real stake in making sure that people are able to buy homes. and so as long as the government is politically rewarded by

allowing people, enabling people to buy homes, by reducing underwriting standards, forcing down mortgage rates and reducing underwriting standards, the government gets political credit for that. so i'm afraid the only thing i can say is i'm talking about what the policy of the future should be, is that we will only be able to avoid these kinds of crashes and avoid the taxpayer obligations that result when the government is forcing these mortgages to be made, the only way we can do this is to get the government out of the housing finance business. it has been in the business since the 1930s. but even when it is in this business as it was between 1965-1995 it didn't increase the homeownership rate. when they really tried to

increase the homeownership rate they created the conditions for a financial crisis. so if i were making policy, i would say let's get rid of fannie mae and freddie mac. it's probably a good idea to a subcategory that program for people who don't have down payments, as long as they have good credit ratings and have shown an intention to meet their contractual obligations in other areas. so the fha should probably continue to exist in some way, but on a very limited basis and only for people who have these special needs. but for the government to mix into the system, forcing new buyers, making mortgages much

more available to the public in general, that is always going to cause us trouble because of the value that that has for political purposes to an administration that is in power. thank you. >> damon, would you like to make further comments? >> well, let me just say, we want to transition to a more informal structure i think, but you've got to watch the sleight-of-hand. i didn't say fannie and freddie had a government guarantee. i said that an implicit guarantee. and that i think is not a debatable proposition to, in fact, that's at the core of the conservative critique of fannie and freddie during this period. secondly, you've got to watch the timeframe. peter has given you i think the really excellent explanation for

the housing bubble and financial collapse of 1995. everyone is looking at me so seriously. it was no housing bubble our financial collapse in 1995 the you have to link it to the dates that happen. these events happened in the early 2000s. and they happened because fannie and freddie's, the process of changing governments in fannie and freddie let him to be equity return driven. the federal reserve stopped paying any attention to whether not loans being made to poor people were fair. the financial markets stepped into that space. and then fannie and freddie followed. those are the facts. those of what the charts that show you the timeline prove indisputably. we can have a conversation based on dates that are not relevant to when these events happened,

but the real question you have to ask is why are we having that conversation? why are we being shown snapshots that out of context box why are we discussing dates their 15 years before the events? there's two reasons. i think peter knows appreciate fully about what the reasons are. he's got a pretzel disagreement that we are directed at the financial sector because i think peter believes its self-regulating and effectively so. i would submit to you we've had an experimental test of this proposition. and that it's not true. financial markets are not effectively self-regulating. but peter and i have a principle to scream about this into could make up your own minds. the second proposition which really bothers me is the proposition that the problem

here was the effort by public policymakers to varying degrees over a pre-that began in the 1970s, to see that poor people and particularly people of color have access to housing finance. my family tried to buy a house and successfully gets a. we were white. we tried to buy house in richmond, virginia, in 1973. my father was a university professor with a middle-class income with a spotless credit. no one would lend to them. no one. there were people in that community and we're trying to buy into that owned their own homes, somehow. and those kinds of folks with people who were targeted by the first step in a process we have just been discussing. those subprime loans were made in 2002-2003 and 2004. a lot of them were made to people already owned their own homes. the financial crisis was in part

about trying to promote homeownership to exploit to those means. and in part it was about pushing cash in defense of existing homeowners to didn't understand -- and then not having them once a hand grenade blew up. the real explanation for peter's line about the long slow recovery, in my view, and it's not a flattering explanation for the democrats. the real exploration to this is a failed to do what was done to some degree in the great depression, which was to give relief to people and loans that they could not pay. what was the consequence of that? the consequence of that was, in this is what, i forgot to say this and it's been my view the most important thing about all of this. the consequence of not providing help to homeowners with loans they could not pay was a couple things.

one was it depressed the housing market and the economy during the period. the second thing it did was that it killed the net worth of african-american and latino families in the united states, so that today as we sit here and net worth, the median net worth of african-american and latino families is approximately a third of what it was on the day that lehman brothers went under. and that seems, that's a very, that's a very serious and daunting fact. and it was done, it happened that way because the alternative, and this sort of goes beyond the question of housing but you've got to understand it was going on, if you would recognize what the loans that were they doing this be from 2001-2007, during the period when the dynamics i was describing were a worker and by

the way, this street is again 10 years after the things. is trying to describe cause the things to occur. if the loans made during this window were written down to what they were really worth conduit effective we capitalize the banks. instead, we asked energies of colors to recapitalize the banks for us. or to participate in an elaborate ruse in which we pretended the banks were okay. and we asked the poorest people in the country to carry the weight. that's what happened. it's inexcusable and for reasons that if they didn't think about our obvious it's not ever discussed. now, the thing that troubles me about peter's argument, he doesn't make it explicitly, but he seeks to assign responsibility for the financial crisis to a long-term effort to try to get people of color and

poor people access to credit. that's what these dates about these targets are really about. this is code. the world that peter would like to return to is the world where my father, a white man, could not get a housing loan it has is trying to buy a house next to black people. that's what this is about. let's not kid ourselves that that's what it is about. if you doubt this is someone that happening in america today, consider the fact that people interested business today asked facebook to target the loans only to white people. not their loans whether ads today. real estate ads on facebook are being targeted by race. you not think that these problems go away if you deregulate. they return. >> i think i'd like a moment to respond. first of all you have to think about why these terrible loans were made, why they were made in

communities of color, let you know communities, the low income borrowers and so forth. they were made because the government would buy them. this is a government policy, a government program, fannie mae and freddie mac, that created a buyer for these loans. they needed these loans in order to meet the affordable housing goals, which the government required them to do. and so you can blame anyone you want for what happened here. and damon is completely correct about what has happened to housing values in communities of color, and to the net worth and so forth. but this is the result of a very poorly designed government policy that created a market for these loans. so banks and other our rigidities new that they could

make these loans, and they had a buyer for these loans and it was fannie mae and freddie mac. so that's what you have to consider about why we had a financial crisis and why the terrible things that damon described just now occurred. it was because of a very poorly designed government program that made it profitable for organizations to make these terrible loans. they had a buyer for those loans. >> ken come any final comments? >> open up for q&a again. if you have questions, let our associate find you with a microphone. we have one question here and one question here. we will start with this one.

>> i had a question for peter. would the crisis have occurred without the direct encouragement of banks to make lower credit quality loans in certain neighborhoods, instituted through the community reinvestment act so that there was a direct incentive for the banks in order, which can be held over their heads if they wanted to merge, get regulatory approval. >> crp, the committee for investment act, was very small in terms of its impact. i don't even cover it in a substantial way in the book because the are not, there is enough data about the loans are actually made under cra rules to

protect them to what happened in the financial crisis. the main problem was before the housing goals where fannie and freddie had an incentive to buy these loans. if cra was a factor, it was very hard to identify. people do confuse the two. affordable housing goals and community reinvestment act, but in my view, of nursing enough data for me to say that the cra has had any impact on the problem of the financial crisis. >> question here. >> first, there's some assumptions that are flawed in this discussion. one, the professor address is a crisis goes back to somewhere

around 1965-70. second is that the crisis didn't result from the stakes. it resulted from the incentives and the fact that the model of the financial industry enabled a lot of people, ceos and their immediate associates, to profit from this model without any skin of their own, skin in the game. and third is that dodd-frank doesn't go far enough, because it quantifies the doctrine of too big to fail. so the question, which i'm sure you want to focus on now is, if going forward one of the things you have to do is to re-examine the idea that a 30 year mortgage is sacrosanct and look at

mortgage models that are in place in other countries, that entail less risk. and then somehow it has to get actual capital behind whatever does you decide to do, which we don't have now. >> ken, do you want to take that? >> you bring this up in one of the things that i think it's interesting, i did really trying to make a big point of it, but it seems strange to me, what worked in the 1950s was we did a good job of assessing and holding credit risk. there could be a lot of reasons why. it was with a very substantial expansion of these programs which ordinarily you would think might lead to moral hazard of some kind. i think what's interesting to me in this debate right now is we would talk about skin in the game, the skin in the game that started the bnl's, assisting the

savings and loans where local networks of builders, material suppliers, real estate agents, appraisers. there's industries in every locality in the united states that are attached to that housing market, not some of the. and all of them suffered during the crisis. we have completely disempowered those local networks, those folks who rely somehow on local activity in the housing market. and i think in doing that then we are left with this problem of trying to demand capital of very large and very dispersed organizations. to me there's a natural skin in the game to take advantage of where we can, which is local lending networks. that doesn't seem to be part of the discussion at this time that we are having in reform and i think that's too bad. >> any comment before go to the next question? >> i think that professor

snowden's comment raises sort of a deep issue. if you have, you could parlay hear this conversation as a conversation about the way you have to put different policy instruments together. so that if you're going to have federal supports for long-term housing credit, then you can't just allow those support to go to any loan in any circumstance. that has to be robust regulation of what the terms of those loans are and under what circumstances the borrowers get access to them. if you one without the other things will go ask you. peter and i have different emphases about which the students were talking about but we agree on that.

the u.s. housing policy have strongly encouraged individual family homeownership going back a long way. you could say the homestead act was a form of that, and certainly the entire time we are talking about and commented that. if you look at other countries come in europe, for example, there's a lot less emphasis on individual family homeownership as a sort of central power of sort of prosperity. instead you have housing credit is, fewer people own their own homes. more government resources a set aside for public housing. it's a very different system. there are arguments one could make that the systems are better than ours. but you have to move to those if you want to sustain austerity, you have to move to those systems wholesale. you couldn't cherry-picked the

pieces of them. and that i think is kind of the fundamental dilemma, just as the one about what to do with the gsp is now raises the same kind of issues about are we going, there is an approach that i didn't mention but it's a legitimate approach. we can say the government is not in the game. with the caveat for people without any savings, peter seems to be more or less saying that. but if you're going to start bringing the government into the game as candidly the large financial institutions very much want, then pressed the rules on the other side. this same principle applies more generally because this is again part of the historic and monetary policy. if you're going to pump liquidity into the economy to stimulate it, you need to solve

on the other hand, regular structures to make sure that liquidity doesn't just produce bubbles. that was the lesson of this period. and some people would argue that those dynamics are present today. and but it's one thing to say, it's one thing to say, i think as peter said, hands-off. that's the position one can argue about but it's a legitimate position to the position that does work is one that his work is one accident applied time and time again because effectively political power finance as required it, which is hands-on but in a way that essentially socializes losses and privatizes losses. that leads to catastrophe. >> one more question here. >> i'm actually an alumnus of this esteemed institution. i've been involved in housing finance for over 47 years. i'm saying that not posting but

to let you know that i go way back, the days when i was in the general counsel's office with george romney, 1969. i've been around the block a lot on these issues. i was involved with committed investment act and to some extent the gse, i will mention it in a minute. peter is well aware of my critique of what his book as well as his colleague who i've had numerous e-mail accounts. i do have a half an hour to go over all that some destroyed to hit a few points. i'm going ask peter to both that chart that you showed a high risk loans. could you please do that, peter? i want to point out to the audience how come i hate to say this, misleading that charges. and the fundamental problem of voici'vealways had and many othe have always had with and in peter in terms of how they love to lump subprime alt-a loans and for those of you don't know,

alt-a loans is basically a euphemism for what's called option a.r.m. loans which are unbelievably toxic. they have negative amortization and interest only. they were the worst performing a loans along with s&ls. let me see if i can read this without my glasses. >> is this the chart you wanted? >> it says -- i don't have my glasses, a little foggy. let's start with loans with fico score under 620. that's 100 billion, right? look a loans with fico scores 620-650. that's 230 billion, right? am i right? let's look a loans with origination ltv's over 90%. what is that? 267 billion. my math is not great but it seems like it's almost 600 billion of the 837 billion. no, right?

it's a huge sure, okay. i'm speaking out for gao on the record here i've done multiple study for congress on the housing crisis. we done at least a dozen. beginning by the way with predatory lending. that's what it was called and you should read this, how do that told us in 2004 come at their chief counsel told us, he was on the record, he said it prevents us from imposing consumer protection and -- consumer protection of non-bank holding company mortgage subsidiaries. some of the worst subprime an option a.r.m. loans are in history. they were worse. they were horrible. they were probably just as bad as new century and fremont and others who were not under the. greenspan the company literally told his examiners don't go in

and look at those loans. guess what. ben bernanke began doing when he was chairman and one after the worst one, countrywide. country wanted to examine nation. this is public record i'm about to tell you. countrywide had a fair lending exam that, let's look at it. it was as bad as you can imagine. guess what they did. they jumped ship and went to ots, another wonderful failed regulator. hsb was another really bad one. washington mutual at long beach, was horrendously predatory. their chief with budget holders in an interview, and again this is public information, he said this in congress that they literally prayed on minority and they didn't than the worst subprime loans. and guess what. none of these loans to my knowledge were sold to the gses. so my point is that when we looked at subprime loans, and

particularly what are called hybrid arms where it explodes from two years or three years to the libor rate plus what ever. 3%-11%. those loans and those horrible option a.r.m. loans had literally 50-60% default rates. i defy you to end his colleague to show me how these other so-called high risk loans even came close to that. they did not. we looked at very carefully. yes high ltv's can create some higher -- so here's a big problem and as a guy who's worked on cra for many, many years. there's a big difference between a high risk loan, which is not the ideal the 1980s conforming loan that peter and ed love. they are high risk but they're not these extraordinarily high risk loans that are not entirely but almost all purchased by wall

street, not by come and by the way, one reason why they couldn't buy them, you didn't mention this, why did their market share go from of a 55% to 35% between '03 at '06? not because they're incompetent. they got caught with your hand in the cookie jar. it was cold of the accounting scandal, right? at both the gses were all the executives who were paid bonuses based on hating certain marks, housing goals is one of the but that was not the biggest one, they literally got caught by the auditors in '03. guess what. the regulators said we are going to put a cap on your purchase loans. so as a result of that it made it very difficult for them to buy these subprime and alt-a loans because they were not about to securitize them and make it public to the rest of world. what did they do? they then turned -- as the

medevac lifted the cap in '06, appointed by george bush, he testified in congress, and you can find it, he said the reason why the gses are failing is by but because they bought these wall street pls securities. not because their vote lives are going back. this wasn't '08. everything still didn't hit the fan completely. in fact, they were the biggest purchasers of pls in the entire world, in the entire world. so that's what was driving to the they were probably driven by the gold glove that but it was money. they were making huge money. you know peter why. because they borrowed extremely low rates spent can you wrap it up speak with a lasting one to ask peter is, this is my big question. mark zandi can do your firm when you're booking a, mark zandi, for those of you who don't know, is one of the most preeminent economist in the country, headed up moody's analytics, and

incidentally a former economic adviser to john mccain when he ran for president. he showed peter his report, which is dated september 2013 called road to reform. and in this table he showed peter, which supplies a peter had never seen before, how the losses for pls market for the seven-year period from '06-11 on wall street, okay, it was $449 billion. the gses, 13 billion. he admitted to me afterwards what it went up to him and talk to him that, in fact, that is being a little too conservative because he didn't completely include all these jealous security losses so as to reduce the numbers but a doping will be much more than may be doubled or even if it is double that, okay, just listen to what i just told you, okay?

445 billion -- by the way, portfolio lenders in this country lost 218 billion, all right? so we are talking about comics use the by the way, i made a mistake. 12 billion was the first three years. for the whole seven years it was 129 billion, sorry. so my point is realized losses are actual losses. that's what causes crises. even what do liberties are. delinquent is always don't turn into losses. so you said to mark, i'm going to get back to you, mark. i can look at this. together to back to him? i would love to your explanation for this. >> yeah, mark and i have exchanged e-mails. i disagree with these numbers but the whole point here is that you have to understand that this was a market that was created by the gses. the pls market was created by the gses because they got

credit for the affordable housing goals, no matter how bad the mortgages were, as covered by or backed by, backing the pls that the gses were buying, no matter how bad those mortgages were, they got the credit for them and they didn't take the losses because the losses were taken by the subordinated tranche is on these loans. so that's what happens in the pls, jim. the aaa tranches do not suffer any losses, that's why, that's why fannie and freddie bogdan. they qualified for the goals and they didn't take the losses. that's what they built that market. when the market started going come when the market started going, everyone got in the picture as i said before because the false declined as housing prices with rose and people all over the world so that you could

buy mortgage-backed security or a mortgage in the united states, the likelihood of default was very small and the subprime mortgages were being a lot of returns. so people went after, he became a huge market but you're completely correct, then and freddie with the biggest buyers by far of these pls mortgage-backed securities that were issued by the private sector. they also bought ordinary mortgages, not backed, not backing pls but ordinary mortgages which were also poor quality, as long as they complied with the goals, that's the number over there because you can see that this 830, almost $838 billion in these poor quality mortgages that they had in 2008, those were responsible for 81.3% of the

losses. these are the subprime mortgages. that's what this topline our. [inaudible] speak i think we have to sort of in the discussion and allow, for after the meeting but i think we can see that this debate goes on, right? if it are interesting and complicated follow-up but -- [inaudible] we are delighted to have had all of you hear. please join me in giving our wonderful speakers a great round of applause. [applause] and you are warmly invited to stay after -- [inaudible] >> i think river reception right across the hallway, and hopefully the speakers can stay with us a little bit longer and they would be so happy to talk with you. we invite you of course to come back to our future programs as well. thank you again.

[inaudible conversations] >> republicans are meeting on capitol hill today to discuss how does it was a joint republican government. will take you live to the capital club at 12:30 p.m. eastern for details on the chief of staff of the republican national committee and others about the rnc's role. congress returns for the remainder of the one of the 14th congress. the house convened today to consider a number of bills. live coverage from the house floor on c-span. ascended meeting tomorrow.

live coverage on c-span2 at 4:00 eastern time. centers will debate and vote on ability with the library of congress oral history project. also live on c-span2, discussion about trade policy with republican congressman kevin brady and u.s. trade rep michael from a. they would discuss what to expect from a child administration. politico will host the event live at 5:00 eastern. >> if you read a lot of headlines, you see what google is doing, you see a lot of the proclamations that automotive executives are making them look him in the automotive business register a lot of hype and to think what comes to everyday matters component of marketing hype is okay. when it comes to matters such as this, i think it's a little bit

disingenuous because words are flippantly thrown around. so-and-so says autonomous come when solicitor's autopilot, self driving. what the consumer thinks is i come out of my home, i hit a button and that car will take me anywhere in america anytime and any conditions. i think of all know is not the case. >> watch tonight at eight eastern on c-span2. >> norman lederman is the author and professor of math and science education at the illinois institute of technology. he addressed an audience at westminster college in fulton, missouri, about scientific literacy and next-generation for teaching science. this is about 45 minutes. >> when we talk about today revolves around the next-generation science standards, which can only people are familiar with -- probably

going okay. so those are a new set of standards that came out in 2013, and the acronym is in gss is different next-generation science standards and i have some concerns about a special with respect to the areas that you mentioned that i'm interested in an inquiry and nature science and his title, i like titles, eventually will make sense when it get to the end of a target if it doesn't then it's a good thing my talk is going to end. anyway, entitled the ends may justify the means but the means should never become the ends. and as you mentioned i'm a former high school teacher, biology teacher and chemistry. i've been an assigned profession for over 30 years and i love science and i love kids. this first picture is two of my

grandchildren. and that's another grandchild. i have three. we are trying to get them to love science but young kids are extremely curious about the world and where they live and it's not hard to get them excited. somehow over the years in schools, we get students interested in science. we give them scared of science. they take the minimum science they can, and it's unfortunate because those are future voting citizens and the general public out there doesn't have the highest attitude about science as well. it's unfortunate because everyday i world becomes more scientifically and technologically-based. a lot of the decisions we make need some understanding of science we can make an informed decision.

scientists disagree a lot. this gets portrayed in newspapers on tv, and the public very often asked react and make decisions about their personal life, what they eat and what they do and what's right for the environment. and so science is critical when we like it or not, and my emphasis has always been on the public's understanding of how science works and what applications it has with the knowledge that those are signs textbooks and besides we hear about every day. if you go to washington, d.c. on the rotund and the national academy of sciences, there is a saying they are, what's on that ceiling is one possible answer to the question. which i will let you refer a second or it seems a little bit

militaristic, but it's a pretty standard definition if someone asked you what science is. science is an interesting thing because we recognize it but if we are asked to define it's not so easy to define. when i was at oregon state university, which was many years before i was in chicago, there was a paleobiology is to you to work with a massive the question what is science, and his answer, although the different than the first one you saw. likes to be provocative. he was a great speaker this conference. he tries to get people jazzed up by using things like lies and deceiving the public. but he's just trying to get people to understand that science is not as infallible as many of us believe and that

scientists do the best they can with the data they have and they make inferences from the data. that's what he's really trying to say. those differences of what we use to describe how the world works and all the phenomena we see how the works. by does mean that we are laying. if i were in a classroom and i was asking my students what is science, or i'm working with a group of teachers and asking them what is science, really want to focus on is there are three parts to science. the first one we are all for me with. it's a body of knowledge. pick up any science textbook, commission, biology and the pages are filled with the current knowledge of science. the new standards call the main foundational models disciplinary core ideas and that these overarching or integrating ideas

called crosscutting concepts. things like equilibrium, things like homeostasis, things like osmosis and so on. you are filled with things called theories and things called applause and it goes on and on the. on. i'm not understand a lot of time talking about that today because the main interest i have is in the second thing appear, and the third which i will reveal in a minute, that's tradition thing called science and cory. and a standard it's called science practices. it's the things that scientists do to answer the questions and to develop the knowledge that fills the textbooks. a way that science is done has implications for the end product which is the knowledge, the figures, the loss of the concepts that fill the textbooks. that's known as nature of science. that talks about the

characteristics of the knowledge which are directly derived from how the knowledge is developed. so it's things like all scientific thought is subject to change. it's never absolute. scientific knowledge is partly a function of observation and inference. scientific knowledge is empirically-based. scientists go out and collect data from the natural world. they don't just make up things about they think the world works. it always has to be tested against nature. so that's what nature of science is really referring to. i'm going to spend just about all of my talk on the second to. because all this is science that we learned in school, all the science that we learn from tv, all the science we get from museums, zoos and where ever we confront science, and want to learn about science, the ultimate goal has always been

scientific literacy. we want our general public to be able to take the knowledge that they have in science and use it to make informed decisions about personal issues, about societal issues to be productive citizens. that's the ultimate goal. to reach that goal we need to understand the knowledge but more importantly, my argument, we need to understand how that knowledge was developed and what are the characteristics of the knowledge because of the way it was developed. the same group of people that have on this evening, the first go, national academy of sciences, here is their definition of scientific literacy you're a little bit more long winded but it is saying the same thing, and that is that we want our students and our public to be able to use that knowledge to make informed decisions to that's what, we've been trying to reach this goal

of scientific literacy since the early 1900s, and by everyone's estimation we have not reached that goal yet so we continually try and try and but haven't got there yet. to get more specific about literacy, this also comes from the national academy of sciences. to be scientific, students have to learn how to ask him a find and determine answers to questions as derived from curiosity but everyday expenses but we want them to describe and predict natural phenomena. we want them to be able to read newspaper articles, watch tv and engage in public conversations about the validity of the conclusions that are being presented. so they can with the evidence the way the scientific knowledge in some informed away. identifying scientific issues that underlie national and local decisions, and express positions that are scientifically and

technologically informed. we hear a lot in the news, we did much more so than now, about whether this global warming or global cooling. we have many politicians that don't believe certain things the scientific community has almost total consensus on, and that's always existed in our world, and we want people to know enough about science be able to make sense of some of these positions and arguments. methods to generate is critical. that's another whizzing scientific inquiry. and two if i would argue it's based on evidence, same idea, just long winded. a little departure for a second because this shows up a lot. there were two phrases you will hear and most people will use

those interchangeably. but they don't mean the same thing your wife is science literacy and the other is scientific literacy your science literacy really is focusing on how much science you know. it's not about making decisions. it's not about applying the knowledge to make decisions. it's about how much science do you know. one place it is playing itself out right now is in this big push for stem, science technology and giving and mathematics. which was supposed to mean the science curriculum would be now integrated for those disciplines. but many universities, and mine included, have taken the emphasis on stem cell between we want to have more science, more technology, more engineering and more mathematics. the integration among those is not stressed. scientific illiteracy is more in

line with the position i'm talking about and more in line with the current national standards. and that is focusing things that are science and technology-based but there any context of the world we live in, our daily lives, and that's where the decision-making comes in. all decisions are not made just based on science that's involved because there are other factors, political factors, social factors that all or part of the decision. it's not as simple as we don't want to cut trees down anymore because we are trying to preserve the environment. i used to work in oregon and that was a big war that went on because many people were employed in the lumber industry. if you make a decision not to cut down anymore trees, you put a lot of people out of work. the people would be fighting from an economic decision versus something that's better for the environment.

they are not simple decisions. in the national standards, there is a stress on scientific practices and nature of science. in the ngss, nature of science have eight different components. one is that all scientific investigations use a variety of methods. not just one. one major misconception in the world here is that all scientific investigations follow one set sequence of steps that as the scientific method. ..

up until 19 56, we used to believe 1929 and 48 chromosomes and what is that about? the idea that was raised that there are 46 chromosomes that we still hope to but it wasn't until 1956 and because of advancement in technology, sometimes technology is simply reinterpreting the same data and

that we have a different view of how things have worked. we used to think that dinosaurs were closely related to reptiles and now we believe they are more related to birds. there are many, many other examples. models, laws and theories are critical to science. they help explain or provide framework for the world in which we live. scientific knowledge for the assumptions of science is that there is water and consistency in natural systems. if we find gravity here, we are going to assume it will be everywhere else on the earth, rather than every location being different. science is a human endeavor. that is something that is pretty big. it means a lot more than humans do science, which is true, true, but because humans do science, it has limitations and biases and it all involves creativity

and imagination and all those characteristics. i skipped over that science is a way of knowing which is another vague term. what does that mean? part of it is that the way science is done is different than other disciplines are performed. science addresses questions about the natural and mature world. there are many questions that are not answerable through science. what is love? what is good? what is bad? those are not scientific questions. when we talk about science practices and scientific inquiry, it can be bag and people have written books about this and they often come out to with an addendum redefining what they mean. in curricular reform, it's used in three different ways. one is a a teaching approach. if you are preparing to be a

teacher, 11 of the things you'll hear a lot from the classes is, you should teach science in a way that is very similar to the way scientists use science. you let students develop questions and collect data. you let them develop research design and analyze data and they come up with the conclusions and many argue about the conclusions. the idea behind it is that students do science the way scientists do it, they will and up learning better and they still debate about that. but i am on the inquiry side of that debate. there are two others, one is a performance board, giving your kids the ability to do the things that scientists do. making observations, making inferences, drawing conclusions, developing questions, that is the doing of inquiry. lesson on there, the one that is often ignored that essential to the work that i do is knowledge about inquiry, stepping back and

looking at what we just did and why we did it that way. it's easy to teach students in the school to design an experiment with the control group. it doesn't take very long to do that. but then to have the student step back, and you asked them, why do why do we need a control, they can't answer the question. it's not uncommon for students in science classes to be able to do something that they don't understand what they're doing. my focus is, i think it's better if students understand what it is they are being asked to do, but often that is left out and students just do whatever the teacher tells them to do and it often comes down like a esibbook, a set of of pred steps that they follow without thinking. specific science practices, the way they are listed in the science standards, i call this the list of birds.

students learn how to ask questions, develop and use models, plan and carry out investigations, using mathematics and computational, analyzing, interposing interpreting data, coming up with explanations, engaging in arguments about the evidence, because it's not uncommon in a science class, if you are teaching, that the students, somewhere along the line, the activity, not every group in that class will come up with the same answer. usually that is pretrade as someone did something wrong, but it is very typical of science for people following the same procedures, trying to answer the same questions, coming up with different answers. neither one of them did anything wrong. obtaining and evaluating and communicating information. these are the things you can teach students to do. it's a performance idea of inquiry.

it is formatted in a way, i don't think you can read everything that's there but it's called three-dimensional science learning for the one on the left are the science engineering practices or inquiry, the ones in the middle are disciplinary core ideas, those those are the foundational theories, laws, ideas and science, and on the far right is called close concepts which are overarching ideas in science that integrate all the different science areas and are much bigger than individual factoids or facts. the two things that are circled in red are labeled as connections to nature and science. they are not considered standards, they are not necessarily things that kids will ever be tested or evaluated on, and they are things that i feel right now the new standards that will be left out in the curriculum totally.

when the next generation of science is being developed, there's a big debate about what to do with nature and science and actually that pushed to the back much further than our previous standards which concerns me because i've been working in that area for 30 years. now it's kind of an appendix. what do we want students to know? i work with teachers on a much simplified list and it is that all investigations begin with a question. it may not be a hypothesis. that's another misconception that you have to begin with the hypothesis. a lot of times there are just general questions without protection being made. there is no single set or sequence of steps that are always filed known as the scientific method. were not saying a scientific method doesn't exist, but it's not an accurate representation of all science. inquiry procedures are guided by the question which is why we

have to start with the question that guides your investigation and guides the data you collect and as i said before, all all students doing the same thing trying to answer the same question may not get the same result because they interpret things differently. they focus on some data and not all data. increase procedures can influence the results. research conclusions must be consistent with the data collected and i often have students say, we didn't get what we were supposed to. i said what did you mean? you use the data you had in the data are what they are. the previous speaker said it's just the way it is. there's always a conclusion and the clues conclusion must be consistent with the data. data are not the same as scientific evidence.

we get the data, but the human mind interprets that data and then it becomes evidence for your viewpoint, evidence evidence against it or it becomes irrelevant. evidence is really data that's been interpreted by the human mind. explorations developed, these are things you don't do like observing and inferring and concluding. these are things that students, looking back on what they did, they come to realize, this is knowledge about inquiry and knowledge about science. historically, these have always been mixed up and they've always been there but they've always been mixed up. in the benchmarks program that came about in 1993, nature science was an overarching theme

within which inquiry was included. the national science education standards from 1996 put them together in different ways. they were two separate things that were related but they were different. the and gss now has a subset of inquiries and that's what i call the little red circles where they were aiming the increase section and interestingly enough, the knowledge about inquiry or a subset of nature of science. it looks like three and four are contradictory, but the the key thing is the word about in number four. number three is about doing inquiry, doing science and number four is understanding about what you did. you can see from this that nature science and inquiry

sometimes been kept separate, sometimes are at a hierarchy with nature science at the top and sometimes the others at the top. they're always there with a cause a lot of confusion. what we have found out from over 60 years of research on scientific inquiry and nature of science is that k-12 students, and the general public did not have adequate conceptions of inquiry or the nature of science. these two things are critical to achieve scientific literacy. it is not just the knowledge, it's understanding how the knowledge was developed and what are the implications for the nature of the knowledge and how i make decisions based on that. the the same thing is true with teachers. they don't typically have good understandings of nature and science of inquiry. it's problematic because teachers are expected to teach these things but how could they teach something they do not know

it's not that they can't understand it, it's just that if you think back to your science class, you were ugly for talk anything about nature of science or scientific inquiry. i. i wasn't. i didn't learn about nature of science and about inquiry until after i had a masters degree in biology. it was just not included in any instruction i have had. it's actually been in the goals since 1907 but we still have a long way to go on that. teachers conception are not automatically translated into how they teach. when i was a graduate student i used to believe if you understood nature of science it would affect how you teach. it doesn't. they are not related. it should be, but they are not. teachers, and this relates to high-stakes testing that were getting more more into does not

regard understandings of nature science as having equal status with the traditional core set of ideas. that is because teachers tend to teach toward the test because they want to or they have no choice. they don't value it as much as other areas. finally, what we found out recently is that understanding nature of science and inquiry are best taught through critical reflection on what the students have done. we talked about the extent we just did and why we did it the way we did it. without that reflection, students don't come to understand that. students learn the nature of science just by doing science.

there are many people that believe that today. when students don't go home at night, in my class today mom, not every group got the same answer. that's because we are all different people with different backgrounds and that's why we and up with different answers. that conversation does not happen automatically and frankly if more kids did that, i would be a little worried. some of the best students do that but most of them do not. they just think somebody did something wrong. the explicit approach doesn't work. the historical approach is another one that gets looked at and that is going to the historical development of scientific ideas. we have seen what makes sense but the mind works in strange ways and we logically progress in a linear fashion than what we used to know.

the message from the history of science approach tends to be that students can step out and they tend to think that these people that used to believe dinosaurs were related to reptiles were just ignorant, which they weren't at the times they came to these conclusions. the research shows that at some possible for students to do that. we come to every situation with some kind of background knowledge and background knowledge filters how we interpret what we see. 300 years ago if you looked up in the sky and saw that white object and asked you what it is, you would would say that's the moon. no, you would say that the planet planet. today you would say it's the moon.

same object, same place in the sky and one time we called it a planet and now we call it a moon. 300 years ago, we used to believe the earth was the center of the solar system and anything that orbits was a planet. now we believe the sun is the center of the solar system and anything that over it's the sun is a planet, that's why we are a planet and anything that orbits a planet is a moon or satellite. depending on what theoretical framework we have about the world, it biases, it guides how you interpret what you are looking at. there are no value free and rotations. they are all within the framework you are working with. the exclusive approaches one that treats nature of science and treats an inquiry or practices just like anything else you're trying to teach. it is a goal of your instruction , it is planned for,

it doesn't happen by accident, and that's what makes it explicit. explicit doesn't mean a lecture. it means it's visible in the classroom and its talked about in the classroom. hopefully more so by the students them by the teacher. the students don't have to use these views, unless that takes place, they don't come to learn nature of science or inquiry and that's the focus of my work and i think what's going on in the next generation has forgotten that idea, even though there are 30 years of of research on it. generally, teachers know this, students won't learn what is not taught. you may be able to read that fine print at the very bottom which says generally speaking, the students learned all kinds

of things you didn't intend them to learn, but if you look at what they wrote down, your class would be surprised at some of the stuff that's in there. don't ask me later, and less you talk about it, things students won't learn what you intend. my big summary points are these. this is a necessary platform of learning about scientific practices and the status of scientific knowledge. i'm not advocating at all that we should stop focusing on kids doing investigations. i am all for that. it is absolutely necessary, it gives them an idea or develop the skills that scientists use every day, but it's not enough just to do the science. doing science is necessary, but

it is not sufficient. it is a means to him and i would get back to that title, it's a means to the end of students achievement of scientific literacy. if we want students to be scientifically literate, we need to put them in situations where they can reflect back on what they did, develop their understanding of inquiry, develop an understanding of the status of knowledge and realize that it may change, realize that it's not absolute, realize that realize that it's partly a function of human imagination and inference and also a function of actual data. inquiry has a platform that students need to refer back to. if you go home tonight and you see a debate on the news about whether a genetically modified food is healthy or not, none of

you are going to run out your garage or your backyard and do an investigation. we put students in the position wherein and we have an idea about how science work and why it works that way and when they're confronted with these decisions they need to make, they use that to wait the evidence. when we just stop at students doing inquiry, we stop at that point, were not going far enough that's why i said in my title, the means which is critical become the end point. we stopped at them having to do the science practices and were missing this whole other step which is absolutely essential. the other steps were in the last set in 1996 but now they're just

an afterthought. okay. students need to critically reflect on the signs they've done, develop an understanding its implications in the status of the knowledge. they need to reflect on those inquiry but without that reflection, they don't have the understanding they need to make the decision. without these understandings they miss the basic foundational science and the concepts to enable students to make informed decisions about scientifically based issues. we need the knowledge, we need need to know how it's developed and we need to know what status that knowledge has. in doing science, it's absolutely necessary, as a

means, but it is not the end we desire. the end point always has been and probably always will be scientific literacy. if we just focused on the knowledge or the doing and developing the knowledge, we are missing at least two components of scientific literacy. there's actually more than i haven't even talked about today. that's my message. if you are becoming a teacher, make make sure you engage your students and what you've had them done and what that means to them and their lives. if you are not a science teacher but are consuming, people that are consuming science, think about and ask yourself, how did did they come up with that. what was the data they used to come up with that. what's that mean? that picture on page five of your textbook of the adam, it

looks like the solar system, no one has ever seen in adam. those students believe that someone with a strong enough microsoft microscope saw that adam and the picture in the book is instructional but we don't even believe in adam looks that way anymore. that's based on an old model that looks like a solar system but the adam doesn't look that way at all. so, same thing if you are in a geology class, there's a nice picture of all the different layers of the earth, all the way down to the center and they'll even tell you what the center is made out of whether it's solid or liquid. as far as they know, no one has been to the center of the earth. that's an inference we have made with various types of technology which have evolved over the years but no one has ever seen

it. students need to know where that picture in the book comes from. they need to know what does it mean that it's an inference, that means it can change when we have a different view, in fact, in fact, we used to have a different view of it, and that becomes important because it helps guide future science because all of those parts of the adam drive the types of questions we ask, they they guide what answers are considered acceptable or valid and there really are critical things for the students to know. that is if we want to get to the end point. so, it's a great platform, it's a great means, but it's not the end point.

the in point is scientific literacy. we can't cut ourselves short. with that, i will cut myself short and ask if there are any questions. [applause] >> thank you very much dr. letterman. if anyone has any questions, come on down and we will take your questions one at a time. >> i'm supposed to say i learned something totally clear. okay, if if there's no questions. >> okay, you saved me. >> thank you for your talk. i thought it was very interesting. i was wondering, something that was implied throughout your entire talk was the philosophy,

do you feel as if students need to learn about the philosophy of science to understand science? do think it should be implement it into high school from an early age? >> okay so this is actually a great question and it's actually the core of a continuing debate. i will tell you what the debate is and where i stand on this debate and why i stand the way i do. there are many people who feel it's very important for students to know, and if they get a good understanding of philosophy and history of science it will enable them to understand their science better and understand nature of science and how science is done better. we always have to remember that we are teaching biology,

chemistry, physics, but we are not teaching philosophy. many. many of my philosophy friends argue for that. we need to have more philosophy in our