available online, and i think -- walk you through it a little bit slower than that. so that was a tremendous amount of detail. i will ask you wait for the microphone when you have a question, and certainly keep it in the form of a question rather than a comment. right over here. >> so, your answer to the question about the financial crisis systematic is regulations, financial regulations. and if this is the answer, did it enable or force traders into this? >> i would want to clarify. my answer is that fannie mae and freddie mac didn't perceive themselves subject to a bankruptcy constraint, and so only they had the market power to keep that bubble going for as long as it went. if it had just been private label securitization, then you would have seen the same thing happen that's happened in the 1990s.

the shorts would have won that battle early on. i mean, not right away. it took a while. but how many people here in washington knew about the financial debacle of the 1990s? my point. it didn't make washington, because it wasn't systemic, because fannie mae and freddie mac weren't in it, and the double bubble collapsed. it's the price bubble. focus on the price bubble. what could cause prices to continue to go up? not that everybody thinks housing prices only go up and all these psychological explanations. it's the power of the government that doesn't stop in a bubble. and they couldn't stop, because the regulators said they had to maintain a 50% market share. so i am saying that the bad regulation on the part of the private sector -- so-called private sector, which was really public label securities, fed them. and because they were competing with them, just kept them going beyond the point of no return does that clarify it? >> right over here. >> thank you. in the course of your

presentation, which is an excellent one covering most of the ongoing crisis, which actually goes back to 1966, according to henry kauffman, do you realize that in your description of the bank's activities, that you have really invalidated what peter said? because the too big to fail banks are part and parcel of all of this. they were in all of these transactions, and they also have indulged in capital arbitrage. at every point. so looking forward, you have this is what jpm is about. so how do you factor that in, that -- have you identified the same phenomenon that you did

with fannie and freddie? >> that's an excellent question. i would say that too big to fail is a huge problem, and, you know, going from fannie and freddie that are too big to fail. if they put the same political risk on the banks, and then, you know, lever them up the same way. and from a regulatory perspective, they have how allowed this to happen. it was chronic. the banks were way overleveraged. the fed had papers on regulatory arbitrage going back to 1992, but they never stopped it. it would be no better. now, one might hope that the political pressures that could be put on a fannie mae and freddie mac as government-sponsored enterprises would be less in terms of the banking institution, that that is they would have to put political pressure to say we don't want to be pushed to make bad loans. but i understand the risk, and i think that, you know, you want to try to have a securitization market that relies on the underlying loans that has as many issuers as possible so that

you're not focusing all that risk into big systematically important institutions. the home loan banks have been considered one option to do that, but then again, they're systematically important. so you can shift the risk there, and they would fail. >> yeah, i didn't see a lot of discussion in your presentation about record low interest rates being a factor in the housing bubble. and perhaps even poor monetary policy on the part of the federal reserve. i was hoping maybe you could talk a little bit about that. >> sure. as i said, there's a thousand stories. and, you know, this was one of the stories. interest rates are very low, but what i'm focused on is why it went into housing, right? interest rates were low, bubble could have gone anywhere. excess credit. this is the reason why it went into the housing bubble and it took a housing bubble to make that work. now, it's not just a low but the aaa, aa financing was extremely

low, and the seaming profitability, bigger losses were going to be at the end of the day. but you didn't recognize losses until the prices started to plummet. >> maybe if i could add a little bit to that. you certainly saw during the same time of the housing bubble similar booms and busts, you know, and the shopping mall market, the office market, any type of interest rate-sensitive market. so the point that kevin is making is, of course, these other markets went boom to bust but did not become systemic and did not bring the system done. we did not have a financial crisis because office prices declined. that cost a number of small banks to fail but that was not systemic. so those are the policy differences. but absolutely, i think interest rates played a role there. a question here. >> so, kevin, going back to your anecdote with your conversation with david maxwell.

so how -- how would you have recast that conversation now, knowing what you know now, or would you have said, yeah, david, i think you're right. >> the -- i was on a task force at about that time, policy task force. and when the savings and loans were under water -- the reason the savings and loans were under water, they had no choice but to make fixed rate loans, and funded with short-term deposits, and then monetary policy drove interest rates up, mortgage rates got to 17, 18%. so they were all under water. and the treasury solution to the savings and loan problem was to raise their taxes. take away their tax benefit, which wouldn't have saved them. so the real problem was, fannie mae was going to be allowed to go for broke. and savings and loans were told to go for broke, too. work your way out of this problem, and we won't tell anybody the capital is fake. but the savings and loans were told to go for broke in real estate. i did it in junk bonds and was

successful. the ones who did it in real estate and real estate development got wiped out. only partially successful, a big markdown in the bonds. so i don't know. what was the -- what would we do differently? i mean, there was never a good time. when the reagan administration came in, i contacted the council of economic advisers, and i said, you know, now is the time to do something when the fannie mae problem before it explodes. and, of course, the housing, you know, market was depressed when interest rates went up, oh, this isn't a good time. it's never a good time. >>. [ inaudible ] >> could he have kept the ball flying? why did he -- put them into conservatorship? >> oh, i didn't read his book. you would have to ask him. i think the chinese said, we -- these are government. if you think they're not government, we own a lot of them, we're telling you, these are government. and, you know, they didn't have any choice but to do what the chinese said, right? so if they wanted it more explicit that the government was going to back them, there was no -- because they were now sold

all over the globe, as government securities. nobody could say, oh, well, they're not backed now. in the 1980s, i tried to point out that fislik was only sponsored by the government, it wasn't backed. and they had a picture the next day when they figured that out, had had a picture of the chairman of the home loan bank system, also the chairman of the insurer in front of the government seal shaking hands with the treasury secretary, put that picture out to make sure everybody understood, oh, yeah, you know, we're going to be behind him, even though it started as just being a sponsored form of insurance. so they couldn't walk away at that point. too big. >> that's an important point to emphasize. prior to the early 2000s, securities were small, relatively minor. and you saw during the bubble that increased to almost a fifth. and i think the calculation, wrongly or rightly in the part of treasury was, if we did not honor and freddie and fannies,

the cost of treasury would go up, because given the number of treasury secretaries have -- i will note without any legal authority to do so -- gone overseas and said that freddie and fannie were backed by the federal government. it is worth noting that under secretary snow, they were trying to -- procedures were revolunteers versed when mr. paulson took over. curt. >> randall o'toole at the cato institute identified a lot of state and local governments imposed land use restrictions that limited the supply -- or the supply of new housing. and so i'm just wondering how that integrates into your analysis here. >> well, i think that if you look at that graph of house prices, and then you took that in terms of where there were

land use or -- they call it the planned community, you would find that the prices -- price rises were much bigger, where the supply was restricted and much less where you could build all you wanted. and so that's an average. so it was clearly true, i agree with it totally. >> question over here. >> you've studied the federal reaction to financial crisis, and you know dodd frank and all that stuff. fwifb given what you know now, what do you think is going to happen next, down the road? >> dodd frank was 2600 pages, so i think we're talking about the tens of thousands to 100,000 pages of regulation. and i can tell you, any one page of regulation had to have three law firms, because no two law firms would agree on what the regulations really meant. so you would have to have a third one. nobody is going to be able to figure out exactly how to be in

regulatory compliance. i have said that the volcker rule, which is intuitively, banks shouldn't be with -- betting with depositors' money. but the volcker rule was based on proprietary trading. and what i just told you was, it had nothing to do with either glass/steagall, which was sales and trading activity. they were bringing hedge funds on their balance sheet. and it had nothing to do with the trading and hedge funds. they were parking assets there, and they were parking the assets at twice their value, based on s.e.c. rules. so it's -- it makes intuitive sense they shouldn't have massing trading operations, but that's not what the problem was this last time around. it has nothing to do with it. and jpmorgan -- i mean, everybody's up in arms with them. but they had 110 regulators under the existing regulations. housed permanently in jc morgan's headquarters, and nobody ever had a clue what the trade was, and it's a relatively small fraction of one quarter's earnings. so getting really upset about

what was happening to jpmorgan. but to say that the regulators were going to stop it seems to me to be a bit farfetched. so the only thing in my view that finally worked was the market discipline of the shorts, took way too long. and that's what they're lambasting, politicians and regulators, we can't have these derivatives that -- they're basically shorting the regulators, right, saying this was a regulatory failure, now the whole thing is exposed when they bring the house of cards down. the idea -- treasury now has in its building 300 economists and others who are supposed to prevent systemic risk. they're in the belly of the beast. what are they going to be able to do? >> to reiterate that, i mean, i would say that the theme of both of dpgavin's papers is part of e rationale if not part of the primary driver of the financial crisis, we have decades long where we have replaced market discipline with regulatory oversight and you've seen failures, and dodd/frank

continues along the trend of trying to replace market discipline with regulatory oversight. and i think in that regard, it's almost bound to fail. i will note since the volcker rule was mentioned, exempt from the volcker rule are treasury and freddie and fannie securities. and, of course, bear stearns, half the securities taken to maiden lane 1 were freddie and fannie securities. again, i don't think my own opinion is dodd/frank is not going to help us avoid the next crisis and we need to be very careful about sovereign risk debt, even here in the united states, as well as agency risk debt and how that affect the next financial system. i know we are coming up on 1:00, and so i don't want to keep everybody for too long. so you know, we'll see if we've got one or two last questions and then wrap-up. right over here. >> do you think we can wind down the gses maybe by selling off the assets to enworth or mortgage corporations or do you have an idea, proposal of how we could do that? and do you think the 30-year

mortgage would go away if we were to get rid of the gses? >> winding down -- sort of a tough question. the reason ginny mae was created was to find down fannie mae and freddie mac and only left one part of fannie mae in existence and it was only for fha loans, had absolutely no point to exist once ginnie mae, outside of its chartering legislation went and created a new securities market. so of course you can wind them down. this whole notion that we won't have fixed rate loans without them, well, they're intermedi e intermediat intermediates. it turns out that when these institutions were created and when we got dependent on fixed rate mortgages, 85% of the market on the other side was fixed rate liabilities. it was all in life insurance companies, because we had relatively low insurance. if you go back to the 1970s, everybody has fixed rate nominal

liabilities going on forever. that's down to 15% of the market now. there are no fixed rate liabilities. in pension funds, all hedged to inflation. nobody wants that. so there is a very small other side of the market. if you want a fixed rate loan a pure gamble on your part that you can pay it off if interest rates go down, you're going to have to pay for it. freddie may and fannie mac aren't going to change the price unless they get subsidies that cost the taxpayer somehow. >> point to emphasize, at least the two risk inherent mortgage or credit risk and interest rate risk, freddie and fannie -- only to the extent they hold mortgages on their own portfolio do they take the interest rate risk. when they wrap it up into an mbs, they take the interest rate risk and fannie and freddie provide the credit guarantee. so i think it's important to keep in mind, the fundamental difference between a 30 and a 15 or 20 are the interest rate risks. and, again, that was not something that freddie and fannie necessarily took in place. i will note, we have procedures in law put into the housing and economic recovery act of 2008 where there are receivership provisions to wind down freddie

and fannie. the dodd/frank liquidation provisions mirror those to some extent. so put it this way. if you believe that dodd/frank gives us the power to wind down jpmorgan or citibank, you must by analogy believe we have the power to wind down freddie and fannie. if you believe we don't, then we don't. with that, i really want to thank our audience, and, again, emphasize both papers are online. i believe we have copies here, as well. and i know kevin is going to hang around to answer any other questions. thank you. >> thanks for coming.

here's a look at programs this afternoon. coming up, girl scout ceo an amarie chavez. then a hearing on railroad and highway security. that's followed by a discussion on this month's presidential elections in egypt, the runoff election june 16th and 17th. on the other c-span networks, the atlantic council holds a discussion this afternoon on europe's financial crisis, and how to get out of it. the ceo of deutsche bank will discuss european actions so far, and his thoughts for the future economic outlook in europe. that's at 5:00 eastern time on c-span. president obama is getting a little help from bill clinton at a trio of campaign fund raisers in new york this evening. they'll speak at a private home and then headline a gala at the

waldorf astoria hotel. you can see live coverage at 8:25 eastern on c-span. and the two will end the night at an event dubbed barack on broadway at the new amsterdam theater. wisconsin voters go to the polls tomorrow to decide whether to remove republican governor scott walker from office. he's facing a recall election two years into his term, and he's being challenged by the democratic mayor of milwaukee, tom barrett. they debated last week, and you can watch that debate tomorrow morning at 6:00 eastern on c-span. the ftc is primarily an enforcement agency, and has brought many, many good cases in the consumer privacy area. and has reached settlements with a lot of companies, google, facebook, about some of the promises -- privacy promises they made to consumers. >> i think self regulation is a tool that can be much more responsive to changes in the

marketplace. in a quicker way than regulation or certainly than passing laws can be. >> tonight, a look at the federal trade commission's enforcement the role in dealing with privacy on the internet with maureen olhausen at 8:00 eastern on c-span 2. well, over the past four years, pulitzer prize winning author david marenice has been researching and writing his book, "barack obama the story." he spoke with the relatives on the shores of lake victoria. he also toured the family homes and sights in kansas to find the origins of his mother's family. "barack obama the story" comes out in bookstores june 19th. but book tv will give an early look with exclusive pictures and video, including our trip to kenya, as we traveled with the author in january of 2010. so join us sunday, june 17th at 6:00 p.m. eastern time. and later at 7:30 that same

night, your phone calls, e-mails and tweets for david marnice, c-span 2's book tv. the girl scouts are celebrating their 100th anniversary this year. the organization's ceo, anna marie chavez, spoke recently at the national press club in washington. she talks about how the girl scouts have changed and where they go from here. we begin after the introduction. >> thank you. thank you, theresa, for that wonderful introduction. my mother appreciates the fact you used the official bio. she does take credit. i want to thank the head table. deborah, thank you so much for making this happen. to lydia, who is my colleague. i am really grateful to lead a national organization, but in partnership with 112 girl scout

councils across the country. and lydia leads the nation's capital here, and thank you for being here. to our national board represented by lisa gable to cony lindsey, our president. i bring her good wishes, as well. to those of you in the audience today to support us, and also girl scouts who, by the way, we work for every day, and we're so proud of you. you know, i wanted to start my remarks talking about a girl. a girl, a very special girl, a girl that grew up in china. and a little about this girl if you imagine her hand -- she didn't have fingers, just a palm and a thumb. but there was a family that traveled to china to adopt her in an orphanage. and they brought her to georgia, where they loved her and cared for her, but even the daily tasks of tying a shoe or picking up a toy was difficult for this young girl, who they named danielle. and danielle had lots of

aspirations, but the parents wanted to figure out what they could do for her in her life. so as anybody does these days, right, they googled a solution. and they found a whole community out there of people who want wanted to support this young lady. but they found a group in particular, a group of leaders who wanted to investigate a process to help this little girl named danielle. so this group, they went out, and for six months investigated different options. they visited manufacturing plants, they went to craft stores. and after six months and about 180 hours of research and work, they developed a prosthetic hand made out of molding -- sort of, you know, things they could figure out how to use in a craft store and velcro, and they put it on her hand, and it worked. and for the first time, danielle was able to write her name. well, these amazing individuals are called the flying monkeys. the flying monkeys.

really, truly. that's what their names are. it's a girl scout troop from aims, iowa. yes. ames. and they're so amazing that these members went on to win a global competition, beating out almost 200 other teams, and claiming a $20,000 prize to patent their device they call bob-1. now, it's a great story. and i tell it, because it not only inspires me, but it inspires other girls. you know, think about this. six intrepid middle school girls thinking about how do we create a hand for a little girl? so thinking about these girls, i really get sort of bullish about america's future, given the fact that we have girls out there that have incredible ingenuity, creativity, and not only that, they're thinking about other people and how they can help.

so as the chief executive officer for the girl scouts of the usa, i have the privilege and the honor of seeing these girls across the country. you know, this story has a good ending, but unfortunately, there is another side to this, which i will be very honest, distresses me. it distresses me, because i know remarkable girls trying to do great things, but will enough of them grow up to are their full potential? because, unfortunately, we don't see enough women in leadership positions across the country at this time. you know, if you look at congress, only 16% of our elected officials are women. across corporate america, women occupy only 15% of seats on boardrooms, and just 2% hold a top job at a fortune 500 company. women manage only 3% of all

hedge funds, and 10% of mutual funds. yet women own funds significantly outperform fund in general, even during tough times such as these. women hold just 16% of the top positions at movie studios and own fewer than 6% of tv stations in the united states. and currently, women make up only 6.5% of the science advisory board members at u.s. high-tech firms. so let me give you another image. imagine this. imagine a classroom in an elementary school with 50 kids, evenly divided between boys and girls. and then ask every single girl to leave the room except one. and ask the group of 25 boys and 1 girl to take on and solve a challenging problem. well, that's the situation we have here in the united states.

and unfortunately, you know, we are making progress in some areas. yes, young women are going on to college. you know, they're earning a degree. nearly half of all law students are girls, are women. but as i've noted, in too many cases, we're not getting girls from aspiration to action. especially when it comes to critical fields like science, technology, engineering and science. and math. so it's a vicious cycle. and as the saying goes, you can't buy something you can't see. and if there aren't enough successful women in it technology and engineering, girls can't sit back and go, i can do that. i see myself there. so, again, i work with a lot of girls. i travel the country, i -- one of the best jobs in the world is the job i'm sitting in today. i get to talk to girls ages 5 through 17. and they tell me their dreams.

but they also say, eagle 1 -- by the way, that's what the girl scouts call me. they say eagle 1, help us. because this is what the reality is for us. you know, i go to school, and i'm really psyched about math and science. and then around fourth grade people are like, girls don't do math and science. so then they opt out. then they go on, and they go to high school, and they're thinking about student government. and then they get up, and they do things, and unfortunately, some of the remarks are -- well, girls, that's being too bossy. why are you doing that? and then they go on into their careers, and, again, sometimes they don't see the female role models in the firms, companies they want to work at. so what they say to me, the girls honestly say, anna, help us. help us change the messages that girls are getting in today's society. because unfortunately, at girl scouts, we have a research institute that brings out some unfortunately negative data around girls. right now, our research says

that nearly 90% of girls say that the fashion industry in the media places a lot of pressure on them to be thin. and the fact is that 42% of girls in this country are growing up economically disadvantaged, and those rates are higher for hispanic and african-american girls in this country. and while 8 out of 10 girls are interested in interacting with successful women, a majority of them, 60%, say they haven't been offered a chance to visit the workplaces of successful women in their community during the lastel school year. now, is it any wonder why 61% of girls say that leadership is neither important to them or say that they don't want to be leaders? so i know that you're probably taking a pause with me, because, again, we've got to get beyond this data. now, looking at girls, specifically around stem -- we found a great statistic

recently. february 14th, valentine's day, we published a report that said girls love stem. and it's true. if you ask most girls, the majority of them, over 74% of them, will say, i love math ask science. what they want is a hand up. they want somebody to say, and come by them and mentor them around these issues. and talking to girls, we want to let them know, it's a career option. because, again, we can't have girls opting out. because they can change the world. you know what, it's not just about girl scouts. it's about all girls. you know, there's one girl in particular, her name is angela xang. amazing girl. she at the ripe age of 17 invented a nano particle. not just any nano particle, mind you, but one that kills cancer cells. and surprising -- not surprisingly, she won a $100,000 grand prize recently at a math ask science competition, and then coming up right next to her