history. that's what this reform is all about. [applause] >> this legislation will also lower costs for families and for businesses and for the federal government, reducing our deficit by over $1 trillion in the next two decades. it is paid for. it is fiscally responsible and help lift a decades' long drag on our economy. that's what you all made happen. [applause] . . .

>> you know, there are -- there are few tougher jobs in politics or government then leading one of our legislative chambers. there are men and women who come from different places and face different pressures, reach different conclusions about the same thing and field deeply concerned about different things. by necessity, leaders have to speak to those different concerns. it is not always tidy. it is not always easy. perhaps the greatest and most of

all challenges coupled with these is to advance the dreams of all people. we are blessed by leaders in each chamber who do their jobs for well but who have never lost sight of their larger mission. they did not play for the poor -- short term. they did not play to the polls or politics. one of the best speakers the house of representatives has ever had, speaker nancy pelosi. [cheers and applause]

nancy! one of the best majority leader's the senate has had, mr. harry reid. [cheers and applause] to all of the terrific committee chairs, all the members of congress who did what was difficult but did what was right. and passed health care reform, this generation will thank you and the next generation. this victory was made possible by the painstaking work of members of this administration, including our outstanding secretary of health and human services, kathleen sebelius. [applause]

and one of the unsung heroes of this effort, nancy [unintelligible] [applause] today, i am signing this re form bill in to a lot on behalf of my mother, who argued with insurance companies even as she battled cancer in her final days. i am sending it for ryanne smith. he runs a small business with five employees.

he is trying to do the right thing. this bill will help him of for that coverage. i am signing it for an 11-year- old who is also here. marcellus -- [applause] marcellus lost his mom to an illness. she did not have insurance and could not afford the care she needed. in her memory, he has told the story across america so that no other children have to go through what his family has experienced. [applause] i am sending it for natoma who had to give up her health

coverage after her rates were jacked up by more than 40%. she was terrified that illness would mean she would lose the house her parents built so she gave up her insurance. she is lying in a hospital bed as we speak, faced with just such an illness, praying that she can somehow afford to get well without insurance. her family is here today because she cannot be. her sister connie is here. connie, stand-up. [applause] i am sending this bill for leaders who took up this caused her degenerations. teddy roosevelt to franklin roosevelt. from harry truman to lyndon johnson, bill and hillary clinton, to one of the deans who

has been fighting this along, john dingle. [applause] thto senator ted kennedy. it is fitting that his widow vicki is here. [applause] it is fitting that teddy's would go vicki is here -- widow vicki is here and her son patrick who has made this a reality.

[applause] i remember seeing ted walk through the store in a summit in this room a year ago, one of his last public appearances. it was hard for him to make it. he was confident that we would do the right thing. our presence here today is remarkable and improbable. with all the punditry and the lobbying, all the game playing that passes for governing in washington, it has been easy at times to doubt our ability to do such a big, complicated thing. it is a wonder, is there a limit to what we can achieve?

it is easy to succumb to the sense of cynicism about what is possible in this country. today, we are affirming that essential truth. the truth every generation is called to rediscover for itself. that we're not an asian that skills back its aspirations. we're not a nation that scales back its aspirations. we do not fall prey to fear. we're not a nation that does what is easy. that is not who we are. that is not how we got here. we are a nation that faces its challenges and accepts its responsibilities. we are a nation that does what is hard. what is necessary, what is right. here in this country, we shape our own destiny. that is what we do. that is who we are. that is what makes us the united states of america. we have enshrined as soon as i sign this bill the core

principles that everybody should have some basic security when it comes to their health care. [applause] and it is an extraordinary achievement that has happened because of all of you and the advocates all across the country so thank you, thank you, god bless you, and may god bless the united states of america. [applause] thank you. thank you. all right. i would now like to call up to stage the members of congress who made this possible and the americans who will benefit from these reforms. we will sign this bill.

>> thisi s going to -- this is going to take a little while. [applause] i have to use every pen, so this is going to take a really long time. [laughter] i did not practice.

[inaudible conversations]

[inaudible conversations] [applause] [applause] [applause]

[applause] [inaudible conversations]

[inaudible conversations]

[inaudible conversations] [inaudible conversations]

[inaudible conversations]

[inaudible conversations] [inaudible conversations]

[inaudible conversations]

[inaudible conversations]

[inaudible conversations] [inaudible conversations]

[inaudible conversations]

[inaudible conversations]

[inaudible conversations] [inaudible conversations]

[inaudible conversations]

[no audio] [inaudible conversations]

[cheers and applause] [applause] >> ladies and gentlemen, the president and vice president of the united states. [applause] >> thank you wahl. -- thank you all.

>> yes we can! >> yes, he did. [laughter] thank you for being here. please be seated. ladies and gentlemen, to state the obvious, this is truly a historic day. it -- as all of you know, history is not nearly what is printed in our textbooks. it does not begin or end with a stroke of japan. history is made. when and women decide that there is a greater risk in excepting the situation that we cannot bear that is stealing -- and steeling our spines. history is made when the leaders

passion is matched with his principal in service of his country. mr. president, your passion to make the lives of ordinary americans better has been on display. and the principles that guided your public service, beginning when you were a community organizer have led this nation to this moment. 30 minutes ago, by the stroke of your pen, you began the process of making life better for tens of millions of americans today, and for many more. [applause] for much too long, americans have been denied what every human being is entitled to. decent, affordable health care.

starting with teddy roosevelt, straight through to you, mr. president, everyone else tried. they were great men. they gave it their best. they came up short but you succeeded, mr. president, and we owe you for that. [applause] as i said earlier, i quoted virgil, the classic greek poet who once said the greatest wealth is held. the greatest wealth is health. you have made as a nobler and wealthier nations by providing for the health of your fellow citizens. ladies and tillman, the president of the united states of america, barack obama. [applause]

>> thank you, everybody. thank you. thank you. thank you, everybody. please be seated. we want to do this twice. there are so many people we have to think. as we look around the room, we have got leaders of labor who helped to make this happen. we have got ordinary folks who knocked on doors, made phone calls at the last minute to get this thing over the top by extraordinary members of my cabinet, we got some additional members of congress who helped lead the charge on this. my staff boise are still here -- who i see are still here. i thought they were going to quit but they stuck it out with me.

the main purpose here is to say thank you. and thank you on behalf of the american people. after a century of striving, after a year of debate, after a historic vote, health care reform is no longer and on that promise. it is the law of the land. [applause] it is the law of the land. [applause] and although it may be my signature that is affixed to the bottom of this bill, it was your work, your commitment, your unyielding hope that made this victory possible. when the special interests deployed in army of lobbyists, an onslaught of negative ads,

but to preserve the status quo, you did not give up. you hit the phones and you took to the streets. you mobilized and to organize. you turned up the pressure and you kept up the fight. when the pundits were obsessing over who was up and who was down, you never lost sight of what was right and what was wrong. you knew this was not about the fortunes of a party. this was about the future of our country. [applause] when the opposition said this was not the right time, it did not want to wait. another year or another decade or another generation for reform. you felt the fierce urgency of now. you met the lies with truth and you met cynicism with conviction. most of all, you met fear with a

force that is a lot more powerful. that is faith in america. you met to it with hope. -- met it with hope. [applause] despite decades in which washington failed to tackle our toughest challenges, despite the smallness of what passes for politics these days, despite those who said progress was impossible, he made people believe -- you made people believe that people that love this country can still change it. it is your victory. it is a victory for the united states of america. [applause] for two years in the campaign trail and the past year as we work to the reform our system of health insurance, folks like

you propelled this movement and kept us fixed on what was stake in this fight. rarely has a day gone by that i have not heard from someone personally whether it is in all but -- a letter or e-mail or town hall that has reminded me why we did not give up. who reminded me why we could not quit. i heard from ryan smith who runs a small business with five employees. he is trying to do the right thing, paying for half of the cost of coverage for his workers. but as his previous keep -- premiums go up, he is worried he will have to stop offering health care. but because of this bill, he is now going to be getting tax credits that allow him to do what he knows is the right thing to do, and that will be true for millions of employers all across america. [applause]

i heard the story of 11-year-old marcellus who is right here, looking sharp. [applause] he and i made sure to coordinate our ties. it looks good. [laughter] [applause] marcellus is a wonderful young man. he lost his mom to illness. she did not have insurance. she could not afford the care that she needed. in her memory, marcells has -- marcellus has told her story across the nation so no one would have to go through what his family has experienced. that is why we do not quit.

[applause] i heard from folks like natoma canfield who had to give rep her health care coverage after rates were jacked up by more than 40%. she was terrified that an illness would lose the house that her parents built. she knew that she was burdened by this huge premiums that she would not be able to pay the mortgage so she decided not to keep her health insurance. she is now lying in a hospital bed as we speak, faced with just such an illness and she is praying that she can somehow afford to get well. her sister connie is here today. [applause] it is because of her family that we could not quit. [applause]

i met people like ashley who met worked byfor my campaign. where is she? she is up front. she does not like waving. ashley decided to get involved with our campaign a couple of years ago because her own mother lost her job, and a with it, her health insurance when she got sick. they had to file a bankruptcy. and so actually worked tirelessly, not to get reelected, but to sell the problem. the millions of families across the country were facing. each of these a lot -- americans made their voices heard. it is because of them so many others, so many of you that real, meaningful changes coming to the united states of america. it is because of you that we did

not quit. it is because of you that congress did not quit. it is because of view that i did not quit. it is because of you. [applause] now, let me tell you what change looks like. because those fighting change are still out there, still making a lot of noise about what this reform means. i want the american people to

understand it and look it up for yourself. go on our website or any credible news outlet and look in terms of what reform will mean for you. [laughter] [applause] i said this once or twice, but it bears repeating. if you like your current insurance, you will keep your insurance. no government takeover. nobody is changing what you have got if you are happy with it. if you like your doctor, you will be able to keep your doctor. more people will keep their doctors because your coverage will be more secure and more stable than it was before i sign this legislation. and now that this legislation has passed, you do not have to take my word for it.

you will be able to see it in your own lives. i heard one of the republican leaders say, this is going to be armageddon. two months from now, six months from now, you can check it out and we will look around. and we will see. it did not have to take my word for it. -- you do not have to take my word for it. what works in our system will not change. and a lot of people are happy with the health care they have got and that will not change because of this legislation. here is what will change. here is what will change right away. this year, we will start offering tax credits to 4 million small businesses. folks like ryan will get a tax breaks and can afford the coverage he has already

provided for his employees and who knows, because of that tax break, he may decide to hire a couple more folks in his small business because of this legislation. [applause] this year, tens of thousands of uninsured americans with a pre- existing condition and parents whose children have a pre- existing condition will finally be able to purchase the coverage they need. that means folks like natoma canfield will have access to affordable health care insurance. that happens this year. [applause] this year, insurance companies will no longer be able to drop people's coverage when they get sick or place lifetime limits or restricted annual limits on the amount of care that can receive. this year, all new insurance plans will be required to offer

free preventive care. this year, and adults will be able to stay on their parents policies until they're 26 years old. that all happens this year. [applause] this year, seniors to fall in the coverage gap known as the doughnut hole will get some help to help pay for prescription drugs. i want seniors to know, despite what some have said, these reforms will not cut your guaranteed benefits. let me repeat that. it will not cut york benefits period. i would be wary of anyone who claims otherwise. these reforms will not give the government more control over your health care, they certainly will not give the insurance companies more control over your health care. these reforms give you more control over your health care. and that is only the beginning.

that is only the beginning. after more than a decade, we renewed the indian health care improvement act. [applause] the other changes i am signing into law will take several years to implement fully. this is a difficult, complex issue and we want to get it right. one of these reforms is the creation of the health insurance exchange. this is one of the most important reforms. originally, i should point out, it was a republican idea. imagine that. [laughter] the ideas, -- idea is there are people or small businesses buying health care.

they have no leverage. they have no bargaining power with insurance companies. but now, what we're going to do is create exchanges all across the country where uninsured people, small businesses, they are going to be able to purchase affordable quality insurance. there will be part of a big pool just like federal employees are part of a big pool. they will have the same choice of private health insurance that members of congress get for themselves. that is going to happen. as a consequence of this legislation. when this exchange is up and running, not only because of a better bargaining power will they see their premiums reduced, will people get a better deal, but millions of people who still not -- cannot afford it will get tax breaks so they can afford coverage. this represents the largest middle class tax cut for health care in our history. it is going to mean that

millions of people can get health care that do not have it currently. [applause] now, for those of us who fought so hard for these reforms and believe in them so deeply, our job is not finished. we're going to have to see to it that these reforms are administered fairly and responsibly. this includes rooting out waste and fraud and abuse in the system. that is how we will extend the life of medicare and bring down health-care costs for families and businesses and government. it is through these reforms that we achieve the biggest reductions in our long-term deficits since the balanced budget act of the 1990's. for all those folks out there who are talking about being fiscal hawks and did not do much when they were in power, let's just remind them that according to the congressional budget office, this represents over one

trillion dollars worth of production that is being done in a smart way. for those who have been suspicious of reform, and there are a lot of wonderful folks out there who with all the noise got concerned. because of the misinformation that has marred this debate, i just repeat, do not take my word for it. go to our website, white house.gov, i doubt how reform will affect you. i am confident you will like what you see. a common-sense approach that maintains the private insurance system but makes it work for everybody. makes it work not just for the insurance companies, but makes it work for you. so that is what health reform is all about. now, as long as a road as this has been, we all know our journey is far from over.

there is still the work to do to rebuild this economy. there is still work to do to spur on hiring. there is work to do to improve our schools and make sure every child has a decent education. there is work to do to reduce our dependence on foreign oil. there is more work to do to provide greater economic security to a middle class that has been struggling for a decade. this victory does not erase the many serious challenges we face as a nation. those challenges have been allowed to linger for years, even decades. we're not going to solve them all overnight. as we tackle all these other challenges that we face, as we continue on this journey, we can take our next steps with new confidence, with a new wind at our backs. because we know it is still possible to big things -- do big things in america. it is possible to rise above the skepticism, the cynicism, the

fear, because we know it is possible to fulfil our duties to one another and a future generation, so yes, this has been a difficult two years and it will be difficult days ahead. let us always remember the lesson of this day and listen of history, that we, as a people, do not shrink from a challenge, we overcome it. we did not fear the future. we shape the future. that is what we do. that is who we are. that makes us the united states of america. god bless us and god bless the united states of america. [applause]

[applause] [inaudible conversations]

[inaudible conversations] [inaudible conversations]

[inaudible conversations] ♪

♪ [inaudible conversations] [inaudible conversations]

[inaudible conversations]

[inaudible conversations]

[inaudible conversations] >> follow the continued health care debate online at c- span.org/healthcare. you'll find hundreds of hours of video and from markups to the signing ceremony. one of our guests this morning was the founder and editor of " the weekly standard." this is 40 minutes. this for a [captions copyright national cable satellite corp. 2010] host: mislocate inside the archives here in washington d.c.. -- this is looking into the archives here in washington d.c.. and we welcome bill kristol from the codey standard -- from the "weekly standard".

has the government fulfilled its mission to educate the fish -- the people? guest: its vision is not really to educate the people. about 92% of the spending of state and local. and obviously if you go to school in fairfax county, where our kids go to public school, the decisions are made where they should be made, but the state or the county. some places, by the city or town. the federal department of education can play a role. i came to washington to work in the education department along time ago, actually. to work for bill bennett when he was education secretary. and we try to play a role to stimulate debate about education and encouge refm and encouraging excellence, some of the same questions asked here were questions that we heard 25 years ago. huddy make sure that kids are getting pushed and get a chance

to compete with those around the world and the best opportunities they can. education is not that changed. the good news is that people understand how important education is. the good news is that parents understand how they need to push the school systems. the good news is that every teacher knows how to challenge. the bad teachers, i think that has changed. some came in and said, we need to fire the bad teachers, the bad principle. and people were shocked. it is controversial when it was talked of, a little bit of tough love in the education establishment. but here we have arne duncan saying similar things to what bill bennett said it 25 years ago when he worked for arnold -- ronald reagan. host: do we still need a

department of education? i did not know. my father got a terrific education. in the public schools of new york in the 1920's and 1930's and there was no federal department of education. it is not as if education has gotten so much better since the education department was begun under jimmy carter in 1978 or 1979. . .

not doing what they should be doing, washington has a limited ability to help. in that respect, the notion that washington is going to fix these things is a trap for people to things is a trap for people to host: we are talking about education with bill kristol of the "weekly standard" and also talking about politics and health care. but first, some questions from the students here. >> i'm from san francisco, california. do you support president obama's plan to pull troops out of iraq by 2011, and if not, what you think is a proper time line? -- what do you think is a proper time line? guest: i have been involved in the iraq debate over the last several years. i think it's terrific that things have taken a turn for the better in iraq kirk -- ever

since the surge in early 2007 under general patraeus and general air now. if he says to back it, i trust it. he is not going to risk u.s. troops or u.s. success in iraq by going too fast for drawdown. but i hope that president obama keeps an open mind. i think it is foolish to set an arbitrary number -- 50,000 by sunday, june, 2011. that was just picked out of the air. if you are fighting a war, and we have sacrificed a lot in that war, and you want to make it come out well, which is important for the middle east and our future, it is foolish to get trapped by some campaign promises for some arbitrary date. if we need to slow down the withdrawal, i hope he understands. it would be foolish to stick to that arbitrary number.

host: for the students here, can you understand -- can you explain the role that the "weekly standard" plays in politics here? guest: i introduced as bill kristol, the editor of the "weekly standard" n'yah often get asked how often it comes out -- and i often get asked how often it comes out. we do come out weekly. we have about 100,000 paid. subscribers, lots and lots of people come to the website to read the material. we're a conservative magazines are 1995. a little unpredictable in their conservatism sometimes. we have supported president clinton in some things and we have supported president obama in his decision to send more troops to afghanistan. we try not to be simply partisan or predictable. i hope we inform the debate. i think a fair number of

conservative politicians look to us to see what the arguments are on some issues, and a lot of liberals i know. the "weekly standard", if only to see what is being argued on the other side. and we also focus on music and history and art, which is a strong focus of the magazine as well. we had a piece just two or three weeks ago by the -- by a leading iraq expert that has been there several times reporting on what the situation was with the election and what the prospects were and what the challenges are. i encourage you to read it online. host: both of our speakers today have a -- are graduates of harvard. he played basketball. do you? guest: yes, we all play

basketball. but i imagine that he and president obama are better basketball players that i am. >> i'm from north carolina and i come from a family of farmers. my dad and i live on a farm and he has a lot of acres and we grow soybeans. i was wondering how the conservative party feels about agriculture in america. it should it stay in america or go overseas? guest: when you drive through north carolina you do see a lot of family farms. generally speaking, conservatives are pert free trade, -- are pro-free trade, so i do not think it is good to shut ourselves off from that. but it is good to have things that are consumed locally, or

nearby. it is one of the good things that americans have done in the last decade, the amazing strength are our culture. we are now producing an amazing amount of food and fewer people are involved in it, which is good for the country as a whole. it allows people to do other things. it is more efficient. but i am no expert on foreign policy or food exports and the like. host: juanita is joining us from union, missouri with bill kristol of the "weekly standard kik." caller: because of this bill and its cost, i may personally have to sell my home. i think basically what he has done is given a death sentence, basically, to all senior citizens. i'm sorry if people do not agree with me, but he is rationing health care to anyone that is

not on medicare. i have a backup insurance, but even at that, it is not going to meet the need. host: thank you. guest: i am an opponent of the obama health care proposal. i do not think it will be good for our country and it will explode the deficit. i hope, in fact, that after the elections of 2010 and 2012, large parts of it can be repealed. this is a democracy and one vote does not determine our future forever. obviously, bush thought he had put the country on certain patents and president obama has come in and reverse a lot of those paths. in 2010 and 2012 are think some of what obama has done will be reversed as well. -- i think some of what obama has done will be reversed as well. government is a huge -- government as a huge player in health care is not always good

business. i think this will create more regulation and make the system less effective. host: but you're already seeing the political divide on this issue democrats today and mike allen reporting in the political st. they welcome the debate. is this a game changer -- saying they welcome the debate. this is a game changer? i do guest: not think so. it has been covered -- guest: i do not think so. that has been covered extensively by you and everyone else. it is the same bill we have been debating for a year and not much is going to go into effect in the next few months. and some of what is going to go into effect is bad, actually. the cuts in medicare advantage and some of the plans that seniors can buy will really have an effect on what seniors can get. i do not think it is good

legislation. but it is a democracy and it is ridiculous, this notion that -- i certainly accept that president obama is entitled to get through legislation that he thinks is important. i think democrats should give room for that. we're not going to just go home and say, i guess we lost about one. we never get to have another argument about health care. that is one of the disturbing things about the way that president obama addresses it sometimes. he acts as if this will once for -- once and for all and the debate. to many people think it is foolish. to many people think it will -- too many people think it will damage the economy.

we will soon see that it is when to explode the deficit. we are already running a big deficit. i predict that we will not implement this health-care bill in the way that it is now past. there will be changes in the next three or four years. host: chris from buffalo, we welcome you to the program. caller: i'm calling about what i would consider a discrepancy, or a bit of hypocrisy on the part of republicans that now they like to talk about the deficit when they had two wars that were underpaid for, the bush tax cuts that were underpaid for. they created a doughnut hole in medicare. there was no regulation in these financial industries with no congressional oversight when they were in power. all of a sudden in one year, president obama is supposed to be able to fix all of this, and yet, republicans come up with

new ideas for these things. but they like to demonize the president for what he is trying to do. guest: republicans made plenty of mistakes. some of them may have been worthwhile expenditures, some not. but that does not justify president obama making mistakes. he has increased the deficit of what appeared that part is just a fact. he hasn't -- he has invested in the economy and some people say that is wise. i think we're running a dangerously high level of debt. and i think republicans do have alternatives. republicans have proposed various cuts in spending in the long-term and short-term. no one can do away with it immediately. it would be foolish for a candidate to say, let me in the debt is when to go away. -- elect me and that that is going to go away. there is a spending bill that is

part of the reform bill for higher education. arne duncan talked about education expenditures. they're not cutting. we are fighting two wars. you can debate whether we ought to be, but here we are. it is tougher times than it used to be. and what happens to families, they tighten their belts and cut out some expenditures. this president is not cutting anything. he went to every cabinet and secretary and said, let's stilt -- let's spend more. he believes he is doing the right thing for the country. he thinks the spending is important to prevent us from going into a worse recession. he thinks it is important to spend money on these different areas. but some of us think it is not sustainable. we need to cut some things that sound good, but still need to

cut. i think that is a real debate that the two parties are going to have in the next few years. host: the question right over here. >> i'm from boise idaho. hardee believe the health care bill can be improved? -- how do you believe the health care bill can be improved? guest: that is a complicated answer because it is 2700 pages long. if a republican president were to come into power in 2013, parts of it could be repealed or abolished. parts of it could be dealt with pretty easily. other parts are going into effect now and people will have to judge and people can decide. some parts are ok. some can be changed or amended to be more consistent with conservative ideas. and we have repealed legislation in this country before.

in 1988, legislation was passed that was repealed by the next congress. it is a question that a lot of people are beginning to think about, a lot of republicans and conservatives that and people that do not like this healthcare plan. you cannot just snap your fingers and say, let's pretend. once it begins to go into effect, you ought to figure out to undo certain aspects of it. host: right here. >> with many democrats leaving office around the nation, how you think this reflects president obama's job that he is doing? guest: it has been an amazing year and one thing you should learn, being in high school, is that most people tend to predict what has been napping -- happening in the last few weeks or months, they tend to project in a straight line.

our member at penn state in our member at penn state in 1979, they had some that was a bit of a comedown after the excitement. you cannot predict the future. think about the past four or five years. bush was riding high in 2004, republicans won the congress. the first time in 80 years a republican president and republican congress had been elected at the same time. conservatives like me thought was a new moment for conservatives to really govern, and it fell apart in 2005 and 2006. there were disastrous years, iraq went very badly. immigration split the republican party, katrina, it was one thing after the other.

and then, one more season in 2008, and president obama won in 2008. who is the democratic nominee going to be, people would have said hillary clinton. president obama would have been elected to the senate in november of 2004. if you had said it, which democrats would win, it would have been hillary clinton. and damned -- and president obama is on the top of the world. conservatives are in total disarray and it is going to take 10, 20, 30 years for a recovery from the bush administration. suddenly, some of obama's policies are not so popular. in virginia, republicans won the governorship in a state that obama had carried. and of course, scott brown of

massachusetts. politics can change quickly in a democracy where people change their minds. people vote for president obama because they do not like bush. and did they say, with a second, i do not know if i signed on to this kind of health-care policy for this kind of foreign policy. it is not fair to say that republicans are not -- are being too confident because president obama is not that popular now or because democrats are retiring. it does not mean that things could not change again. having said that, given where history is now, republicans may take control of one or both bodies. and that in 2012 becomes a very big election. i think the two parties are very different in the way they look at fundamental questions and the role of government.

pretty different also on some foreign policy issues. i think we will have a big debate in the next few years about the future of the country. everyone knows the debt is too high, large portions of the government are not working well and large portions of the private sector are not working well. it is a very interesting time to be getting involved and watching what is happening in this democracy. there are some times, you know, things are chugging along peacefully and they do not change that much. there is not that much drama, not that much of conflict -- consequence happening. i think there -- this is a very unusual moment. really, it is up in the air. there's a wide spectrum of possible outcomes two or three years from now in terms of politics and policy. it is a good time to be engaged

in the debate. i think republicans will do well in this coming election. it is really key for conservatives like myself to really explain why conservative policies will address these problems -- these policies better than liberal policies. why there were mistakes made in the past and to say, yes, at times conservative policies have not worked. there's no reason the bush administration should have led banks levy themselves 30 to one, not that others did not have responsibility as well. but we need to be honest about that and present to the american public in 2012 a series agenda for helping the country. host: throughout the year, the close-up program brings students to washington d.c., many first- time visitors to our nation's capital, and we are joined by about 200 students from 10 states. one of the questions, right over

here. >> arm from boise, idaho. what are your -- i am from boise, idaho. what are your views on china and how to deal with them? guest: people in washington are supposed to have universal knowledge and have an intelligent opinion about everything, but i can honestly say that i do not know enough about the chinese currency trading you should ask an actual economist about that. host: york governor in idaho did something that was the first in the nation. anyone in idaho want to respond to what he did and what this means for the health-care debate? >> i thought what he did was -- well, i agree with him. host: tell bill kristol what he did.

>> did he say that the mandate to buy insurance against our constitutional rights? host: and he was the first governor to do so. there are 37 states that are likely to fileñi similarly, like in your home state of virginia. guest: the federal government can require certain things. if you get a pell grant you have to fulfill federal requirements by not doing drugs and assuring the federal government that the moneys were and where it ought to be going. but can the federal government make you buy something? can he tell you you have to have health insurance? it is uncertain constitutionally. there are very few cases like that where the federal government says, you have to buy

this good. the federal government does not say you have to have car insurance. they say, if you want to drive a car, the state laws say you ought to be injured. -- insured. there is a big question about whether this mandate is constitutional. and obviously, there are a lot of state attorney general's that will question that. can we trust individuals and families to make intelligent decisions for themselves? should we help them to buy health insurance if their lower income? yes, i think there's quite a bit of agreement on that. but should we require every individual through the federal government? if a state once require it, that -- wants to require that, that is up to them.

caller: something that mr. kristol said early on, it was something to the effect of what you with children that are more academically challenged, and at the same time address the needs of those really first-rate academic the bright children -- academically bright children. i'm concerned about the attitude that exists with teachers that have that attitude of, oh, yeah, we have those that are not that academically bright and we have these really first-rate children. shouldn't our education system be addressing the problems of the attitudes that exist that automatically peg some children as not so academically bright and then we have the reliefers

rate? you may have said that unconsciously, but you see how that pegs those children? guest: no, i do not think that these markets are better people than the less intelligent or less academically gifted students. i think is foolish to have kids go through public school and have kids who are smarter than my kids and my kids are more academically gifted in other subjects. there are students that can perform at different levels. should we try to help those that are struggling? absolutely. does it help those who are struggling to draw them into a class that with those who are more gifted? i'm not sure it does. -my sense is that some students benefit more from a high academic, classical education. some benefit more from a vocational education. and we have a diversity -- my impression is -- in our schools of glasses and tort system at

least in the bigger public schools. -- in our schools of classes and choices in our school system, at least at our bigger schools. i think we probably should spend more to help those that are struggling. they probably need more help in the way of individual assistance from teachers and that kind of thing. but i also do think it is a problem -- i just say this for my own experience watching students in different school systems. i think we need to pay attention and help those that need help, i believe that. but we also need to help those who can achieve at high levels academically and sometimes are not challenged. one of the students questioned secretary duncan about this. they sometimes give off and get into disciplinary problems or whatever.

in any case, that is not good. if you are talented, you need to develop those talents. the what is the point of being this great, free country if we do not help kids to look the best they can. i think is a concern for all students and we need to seriously try to help all students what we need to provide good opportunities for those who are most academically gifted. host: here's a question in the back. >> i am from boise, idaho. i have a question relating back to the united states carrying a significant amount of debt. what is your personal solution to paying off the 10 year treasury bonds to china? guest: china is a big topic in boise. something in the water in idaho that makes them more willing to stand up and ask questions. which is good.

honestly, the china question is very complicated. the chinese seated in their interest to buy treasury bonds. that is not a bad thing. it is an open market. whether it creates longer-term problems for our country if we are in debt to china for a huge amount of money, i think that is a problem, yes. it is one of the great achievements that we step back and say, two minutes on china because there have been a couple of questions about it. one of the great achievements of the last 25, 30 years, a little more than your lifetimes, is they have brought hundreds of thousands of people out of poverty in china and india. when i was your age, china was engaged in a horrible internal revolution with tens of millions of chinese killed. india look like it was going to lose tens of millions of people to famine. it looked like they could have massive starvation in a place

like india. one of the great achievements in the last quarter century is that those two countries have gotten on the road to economic prosperity. hundreds of thousands of people live much better lives. that is a good thing for the world and for us as a country. we compete with china and india. people say, what about china? we are much better off with a wellesley, rising -- with a wealthy, rising china than a port and chaotic one. -- then a poor and chaotic one. having said that, china does have an autocratic government. that is a bad thing, i think. i would much prefer something like india, that has a democratic government like us. they could use that debt, they could use that as leverage over us. it would be great to see china

with more political freedom. if china and india and the u.s. for all free, flourishing liberal democracies, your futures, i think, would be much brighter. china is worrisome because is a -- an unstable political situation because it is governed by this one party that does not have much legitimacy except that they have been doing a good job of keeping economic growth going. but if economic growth slows down, it could go in another direction. it is right of you all to think a lot about china and to learn a lot about china and india, i would say. your generation is going to be much more focused on asia than mine has, probably. when i went to school, we learned about europe and asia was a secondary thing. for you all, china and india are a large part of the future. host: growing up, many fathers say, and each your meal because

their return and india who are starving. -- eat your meal because there are starting children in china and india. now he says, each more meal because -- it is an edge even forced the united states deserves some credit. we provide the basic world order that allows countries to develop in peace. we provided the open trading framework where the countries could have capital and export goods. china is exporting goods -- on the other hand, look. on the broader view, it is a very good thing that china has been able to make the progress they have. >> we will take a call and then go to you. this is from california. >> the good morning, there is an article called "return of the

deal." i will tell you about our financial crisis. our crisis is fighting wars and funding is real. and now you want to start a draft? our crisis is funding israel and fighting wars for them. and now you want to start a draft? everyone knows that aipac controls our congress. you can look on page 147 of the 9/11 commission report that talks about why we were attacked on 9/11, because of our support for israel and their oppression of the palestinians. guest: we were not attacked on 9/11 because we were supportive of israel. the congress is not controlled by israel. israel has never had any american to fight for israel. we give 3000 in foreign aid -- $3 million in foreign aid every year to israel. maybe we should not give accurate -- give it back.

-- maybe we should not give that. host: today, the israeli prime minister is sitting down with the president. what do you think that conversation will be like? guest: i have met them both and they're both impressive, intelligent and proud men who are not used to differing to anyone else in the room. they're both used to being deferred to. i would like to be a fly on the wall at it. i guess they're not even allowing cameras at all, not even for the handshake at the beginning. obviously, there have been tensions between the obama administration and the netanyahu administration. presumably, they will try to work that out in private. tensions are usually about small things when compared to the threat of a nuclear iran. i hope they focus, honestly come

on what we do to prevent this iranian regime from getting nuclear weapons rather than squabbling over a part of -- apartment buildings in a part of jerusalem that is already jewish. is going to be part of israel the matter where the borders are. it is stupid, in my view, of the obama administration to overreact to the surprise. it is an unnecessary fight when they should focus on iran. host: right appear. >> i'm from oahu. i was wondering about illegal immigration. i am not a bit -- a very big fan of that, but i believe that everyone should be able to live in this country. it is a great country. host: one of the ideas out here is to give those in this country illegally a form of amnesty, to give them a right to citizenship. is that a good idea?

>> yes, that is what i'm getting at. it takes 15 years or so for some people to get their green card and i believe that is a very long time so, immigration reform, is it going to take a shorter amount of time to get its back and do you believe it will increase the amount of -- amount of time to get it? and you believe it will increase the amount of time to get it? guest: i'm like you, i have more liberal views that most conservatives on the immigration issue. i would like to see a way past -- a way to citizenship for those here illegally. to be fair, a lot of people have waited in line for a long time to be -- to be here legally. and there is something unfair of those who jumped the q and got here ahead of them. -- who jumped been queue and got

at of them. there are people who have lived here, paid their taxes here, voted here, they should have first consideration at those jobs. i think it is a very tough issue. i am pleased that the motions have receded a little bit on the issue. i am a bit surprised that president obama says he is going to make this a priority to the degree that he plans to. i cannot believe that congress can pass immigration reform in 2010 and i do not think it's healthy to raise it if you will not solve the issue. you will inflamed the debate and not get much done. i know it is unfashionable of me to say this, but maybe it is better to leave the issue alone for a while. let's let the economy come back a little bit and let's see if we can't get some bipartisan decision that's on the immigration.

>> on washington journal tomorrow morning, an examination of the government policy role in housing with corbett daly, chairman of economic policy for reuters. then, a texas republican henry cuellar will take your questions about drug trafficking along the u.s.-mexico border. we will discuss congressional agenda with richard burr of north carolina. and from the peace center of the states, where they have declined for the first time in nearly 40 years. "washington journal" is live on c-span every day. in a few moments, treasury secretary timothy geithner

testifies on capitol hill about the governor -- government's role in the housing markets. a couple of events from great britain including conservative party leader david cameron's news conference and remarks by prime minister gordon brown on goal -- the global challenges. then, president obama signs the health care bill passed on sunday night. >> our commitment to israel's security in israel's future is rock-solid, unwavering, enduring, and for ever. >> whether as secretary of state, senator, first lady, or attorney in 1991, you can share it on line at the new c-span video library with a hundred and 50,000 hours of video.

-- 150,000 hours of video. >> now i house financial services committee hearing from the future of the housing and mortgage markets. the federal role in housing from treasury secretary timothy geithner for about 2.5 hours. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> the president is signing the health care bill today. that is why there are so few democrats here and why there may be fewer democrats here. ordinarily, i would have considered postponing the hearing, but this hearing has already been once postponed. we have a crowded hearing schedule, we have hearings coming out on lehman brothers,

on greece, some other issues. therefore, i did not want to postpone this hearing. we're going to go ahead is let a chance to ask questions if and when they come. that is why we are somewhat thin, particularly on the democratic side. i also want to announce that we are i think close to some agreement. the gentleman from west virginia and the gentleman from california have been working on the fha reforms. we were on track to have a markup on thursday. we won't be having a markup on thursday. we probably won't be here. we will have an agreement on an fha bill.

we will go ahead with a hearing on the federal reserve's ened to d -- need to deal with the liquidity. the hearing on the federal reserve will go forward. the markup will not happen. it with that, i recognize for the first opening statement, we have eight minutes of opening statements. the chairman of the subcommittee on financial institutions which has jurisdiction under -- jurisdiction under our rules. the gentleman from pennsylvania. >> thank you very much, mr. chairman. last year, the capital market subcommittee held the first hearing to examine the present

status and future structure of fannie mae and freddie mac. today, we continue with what will undoubtedly be a long-term negotiation about the prospective configuration of our nation's housing finance system. the considerable stress in our economy and the need to maintain access to affordable mortgages, secretary paulson placed faie mae and freddie mac -- since then, the treasury department has committed to push forward preferred stock of the enterprises. government agencies have put forward $1.30 trillion in mortgage-backed securities. they have helped to keep housing credit available for america prevent a complete collapse. we will talk about what kind of

finance system which reconstruct for the future. while we must give a thoughtful consideration -- about why we created government sponsored housing in the first place. my goals in these debates are to establish a more stable, long- term funding source to help average americans. the housing system continues to support community bank and credit union lending. the task before us is not all that different from the one thatngineers and policymakers based in preparing for the big -- construction project. we must figure out what pieces

in the finance system worked. we also need to determine what parts of the infrastructure we need to eliminate. in order to ensure access, we must work to keep capital moving to the financial pipelines during our legislative debate. secretary has joined us. we will also hear from the secretary of housing and urban development. at the completion of these initial proceedings by the committee, the capital markets subcommittee will renew its examination by exploring detailed and technical questions related to government sponsored enterprises in our nation's's housing finance system. i appreciate your efforts regarding what functions a new housing finance system -- we

must also work to do no harm to the finance system that has worked well and protect taxpayers for future losses. >> we will now read -- you will have one minute. >> thank you for this long overdue hearing. the treasury department still does not have a plan for fannie and freddie. the housing market -- the response has been to pledge unlimited bailout aid and guarantee all the gse debt which has cost the american taxpayers more than $127 billion.

the question posed is, what should the new system be able to do? the answer is simple. protect taxpayers from further losses and bailouts in order to build a stable housing finance system based on private capital while the administration and congressional democrats remain silent, the republicans have inoduced a legislative measures to immediately address the failures. i yield myself an additional 20 seconds. to immediately address failures and put forth real solutions. i hope today is the beginning of open dialogue between congress and the administration, and that you follow the leadership of house republicans and phase out federal credit privileges with taxpayer support and guarantee that fannie and freddie. >> we're going to hold ourselves to this. the gentleman is recognized for one minute and a half >.

>> because they were perceived to be government-backed, the prevent excessive risk-taking. it formed a duopoly over the secondary mortgage market is dominated much of the market. between the homeowners and flippers, you had over 10 million individual loans outstanding guaranteed by freddie and fannie. they accounted for 85% of their losses. in 1992 jiechi act. going forward, these requirements should be repealed as should any other mandate --

for a broader goal. i carry legislation [unintelligible] the leveraging of these institutions would allow regulators to do that. never in the future should we allow that kind of arbitrage leveraging of institutions like this. that is why i say the 1992 gse act with a view affordable housing mandates, frankly, should be dropped. >> the gentleman from illinois for one minute. >> from the fall of 2008, fannie mae and freddie mac have lost $174 billion in losses that are anticipated.

over $127 billion and are liable for outstanding mortgage applications. the mortgage market participants in mortgages in 2009 -- taxpayers deserve to know where the dollars are going. republicans have proposed reforms that will impose common sense on these institutions and take immediate steps to wind down the imminent risk they pose to the long-term stability of our housing market. gse reform is critical. i yield back. >> the gentleman from california, mr. miller, for one minute. >> the government currently owns 80% of fannie and freddie. the current scenario is not one that should last indefinitely. i must disagree with anyone that

is against this credit union and think it must be abolished. the illegality rate is dramatically lower in california than the general market. that is that while many of their loans were bad, they outperform the rest of the market. the make up roughly 92% of the loans made to date. i have yet to see a viable alternative from this administration or this congress. that allows the government to recoup its investment and ensure the viable secondary market in the home loan business. i look forward to hearing your testimony and how we should go forward. i yield back. >> i recognize myself for the remaining four minutes and 40 seconds. i very much agree that this is a subject that has to be addressed. that is why i initiated the schedule, i regret the fact that the constituency of mine made us

hold off a couple of weeks. i want to stress that i believe this should be seen in -- what about housing finance. we have a very complex housing finance system without any overall [unintelligible] there is the fha nd fannie mae. there is the fha and fannie mae. there are freddie -- fannie mae and freddie mac. hybrids, as they were. public shareholders corporations giving a variety of presidential candidates. it came in the conflict in some ways with the private mandate.

there are the federal home loan banks that should not be left out. they play an important role in housing finance. many of them will be in agreement with what we just heard from the gentleman from california. what is to figure out the best way to wind down fannie mae and freddie mac. one important job is to decide what goes in their place. when i say this side, much of that will not the government mandated. there will be some role for government agencies figuring out the interaction. who provides liquidity for the secondary mortgage market? is their role for subsidy. -- is there a role for subsidy? because when you put people in deceen conont the problems we have seen of people going

inappropriately into homeownership. there are claims to be made for helping some working people get into homes after careful scrutiny. that they be part of the fha. yes, it is important to put into place a way to wind down danny may and freddie mac. the overwhelming consensus -- fannie mae and freddie mac. the overwhelming consensus is home builders, mortgage bankers, bankers, advocates for various groups, advocates for minority groups, all agree that simply abolishing fannie and freddie as well as we do that would not be enough. we also have to make decisions about what replaces it. many of those replacement entities will be purely private.

notice there was a piece in the republican bill that said they have the state can do this. -- a heavy state can do this. those that can be doing the purely private aspect, what is the role of fannie mae and freddie mac? i stress that this is the beginning of this process, we will simtaneously be figuring out how best to wipe down fannie mae and freddie mac. -- wd down fannie mae and freddie mac. and we will be ready to replace the functions they are now performing in the economy without even [unintelligible] the old story says that you can't tear down the old jail until you build the new one. that is probably where we are in regard to this effort. we have a very important set of functions that need to be performed. it is important for us to be

careful with the replacement of fannie mae and freddie mac. it will deal with housing and also deal with the economy. that is one of the things we get from all of the participants in the economy who are coming forward. the goal of this committee will be to i hope come out with a religious station to dispose of those jobs. -- with legislation to dispose of those jobs. and leave room for the private sector. the gentleman from west virginia is recognized for one minute. >> i would like to thank you for this hearing today. something that needs immediate attention. the finance -- the housing system is slowly recovering, but is being dominated by the gse's. as many of my colleagues know, the fha is facing serious challenges with the capital reserve levels. i am pleased that commissioner stevens is seeking a bipartisan

approach to resolve the fha challenges. unfortunately, the same commitment for reaching a consensus could not be reached with approach to the gse's. with massive taxpayer exposure, they chose to barely mentioned the reform. the time for action is now. the federal government should not be playing this larger role in the nation's housing finance system. we need to begin determining the roles of the gse's. a look for a hearing t testimony of the witness. thank you. >> for one minute and 10 seconds, mr. hennesy. >> none was dumber than that decorated the gse monopolies. in other words, the federal government is hoping that we

will let you monopolize the market as long as you securitize mortgages for those that can't afford to pay them. ultimately, the story is one of enriched executives, cookbooks, political bullying, a massively inflated housing bottle -- bubble, and the mother of all taxpayer bailouts. the message from the administration, page 352 of the budget, the administration continues to monitor the situation. it is on satisfactory to -- is unsatisfactory to preserve the status quo. republicans are attempting to lead, i am attempting to be one of them. that is why i have introduced hr4889, over a five-year period, it would transition gse's to a

competitive marketplace without taxpayer bailout. >> the gentleman is recognized for one minute. >> it has been ree months since the obama registration lifted the cap on fannie and freddie and allowed them to pay out millions of dollars to executives that a lot of people are simply losing the taxpayer'' money. today is the very first hearing on the topic that i believe is unbelievable. a ranking member sent a letter immediately after that saying that we should have a hearing on this. we have had 20 hearings on other sundry issues. we're having a hearing today on one of the topics [unintelligible] for a lot of people, it is uncomfortable to discuss this issue, because they played a supporting role and the demise of the gse's and fannie and freddie. the ap says, if we rush, wdo

not achieve enough for a consensus. it has been almost -- >> the gentleman's time has expired. the gentleman's time has expired. the minority can divide its time as it wishes. if you have one minute, you have to talk for one minute. the secretary of the treasury is now recognized for his statement. >> chairman frank, ranking member baucus, thank you for giving me the chance to come before you again. i want to complement many of you for pointing at that the challenge of reform requires a broad look at the full range of government institutions and housing market. in effort to build consensus on reform -- fannie mae and freddie mac played a significant role in the financial crisis. it allowed to take on an excessive risk and leverage with inadequate capital.

by fall of 2008, there collapse posed a threat to the entire financial system. fannie and freddie operated with a perception of government backing which allowed them to take on significant leverage and build up the retained portfolios and would not be allowed for an enterprise. restraints that would have protected the system from failure -- this committee understand as well as anyone that these failures were not unique to fannie and freddie, which is why you move late last year to pass a comprehensive set of financial reforms for the rest of the american financial system. the failures of fannie and freddie were symptomatic as a whole. they were made by people over a long period of time. they take on a tremendous amount of risk, there was damage and erosion in underwriting standards that a buildup of leverage across the financial system.

private companies, mortgage brokers, and large financial institutions with no government backing were becoming over leveraged. there were offering credimericat afford. and in many cases, they did not understand it. and there was the unrealistic assumption that housing prices would always go up. they brought americans to the edge of financial collapse. over the past year, the head and attrition has made important progress towards comprehensive financial reform and it marks the beginning of the next stage in the process of reform, and value it had tbring reform to the gse's and the entire housing finance system. . .

the same people voted ainst him. mr. banner, and others. this notion that it was the democrats that stopped him -- >> with the gentleman yield? >> i would deal with unanimous

consent. >> i think my words actually were to the secretary that some members of this committee were uncomfortable with discussing this issue. i am looking at my notes. i never mention the democrats at all. i think the gentlemen protests too much. >> i thought he had said that people on the other side. in fact, he was referring to ms. miller, mr. cantor, i accept my correction. i appreciate making sure that people know that he was criticizing them, not just some of us. he got 70 republican votes, people voting againstim. the bill that the republican house passed was denounced by the republican president.i remee could pass this legislation in

2005 if he had not gotten the one fingeralute from the white house. mr. snow was in favor of going forward. what happened was the republican senate and the republican house had a fight and no bill passed. come 2006, mr. paulson becomes secretary of the treasury. he asked for permission to negotiate with the congress whom he admires over the objection of many others in the white house. he is negotiating with me, in the next election, the democrats got a majority. he points out in his book that he -- we passed a bill that he said was far from perfect, but was still better than the republican bill in 2005. i apologize to the judgment from new jersey. i thought he was saying it was

the democrats that had done this. he is talking about the democrats at the republican leadership. i do remember this, they were outvoted by the democrats and some republicans. in 2005, the records are all here, no amendment either in committee or on theloor and that making the bill tougher on fannie and freddie that received a majority of republican votes past. in other words, the bill that passed committee on the floor -- in no case did a majority of republicans get overwritten because the minority of republicans were with the democrats. that is history, and we have to go forward. i believe that in regard to the current situation, there is agreement that we need to replace fannie and freddie. there may be disagreement about whether doing that is enough,

and whether or not we need to also figure out if we need to restructure the federal homeowner banks. and do we need to provide any more authoty in terms of the liquidity of the secondary mortgage mket? in some ways, they are harder intellectually. the gentleman from alama. >> there is a questn [lauter] >> this will not come out of the gentleman's time. each member has five minutes. >> secretary geithner, how can you say that regulatory reform bill in the senate is comprehensive? . .

>> things began to change at the beginning of this decade, and at that point you saw fanny and freddie build up portfolios. they also started to provide guarantees that ultimately resulted in them taking on more credit risk than theyf'u were charging for. both those mistakes were central to the problem.

>> mr. secretary, i would have to disagree with you. in 1997, they started making loans without downpayments and to people with questionable credit. i think it was a disaster waiting to happen. i will say that several of us did speak on the house floor at that time and resisted thecltons to relax those standards. >> i was not a combatant in these debates for that period of od. of advocacy people in both sides of the aie and the administration starting in the 1970's t bring stronger oversights. as many of you have said, those effort wer not successful, and that was a failure. >> several alternatives have been suggested to reform them.

one was simply to naltize them and make the government -- nationalize them and make the gornment have a line of credit with the treasury and be exempt from state and local taxes. another is to create morekyñ g.s.e.'s to compete against each other. this is the government competing against itself. still, with the government subsidy and guaranteees, isn't better alternative to do what we republicans are suggesting, and that is phase out the government subsidy and guaranteey and duopoly over time, transition to a market-based environment, and implemenwithdrawal of all federal government support? >> i agree with you, congressman. i do not think eithe of the two options you began with looked particularlyling appea at this stage.

>> which two? >> full nationalization or creating a full new class of g.s.e.'s to compete with each other, tse do not look like appealing options to me. i have not had an opportunity to look in detail at yr proposals, but i will. i any you ended by saying a transition to a world in which you phase out all government support in any form? is that what you said? >> particularly a g.s.e. tt has a line of credi with the treasury or ability to borro from the fed or state and local government? >> personally think we need to end a system iwhich you have this awkward combination of private$cñ shareholders with a broad sense of implicit support. i think that system was a rrle mistake. those mistakes were vercons consequential. as we work together to create a new situation to create our current ro we should at least agree we should n

you have a government entity competing withhe private market, you subsidize them in anyway, it is unfair competition, and i tnk it crowds out the private market. i think we have seen the result of that. >> i think, again, at the heart of this debate would be to think about what is the appropriate role for the governmen in providing some form of guaranteees in providing some stable form of government finance and what role should the government have. that's the prime question we face. we should take a fresh look at that. that will be critical to reach consensus on before we determine what that transition pass should be to that new regime. >> the gentlan from pennsylvania. >> thank y very much. welcom back, mr. secretary. it seems you have been remis. you haven't been here at least a >> i have had the privilege of

being with this committee many times and i look forward to being here many more times. >> very good. it seems we had seft yesterday former -- former chairman bernanke and former chairman volker. he was calling the committee's attention to the difficulty in te aregulaording to their authority. to a large extent i listened to the banter back and forth other as to who is at fault, why are they at fault. i think you are taking the correct perspective here. that's history. now we have to go forward and do something. now we have to address and answer some serious questions. i happen to agree with you. with all the errors that may have occurred at sometime with fanny and freddie, the reality is for a period of 20 and 30

years, we had relatively stable real estate market that x very well at poor times, so that we didn't have stops and starts as we have had in prior decades. the question, i guess, that comes to my mind, is what are we going to be able to do about when this congress passes authorization for someone like the federal reserve to create and control mortgages and how they are made and who is allowed to get them and they don't exercise that influence? republicans were in power for the 10 years tha that failure occurred or whether the democrats were in power we can see that at some time in the future one party will be in power and we are not getting the anticipated results from regular lateors that at least in policy should we start with that proposition and see -- because it really doesn't matter combha

we do here if it is not implemented. what plans can you make or are you intening to make for better implement asian for -- implement ation for public policy? >> i think you have to make sure the institution has the authority and ability to put in place those constraints. amung the many failures -- among the many failures is we did not give them the authority to set capital requirements high enough to prevent taxpayer loss in those entities. i think that is the most important thing. if you don't have that, nothing may be posble. you have to make sure congress is holding those oversight bodies accountable overtime. i think you have to start by making sure there is clear

authority that can impose systemic damage to the financial system as a whole. >> are the independent regulators too independent in terms of when they seem to be going astray in what they are doing? neither the executive nor the they are independent. >> i think weçuv created a syst that put a lot of challenge on the reag lateor -- challenge on the regulators for the following situations. they were held to quite high standards for consumer regulation, but there were areas that had no effective oversight or enforcement in place. when you do that, risk tends to migrate from where it is con strained to where it is unconstrained. it tends to move to where the situation is more compliant or the regulator less experienced. a central part would be to make sure you have clear standards

enforced evenly across institutions doing similar activiti. if you do that, you make the job of a supervisor much easier. if you make it;fx easy for firmo evade those protections, you make their jobs more difficult. when you look at fannie may and freddie mac you find underwritingc/y business migrat from those institutions to parts of the system that were engaged in a competitive race to the bottom in underwriting standards in consumer protection. the most important thing we have to do in financial reform, and this will be true as we move to housing finance is to make sure there are clear standards with clear accountability for enforcing those standards. >> thank you, mr. secretary. my time has expired. >> the gentleman from delaware. >> thank you, mr. chairman. i have three questions here. i am going to try to put them together. it may get complicated. last month i asked federal reserve chairman bernanke

whether fannie may and freddie mac are serving their purpose or whether we should look at different ways to finance mortgages, and he responded the fed has been vocal on this issue for years. he said we need to be cautious about returning to the existing model with conflicts between private shareholders and public objectives. he suggested that public utility approach. my first question is, would you agree or could you comment on that assessment? my second question is, using the federal home loan bank model, is that something you could actually substitute for all this in terms of what we're doing or not doing as far as the future is concerned? they don't seem to have had the problems that the other g.s.e.'s have had? and my other point is how about eliminating all these systems which is a system whereby institutions making loans have

to make their own loans based on what they are doing? i am not necessarily advocating that or saying you do, but i am interested in your opinion. >> i amany interested in your quote from paul volker about what i think -- what he think happened. i think he's right there. i think your options are something we should take a careful look at. i think the federal home loan bank system is not without challenge today. i think as the chairman said at the beginning, when you look at the housing finance sectors, you have to look at the l.b. finance as well to make sure it can play the role it is designed to play, again, without leaving us without too much risk in the future that the government will have to come in and underwrite those losses. you asked if it is possible for the government to play no role in providing for the mortgage finance plarkt through explicit

guaranteees, subsidies, support for liquidity. i think there is a -- there is certainly a pure theoretical option in which that may make sense, but my own view is this will probably be a good economic case for some continued provision of a carefully designed guaranteee by the public sector going forward. housing markets are so critical to overall economic activities, they played such a large role in people's wealth, the perception they are very vulnerable to volatility. when you experience broader financial markets, shocks to the financial system. because of that inequal housing markets play, i think there is likely to be a good economic case that is likely both conservatives and liberals could agree on for the design of a carefully calibrated guaranteee appropriately priced that would continue in some form. >> what do you think the time

table on all this is? we have had a lot of discussion, some hearings now and that kind of thing. is this something you feel needs to be addressed in the next two or three months or within a year, or do you have any thoughts about the time-table and how quickly congress and the administration should move on these issues? >> i think realistically it will take several months to do a careful exploration and shape legislation that could command consensus. i think we're at the point we can start that process in ernest. i think we should try to get it writhe right. i don't know why this should take years. i think wreel really we're at the moment where there is a huge compelling need where we design this successor system, and it is hard for anybody to argue that we can live with the system as it now is indefinitely in the future. i know people are worried we are not going to take advantage of this moment forever and put it in place at this moment because

many people tried in the past and failed to get consensus. i don't think we face that risk because no one can look at the model we have today and say we can afford to live with that model going forward. i would suspect will you find broad support for reform. the challenge will be to design something we think will work better in the future. >> i would agree with you that it is goingw to take time to pu it together, but i#lá would hope could work on it together as rapidly as possible. there are a lot of dollars out there and a lot of reflection. thank you, mr. secretary. i yield back. >> the gentleman from california. >> thank you very much. fa you, mr. secretary for being here to discuss fanny and freddie, g.s.e.'s that we depended on for many years to provide mortgage support. mortgage financing for low and moderate income homes. with the missteps about fannie

may and freddie mac and to the sub-prime mortgage market during the past several years and the resulting conservorships they were given little credit, they developed a fixed-rate 30-year mortgage that made mortgage credit=yñ ownership available to millions of americans families. these were the good aspects. i won't run away from that. i know that since they have been in trouble and some of us have been accused having given them so much support that people are sometimes hesitant to say that. i believe they dove into uncharted waters when they followed private firms into the subprime market in an attempt to increase market earnings. this effort, to me, earnings targets may have been the fatal flaw in their structure. if they had not been so focused on quarterly earnings reports, they may have weathered that storm. having said that, we continue to

have a great need for low and moderate income housing in this country. this committee, led by chairman and strongly supported by members of this committee particularly on this side of the aisle, are supporting a $1 billion housing trust fund, national housing trust fund. that's important to us right now. we were, we thought, going to get resources from fanny, freddie, and that's not possible at this time. do you have anyway -- any way or do you have any ideas how we can support this housing trust fund? i would like to hear about that. >> i think what you said at the beginning is important for people to understand. our housing finance system did work remarkably well over a period of many, many decades. it was in many ways the envy of the world. things started to change in the late 1990's and in the last

decade. you saw a dramatic increase in risk on their balance sheets and a substantial erosion in underwriting more broadly. as we know, those mistakes caused a huge amount of damage. i agree with you that it is important as we think about the future to make sure we retain what was good about this system. i don't think it will be 10able to recreate the system as it exists in the future. in the future, we will have to do things -- we will have to do fundamental change if we are going to achieve the objective you laid out at the beginning. we are, of course, preparedeáé work with people in the committee to find ways to provide continued support for the housing trust fund. i'm not in a position to describe in precise detail how we can do that, but we do have some suggestions. >> i freeshate that vemp. -- i appreciate that very much. we look forward to working with you on that. as i wrap this up, i would just like to be clear about whether or not we are talking about

fanny and freddie formulated perhaps in different ways to continue the mission without the risk or are we talking about getting rid of it all together? what are we talking about here? >> well, i think as many of your colleagues have already said, i don't think there is a credible argument that we can polish, put out of existence these institutions today. that would not be responsible. one could not defend that. i think we need to be careful as we work together to design the future of the american housing finance system. we preserve what was good, but we end what was too risky. >> that makes good sense. in the interim, i appreciate your reputation that you will help -- your representation that you will help us do something.

we need something while we are trying to reorganize those g.s.e.'s. thank you. >> i want to stress again the administration was committed to work with us on this. we are talking primarily about rental housing. we are not wooing out home ownership. but many of us believe we did too much in terms of rental housing and the right finance in terms of rental housing avoids the other problems we have had in the past. the gentleman from california, mr. roice. >> mr. geithner, i want to thank you, and i also want to thank you for the period of time when you were at the fed. i went back to my notes. i counted 15 times when the fed came before congress and warned us about the moral hazard with respect to the g.s.e.'s. i admit we were in the minority. those of us, i think there were about 70 of us, who listened to the fed about this argument, about the over-leveraging. my amendment on the house floor was not actually written by me, it was actually written by the fed, just as over on the senate

side. chuck hagele's amendment was about the ash trauge going -- arbitra gesm -- arbitrage going forward. >> will the gentleman yield? >> if you will yield me additional time. >> chris dodd was not even the ranking democrat. the republicans were in control at that point in time in 2005, so chris dodd was the second ranking democrat in the minority. >> yes, and he objected to the bill on the house floor going forward. the point i'm making is that the fed recognized the problem created in the housing market. but there is another aspect about this that economists have talked to me about. we have also seen over the last 10 or 15 years the huge increase in the derivatives market. this is where i'm going with this with respect to the

g.s.e.'s, how much of that was tied to the g.s.e.'s?v[ especially since they trade in the derivatives market the same way they did in the housing market, and i was going to ask you, mr. secretary, have you looked at this issue where g.s.e.'s were a large driver in the growth of derivatives market and in the non-risk-adjusted trading that went on? the point i'm trying to make is that these entities is that because of the presumption, because of the moral hazard, the same argument you were making to us, just like investors in their debt believed they were triple a the counterparties here believed they were triple a. but here it had additional significance. so they played a big role, i think, in the growth of the derivatives market. how do we mitigate that going forward? >> g.s.e.'s take on two types of

risk. a lot of the mortgages are guaranteeing their 30-year fixed rate mortgages. they need the capacity to hedge those risks. they need derivatives markets to hedge the risks on their books. i think what they did there was necessary. again, the central failure of oversight of the g.s.e.'s was not to force them to hold enough capital to back their commitments. they took on more risk than they had capital to support. now, this committee has passed a sweeping set of reforms to establish oversight over the derivatives marketsment -- markets. those reforms would make sure you could force institutions to hold capital, would force standardized derivatives on to central clearing houses where you could regulate and supervise margins. it would give the f.c.c. the authority to police those markets, and iti.÷ would bring broad transparency to trading in those important markets.

we think those reforms would be -- are necessary to and are central to to reduce the substantial risk that comes in the growth of those markets. i think we would be doing a more -- doing a lot to create a more stable system. >> i understand that argument. but there is still, you still have the moral hazard problem because of the presumption of the government-bab backed -- because of the government-backed guaranteee. when you and the treasury come forward and say we've got to make sure they don't over-leverage. they were over-leveraged at 101. they were involved in arbitrage big time, and all the fed was asking was the ability to delargee this portfolio arguing that if we slowly did that, we would avoid the bust in the market, we would avoid the systemic risk that would otherwise hit us. that risk did hit us.

the fed turned out to be right about this. how do we overcome the fact that when we create a government-sponsored enterprise it becomes so powerful it leans on the very institution that was supposed to regulate it? >> even without the many failures in the g.s.e.'s, what happened in the derivatives market posed significant danger to the market. we would have to impose standards over the derivatives markets themselves. you are right to emphasize, the heart of all financial crisis when you have too much leverage and not enough financial capital to back commitments. that was pervasive across financial systems, not just in the g.s.e.'s. >> i have a few more questions for the record, and if you wouldn't mind getting back to me in writing, i would appreciate it. >> thank you, gentleman. and i recognize the gentleman from new york, but i ask for 20 seconds, if you would yield to me just to say that, yes, the

fed was complaining about fanny and freddie buying up mortgages, but the fed at the time was refusing to use the authority congress gave it in 1974 to stop the madagascar bad mortgages from being made in the first place. they were worried about the secondary markets when they were worried about their opportunity to correct the primary markets. if the fed had used the authority that mr. greep now acknowledges you could have used, you wouldn't have had those bad loans in the first place for fanny and freddie to buy up. >> thank you, mr. chairman. in 2007 both fanny and freddie invest in to a very successful affordable housing project in the district i monitor -- i am honored to represent. over 225,000 live in this affordable stabilized risk housing. fanny and freddie were the senior debt holders in a $22 billion mortgage-backed securities deal that included the peter cooper debt.

it was well known in the press and by economists and people looking at the "deal" deal, they knew at the time that the rental income on the sky town property would not be sufficient to meet the owner's debt service obstacle gages. the owners knew they would have turn over or convert affordable housing in order to increase the rate of turnover. hundreds and hundreds of my constituents, the tenants were dragged into court to defend their homes on frivolous lawsuits. knowing this, fanny and freddie, still invested in this debt. i would like to ask you, secretary geithner, what can be done to prevent g.s.e.'s from investing in properties that can only be profittable if you convert housing to market rate by forcing out certain tenants? certainly working against the mission of fanny and freddie to

build or provide a base for affordable housing? i am working on legislation with the chairman and others to ensure that enterprises cannot receive affordable housing goals credits for investments like the one they made in the sky town debt, and do you believe they should receive housing goal credit for this type of investment that they know cannot continue to provide affordable housing? >> congressman, i don't know, but i would be happen to spend time talking to you and your staff about that particular problem and how we can prevent this kind of thing from happening again. i can't tell you now what is possible in that dwrare. i understand your concerns, and i'm happy to work with you on that. >> thank you. on this vain, new york city has a growing problem of over-leveraged multi-family properties, including this project. what incentives can we put in place to encourage g.s.e.'s and community banks to work with

local housing authorities to ensure affordable multi-family buildings are sold to buyers who are in the business of preserving affordable housing? we're working hard to build affordable housing, yet when it is sold, it is sold in an umbrella that absolutely makes it impossible to continue as affordable housing. >> my colleagues at the treasury have spent a lot of time working on those issues, and i would be happy to have them come with you and talk through the issues we think would be most productive in meeting those issues. >> how do these securityized loans get detangled in a timely manner in order to prevent tenants from a simultaneous with us foreclosure -- from a tumultuous foreclosure process? what are your ideas in that

area? >> again, i would be happy to spend time talking to you about that. in the market we created for housing and finance, we have made it much more complicated in many ways to work out economically sensible restructuring of loans backed by real estate that may have been possible in a more simple system in the past. you are citing one example of that. there are thousands of examples across the country of that. i think the reforms that this committee has put forward to try to improve the way that securitization works in that area would be helpful, but they will take time coming, and they will not provide immediate relief to the problems you are facing, but we will spend time looking at how to address the specific problems you referred to in new york. >> thank you. my time has expired. >> the gentleman from illinois. >> thank you, mr. chairman. mr. second, it -- mr. secretary,

it seems the g.s.e. have bifurcated consumer regulation from safety and soundness oversight when h.u.d. oversaw freddie and fanny's affordable housing mission and as its safety and soundness regulator was $227 billion bill for the american people. do you think that we're -- the administration is poised right now to make the same mistake by creating a consumer financial protection agency even if it is in the federal reserve and it has been some places have talked about it being a separate agency. can you explain how the financial institution supervision would be -- do you

think it would be more effective if there was one regulator to focus on consumer protection and safety and soundness? >> congressman, it is an important question. we are now living with the consequences of this system which for many, many decades gave bank supervisors the responsibility to write and enforce rules for consumer protection. that system did a terrible job for the country. it did a terrible job of protecting consumers, and it did not do an adequate job of protecting safety and soundness of the banks in our country. there areápk failures in both te two areas, and our judgment is, you are going to get better outcomes in consumer protection and better outcomes in safety and soundness if you separate those functions. we proposed that. i don't know if this helps the argument, but secretary paulson in his financial blueprint, 2008 maybe, proposed exactly the same model which is to separate sun protection from safety and

soundness provision with the baidoa basic judgment that that would produceuóñ better safety soundness regulation and better consumer protection. >> so you would really advocate for separating it? >> absolutely. and i don't believe -- i've heard this argument a lot from bankers and supervisors, and i don't believe that there is -- i don't believe it is a strong argument. again, look at what that system produced. a colossal devastating failure. again, if you -- let me try one simple example. why should there be any conflict between rules designed to give consumers adequate disclosures so they could make choices what type of mortgage product to take and rules designed to enforce sound underwriting standards for consumers? i do not see the basic for conflict. in the bill this committee passed, in recognition of that concern, there are a careful set and checks and balances against the consumer agency would

somehow write rules that could imperil point basic financial system. i think those jobs are better separated. president bush and secretary paulson had the same view in their proposal. i think the record of the current view has that judgment. >> the federal reserve was really responsible for writing the rules and regulations. >> i think that's the point. i think that you want bank supervisorers worrying about liquidity. you want them focused on those core things. you don't want them having spent a bunch of time having worried about consumer protection in that job can be better done by a -- an independent consumer agency. >> i guess i see it gively as with the g.s.e.'s and the bank industries, the consumer regulations and the other regulators was separated and it didn't work. >> again, i respect that view.

but in fact, the g.s.e.'s played a generally quite responsible role in what they do did3f in establishing standardized mortgage products and generally they held to better underwriting standards than was true of the private market. so i don't see the failure and success of the g.s.e.'s has undermining the argument from safety and soundness supervision in banks. >> does it create a duplication with g.s.e.'s or with the banking industry that it's something that one way they propose that this will protect the consumers and then the regulator with safety and soundness and they are in conflict? >> again, if there is any risk of conflict, you can deal with

that risk by making sure you have a body that looks at conflict and can pass judgment of conflict. it is unlikely there would be any conflict. >> the gentleman from california, mr. sherman. >> thank you. mr. secretary, our husing market is to some extent broken. thank god the g.s.e.'s and f.h.a.'s are providing all the financing outside of beverly hills. the definition of median home price is distorted because you may have a few arms length sales home in good condition, and thez you have 10's of thousands of sales in foreclosure, homes in terrible repair, deeds in lieu. now focusing onvoc high-cost ar including los angeles and the 10 largest or most expensive metropolitan areas, what would happen if at the end of the

year, the maximum home limits not only declined from 739.750 but to the fact that the government resets the loan to the current median price. in los angeles this means the f.h.a. limit drops from $729,000 to $376,000. the g.s.e. limit, fanny and freddie, drop from that $72829 to $417. i don't expect by the end of this year we're going to have a robust middle class home finance market independent of the g.s.e.'s. what happens if you have that sudden inability to buy and sell a home anywhere in some of our country's largest areas, what happens to the national economy?

could it cause a second dip in this recession? >> congressman that's a very particular question. i don't have a judgment now about what congress should do with those temporary increase in the conforming limits. i think it was appropriate that congress extended thefment i fully -- extended them. i don't have a judgment yet. i would say the following, though -- i think it is important for people to understand that the basic mistakes most governments make in dealing with real estate crises is they tend to prematurely declare victory. say that the great risks are behind us, and they tend to lock back support too quickly, not too slowly. i think it is important to recognize that this housing crisis, financial crisis, has caused a huge amount of damage and it is going to take quite a long time for us to heal and repair that damage. i don't know how long it is going to take, but it is going

to take some time still. >> do you think we're ready by the end of this year to see the g.s.e. limit drop by half in america's most important and largest cities without damaging the economy of the country? >> as i said, i'm not in a position to make that judgment. we don't need to make that judgment yesterday -- judgment yet. i want to underscore, i think your basic point is you have to be careful that we are doing carefully designed sensible things to help facilitate this repair process and recovery. >> this is just for the record, because i don't want to get you in trouble with the senate. but a year ago today, the president nominated an under-secretary for international affairs. still on hold in the senate after a year. domestic finance and assistant tax policy on hold. so the question for the record

is do holds, filibusters, and the senate practice of not allowing a nominee to work as an acting temporary basis until the confirmation, do those senate practices lead to higher unemployment to companies not being able to find out what the tax regulations are because you don't have an assistant secretary for tax policy? are there hundreds of thousands or tens of thousands of americans unemployed today because of the perqs and progress tiffs of the other body? don't answer that one, for the record. >> can i just thank you for raising that concern and for pointing out that these three senior positions of the treasury remain unoccupied today. it has now been 15 months since the president took office, and we have a -- an amazingly

talented hard-working group of people at the treasury doing a lot of important things for the country, but we need to get those people in place. >> finally, we disagreed on whether the executive branch should have permanent bailout ability to make sure the people on wall street can get bailed out only on the executive branch. congratulations on getting the senate to give -- givingp you that permanent authority. >> actually, we agree on more than you think. as i have said in the past, i would not support, and neither your bill nor the senate bill gives the executive branch the authority you describe. what it does do, if that management in the future gets to the edge of the abyss where it can no longer survive, then the

government should have no other support but to put that into a form of receivership so it can be dismantled overtime. >> we're going to move on. tag the gentleman from texas. >> good to see you again. given the unprecedented support that the federal government, both the federal reserve and the treasury has propped up the securitization market for housing in this country, one of the things that concerns me is that the longer we keep this government presence is the longer that the private sector sits on the sidelines because quite honestly, we do know that there is some activity pending out there. not to the level that we have had in the past. so what do we do? as i hear you saying,

congressman, i'm not really ready to do anything right now. but i'm very concerned that the longer -- it is like a muscle. the doctors tell you, the longer that you don't use a muscle and you keep your arm in a sling, which is where we got the housing finance market today, the harder it is to rehabilitate that arm once you take it out of the sling. how are we going to do that and what is your blueprint to do that? >> congressman, i worry a lot about that risk, and i think you are right to highlight it. i think the main risk we face today, is we have an economy that's only been growing, we have unemployment that's at 10%, higher in many parts of the country. housing market still overwhelming dependent on the government because there is no private will to provide financing for residential real estate, and it is going to take us a while to get through this and be confident that we have got a recovery from place led by the private sector that could be

self-sustaining overtime. the main risk we face today is there enormous damage caused by this crisis. you see it conspicuously in housing across the country. now, if you look at what we have done in the rest of the financial system, you can see we have been very, very careful to unwind, to walk back, to terminate scompend the emergency programs that we no longer need to put in to put in place. we have ended the money market guaranteee fund. the fdic is no longer providing guaranteees for the debt of bank holding companies. we have replaced the overwhelming majority of public investment in banking systems with private capital. we are undoing those emergency programs for the risks you pointed out. he with do not want these markets dependent excessively on government support in the future and we want to see private markets come back as quickly as we can. housing, though, still has been undamaged.

that process -- if you look at what we've done in those other areas, you can see we have been willing, careful, and effective at walking back and unwinding the things that no longer play a useful and effective role in supporting recovery. >> i hear what you are saying, and i agree with that, as well, but one of the big problems here is that we really do not incentivize people to get into the securitization on the private eakt sector -- private sector because we made borrowing very inexpensive. they can borrow very inexpensively. they can go out and borrow the freddie and franny products and there is not a lot of incentives to go out and look for private demand in those markets. >> i agree with that risk. i think if you look, you will have a chance to talk to secretary donvan about that. but if you talk to him and ed dmarco they have put in place a variety of changes in underwriting standards and how they price their guaranteees. it is designed to help promote

the private sector coming back and replacing them as things start to heal, but that process is going to take some time. i think you are right to underscore its importance. i would be happy to support that effort. >> p.m.i. was an important part of the private securitization market, but with the -- what the p.m.i. companies tell me is they can't compete with the federal rates. so sometimes we have to bring a level playing field here so that there is a yield difference there that people are willing to say, i have the higher yield here so i will move outside the current parameters and move into the private securitization. >> it is a question of how we do it. i want to underscore that even though the economy is growing now and we have brought a measure of substantial measureability to the financial system and interest rates are lower than they were, there is a lot of challenge ahead in the

housing financial market, and we can be careful that we're still helping to facilitate this process of recovery. as we transition to a new and better system. >> chairman bernanke is wrapping up his purchase program of mortgages, what do you think that does to the market? >> i would leave that to the chairman to describe, but again, as the fed does the careful responsible thing of winding down its emergency actions, we want to make sure, again, the full complement of government policies is helping facilitate this process of repair. it is getting better. we are making progress, but there is still a lot of damage still out there. >> i want to ask unanimous consent to the national association of credit unions they ask to be put into the record. g.s.e.'s allow credit unions to allow necessary liquidity to

create new mortgages. it remains an important tool for credit unions. they are a valuable resource for low and moderate-income members. has congress considered ways of conforming the current system that we believe safeguards are in place to create a smooth stransigs -- transition and that fannie may and freddie mac not be compromised. that's from the national association of credit unions. the gentleman from massachusetts is recognized for five minutes. >> thank you, mr. secretary. mr. secretary, there have been a lot of big things talked about z very simplistically. i'm not sure i know the exact number. do you know the general percentage of home ownership in this country prior to the existence of fanny and freddie? am i right to think it is in the 30% and 40% range? >> you mean going pack to the 1930's? >> yes. >> i don't know. >> today it is around 70%, give

or take? >> it is about 2/3. >> i look at home ownership. maybe i'm wrong, but i think it is probably the main financial aspect of this country that helped create and maintain the middle class. i come fromjv a neighborhood whe their way into the middle class was the purchase of a simple homezob%ei-i look at fan -- fan freddie mac as symbolic if not responsible for that. prior to fanny and freddie how did people get mortgages? private market alone? there was no government involvement? >> that's right. >> for me, that's what this is all about. i guess i understand that fannie may and freddie mac like everything else needs to be retooled, but as far as the current economic crisis, did fanny and freddie create the derivatives market? >> no. >> did they participate in any worse or differently than a mill

other private event -- entities? >> differently, but i wouldn't say worse. >> so they did some bad things but no worse than any other private entities in this country around the world? >> i would say they were better than most private entities in these markets. >> and that is my problem. i'm not going to suggest that they don't need toob retooled. i'm not going to suggest we don't need to revisit them, or that they don't need to be overseen or destroyed and made up in a different fashion. i came today to listen to give ideas. i will tell you that for me, subjecting potential home owners to nothing but the private market has been tried in this country for 150 years and failed to create a middle class.

since government got involved through fanny and freddie, we created the middle class and we sustained the middle class and when we are done with this, for me, that is the goal.=jç the only goal. as a matter of fact, for me, anything short of that, my emowings might overcome me and i might be tempted to scream out that someone or some thing or some group of people might be a home ownership killer if they got rid of fanny and freddie, and i hope that thank you, mr. secretary. >> the gentleman from texas -- before, the secretary has asked i think reasonably to leave at 12:30. all the members here will be able to question him. i would say another member, if you are planning to come over here at 12:15 and talk to the secretary,mtc have lunch and t talk to the