nonprofit channels, bank cra channels and others tended to perform much better than they did when they were being originated through mortgage -- >> cra, community reinvestment act. >> yes, community reinvestment act. so we know a lot about what works and what doesn't. the thing we've got to remember there are going to be 100 million more americans here by the year 2050, and the proportion of that population is going to be much more minority, particularly there'll be most growth in latino, but also in asian-american, african-american. as the country grows, population's going to be mostly oriented in large metropolitan areas, some of which have done well through this crisis, some of which have not. and we've got to be able to make sure there is a basis for building stable, sustainable communities there. home ownership's not the only solution, but it's a very important part of it. when we talk about the role of the gses and others, we also forget the role the secondary market plays in the providing

for real housing. >> should it continue to be our goal to expand, in particular, nority home ownership, and what is a more sustainable way to do it? >> the products that my colleagues have mentioned, i think, are important. to make sure that the home buyers -- particularly minority home buyers -- understand the product they're getting and aren't taken advantage of. the notion of subprime lending is not a bad thing in and of itself. but when subprime lending becomes predatory lending, that's when it's a bad situation. and i think we have to be careful of that. the second point that has to be made, and alex touched on it and i agree with him, is this has to be a mindset. there's a huge correlation between the tech bubble and the tech burst and the housing bubble and the housing burst, and that is that today's society -- and maybe this applies more to middle class home buyers -- wants instant gratification. a home is not a short-term investment. it's not a day stock. by the way, i think most day stocks aren't day stocks east. but a home is definitely not.

you buy a home first and foremost because it's a place you want to live and, secondly, because in the long term it is a very safe investment. but not to be traded and to be turned over and over. i think that's another important mindset that we have to teach this next generation of home buye. >> as ed reilly pointed out, one striking thing about the poll is americans were as likly to cite non-economic as financial reasons for buying a home. let me turn back to the poll and ask your reaction to what really is, i thought, the central finding or the central core in the poll, that on the one hand americans still overwhelmingly see home ownership as the right personal decision for them and their family. they see it as a sign post on the road to adulthood, a milestone in kind of making it into the middle class. it is an important, it's still kind ofan important intol of kind of -- symbol of kind of advancing in your life. on the other hand, they are much more ambivalent about public privacy meant to promote home

ownership as a broad social good, and we saw them divided evenly on whether government should do what it does now or scale them back. and be we also found, i think quite strikingly, a majority saying that the efforts to expand home home ownership have deabilized communities more than -- one of the arguments for home ownership is it produces more stae communities, but a majority in the poll thought it produc more destabilized communities through foreclosures and all the other problems associated with it. when you look across the panoply of things government has done to promote home ownership, are we spending too much, and are we pushing, in effect, too hard to encourage people to?qúo[jvn&s)z

. >> so the distortion that came in the market was really not from the government role which is largely kind of smooth bubbles and busts and helped with liquidity.

the distortion came -- and i know alex will probably disagree with me on this -- because of the part of the market where we let it go wild. >> alex? >> i would say -- thankou. i would say that the respondents to your poll in their skepticism of the government are absolutely right in their majority views. the attempts particularly through fannie and freddie who did, indeed, jump in and jumped in to subprime investing drove the housing bubble much higher, made it much worse than it would otherwise have been, gave foreign investors -- in particular interesting to people are the chinese, but many foreign investors; germans, chinese, japanese all over the world -- gave them way to inflate housing bubble, inflate housing prices, overextend

credit without taking any of the risk. so the result of that intervention is today that ordinary american taxpayers like you and me are being taxed so that we can pay off the chinese and other foreign bondholders at par who lent money to the deeply-insolvent fannie may and freddie mac. so what we got out of these programs is a very large distortion of price structure, of credit structure and of market functioning, and one of the main reforms we have to make is to move away from that back toward a private market. so, again, i would say the intuition of your heartland is a poll that someone's who's polled a pollee? a respondent? their reactions are absolutely right. >> shanna? >> i think, also, in the poll they said greed, greed, greed and that greed came from wall street and the lenders, and, yeah, fannie and freddie should not have jumped into thearket

and bought everything that they did. and in one respect something alex said earlier, i think i agree with, we've got to go back to a sensible housing market, and i believe if gses did not have shareholders, they wouldn't have dove into that. and dismantling gses doesn't quite make sense to me. i think you have to fix it, get rid of shareholders, get rid of that profit-driven area. but we cannot leave lending in this country in private -- in if this country in private market. they have discriminated against various groups, and we do investigations, and our most recent look at this within the last year and a half found that african-americans and latinos who were more qualified than whites who went in to inquire about a loan were given loan products, but the higher priced

loan products. >> let's dive in right there then because, obviously, we talked about it before with jared bernstein. what should the future of the gses be at this point? what role should they play? obviously, it's going to change from what it is now, but how far should it be reconsidered and in what directions? jerry, do you want to start? >> well, first, let me comment on the previous question. 42-42, that's the -- 46-46 is actually pretty good given the environment we're in right now, and given the fact that if you talk to the american consumer and say what is the government's biggest homeownership program, they're going to say two names: fannie and freddie. and fannie and freddie right now have such bad press that i think if you told people that santa claus had two evels named fannie and freddie, they'd be against christmas. [laughter] it's very bad. so given that situation, i'm not surprised at all where we are. where should the gses go and whether they'll even be called

xses -- gses, i think there absolutely needs to be a secondary market for the financial structure to move forward. >> and a government role in that? >> i think there has to be a government backstop, yes. and i'll give you two examples of y. the first, if any of you are old enough to remember the oil patch days in the '80s when the commercialanking sector absolutely packed up and left oklahoma and texas. the only capital flow into those depressed states was because of the presence of the gses. they kept those states and anybody who lived there, anybody who did business there at that time will tell you that the presence of the gses kept those states above water. the second example is right now. even in their highly-crippled states, the fact that fannie and freddie exists has kept our housing industry from being in a worse situation than it is. so people who say we shouldn't have a government-sponsored enterprise or a government guarantee are ignoring the practical reality is.

the third practical reality of the situation is if it goes to the commercial banks, mr. and mrs. taxpayer of america, you're still going to be on the hook because they all have government barn tee so it's kind of a fallacious argument going forward. i think we have to look at prudential underwriting, we have to look at prudential securitization. let's not forget those who securitize these loans, they're as much at fault as anybody who originated them. and i think we have to make the commitment those two elements need to be better regulated and move forward from there. that's our perspective. >> so the institutions we know as fannie and freddie are not going to survive in anything like we know in their current form. but i think, as does jerry -- >> i hope you're right about that. >> but i believe that there will be and there should be institutions who have responsibility to provide liquidity to the marketplace who have access to a, essentially k provide their investors -- can

provide their investors, global investors and your and my pension fund provide confidence that for their capital to not be sufficient that there was a catastrophic risk insurance fund managed by the government that was available to backstop them. the key difference between fannie and freddie and what we want in the future is that fannie and freddie had an implicit guarantee which meant they didn't pay for it. they were similarly capitalized because -- [inaudible] [aio difficulty] so they met exactly the level they were told to survive. but it wasn't enough. but these should be much more highly capitalized entities, and they should have a responsibility to the investors to pay for the government guarantee. that will create an accumulated reserve fund -- reserve fund that were these entities to fail, there would still be a way of protecting the fakiers

because -- taxpayers. and were in the future that reserve to run low, you can charge more for the guarantee to fillack up like the fdic does and other things. that would give us the benefits of a guarantee. it should be targeted at the middle class. it doesn't need tobe a jumbo market, but we can gradually move that down. that gives us the benefits of the old system without giving up -- and avoiding the problems that we've seen. >> alex, there was a relatively positive nod of your head during that. [laughter] >> it's just a familiar gument. [laughter] >> well, we all, of course, know each other's views and particularly between home builders and think tanks, but we don't always see everything exactly the same. but i agree with jerry about prudential underwriting, fundamental high credit quality and, of course, we want secondary markets in all kinds of things. primary markets work better if their active secondary markets

not only in mortgages, but let's say in stocks and corporate bonds wher we don't think we need gses we have perfectly fine secondary markets, and they work. so my view of fannie and freddie and what should happen to them is they should be on a five-year transition to the end of eir gse status. gse, clearlgiven the experience and poor structure, i'd like to say, look, you can be a private company, or you can be part of the government, but you can't be both at the same time. so in the housing finance system we have at the end of this five-year transition it will be vibrant private markets, there will still be government actors, but they'll be explicitly government actors, explicitly approved, explicitly appropriated by congress for the money they spend. but there won' be any gs.

now, there may be organizations which are fannie and freddie. they won't be gses. they'll be privatized. fannie and freddie, and we'll hardly get there on this five-year transition. >> clarify one point. >> you said there would still be government actors. describe what that would be. >> an fha, for example, with the department of agriculture, but these are fully government actors, not these hybrid, strange creatures which claim at the same time to be government- >> so how do we get there in five years? >> uh, we know fannie and freddie had very little catal. they introduced excess leverage, i'll say hyperleverage into the financial system. one of the reasons they did that is because in their interaction with the banking system through regulation, banks were encouraged in many ways to help leverage fannie and freddie, including by buying the equity of fannie and freddie, an

activity which caused the failure of a number of banks. so fannie and freddie, for starters, need to be right now given the same requirements as national banks. we take away the capital arbitrage and the hyperleverage. they need to be put on a regular pattern by which their conforming loan limits are reduced from the top going down, and then we can observe, we will observe the private markets taking over. in the meantime, no one can compete with a gse. you have to get the gse out of the way. that was true when the gses had almost no capital, it's even more te now that they have no capital whatsoever. and in the end they then would be divided into a liquidating bank which will take a so-called bad bank, all of their old government-guaranteed liabilities to run off over time and a good bank which can be

pratized and sold. >> if gses cease to exist, what happens to the mortgage as we now know it, and particularly 30-year fixed rate mortgage? what's the effect? >> i think the 30-year fixed rate mortgage will be available to those people who have enough wealth to pay a higher premium for the value of the longer -- the private markets will not provide it for most commonly underwritten loans. it will certainly not be available to low and moderate income families. that will have the effect, i think, of adding additional economic insecurity. if you think about it, who is best positioned to hedge the risk of interest rate changes, is it investors or families? think about the transaction cost if suddenly your mortgage costs 20% more after an interest rate adjustment. a larger part of the market to the extent there is a 30-year mortgage, it'll be an fha. in the alex's world, there will be a much higher percentage without this intermediary space, a higher percentage of the market in fha.

and, remember, the government bears 100% of the risk with no capital cushion ahead of it whereas in the structures thai and jerry and others have been talking about, there would be private capital at risk in the form of the secondary market, and there'd be the risk insurance fund. so we're actually going to take on risk on loans directly that we don't need to take. >> if you eliminate the gses, what happens to the mortgage as we now know it? >> she's exactly right, the situation becomes one of great inequity, and you're talking about an area where the upper middle class and the upper class america will have access to capital at a much greater in much greater numbers than the lower middle class and minority groups. when you look at, as i said earlier, when you look at housing, you have to look at it from both the social perspective and from are the economic perspective. and what alex is proposing may make economic sense, but it comptely ignores the barometer of social policy. and when you look at the poll,

and 90% of americans want to be homeowners, i think those 90% of americans would y the government should play a roll -- role in that. shelter is one of the most basic human needs whereas invest anything the stock market isn't. i think you can make a strong case tha what alex is talking about may make economic sense, but you have to have balance. >> in the survey 58% of non-whites want government to contue doing at least as much as it's doing now. among whites, only 41%. a stark racial divide as there is on many issues involving the role of the government. shanna, what do you believe -- what kind of mortgages would be available in a world without gses? if would it significantly change? >> i totally agree with what sarah and jerry just said. i don't have anything more to add. >> okay. >> it would be devastating. >> now, you -- >> thank you. [laughter] >> would the 30-year mortgage go away? would down payments go up? what, what's happened? >> first of all, the 30-year

mortgage would not go away. in a principally private system, there'd be a rich array of types of mortgages. the gse subsidies would go away. now, you're not asking an essential part of the question which is what happens to house prices. >> with right. >> all subsidies are transmitted by market behavior into prices. so when push subsidies on markets, what we have done is push up the price of houses. and one of the best things you can do for home ownership -- although perhaps not for home builders, jerry -- is to have, to cease to have a distortion which pushes up the price of houses. so you have houses whose prices are better. i just want to comment on the 30-year mortgage -- >> alex, could i just ask you e -- but wouldn't that, if you're paying for the gse, that wouldn't exist -- >> i always get this argument. it's my view, and oers like

me, that you can't cite a single instance in which the price of government guarantees is ever adequate to the risks. part of that is the guarantee itself creates more risk as we saw in housing finance. but let me talk about the 30-year mortgage. we tend in housing finance discussions in this country, although in almost no other country, to enshrine the 30-year mortgage with a shining halo and ma it into an icon. this is, this is a mistake. so if i could, i'd just like to talk for half a minute about the dark side of the 30-year fixed rate mortgage. >> okay. [laughter] >> one of the biggest problems in the american housing market and housing finance market right now, today, is precisely the fact that so much of our homes are financed on 30-year fixed rate mogages.

let's ask what is the situation in which a 30-year fixed rat mortgage is terrible for the borrower? forget about all the problems it causes for lenders and investors. why is it terrible for the borrower? answer is when interest rates are very low, but house prices areown o -- so that you can't finance. well, that's our situation now and over the last three years. so the ar recorder -- boar -- borrower is locked into what becomes a very high rate relative to the market, cannot refinance at any price. it's not only a high nominal rate, it's an even higher real rate because the asset is deflating. so the entire assetdeflation is put on on the borrower through e 30-year fixed rate mortgage whereas in this situation in an adjustable rate market like the

classic mortgage you'd be -- classic british mortgage you'd be paying 1%. we wouldn't be standing on our heads with government programs trying to force modifications of 30-year fixed rate mortgages. the dification would have happened automatically and the debt service gone in half. so nothing is good for all seasons and all times. 30-year fixed rate mortgages are good for borrowers when house prices are reliably inflating, they're terrible for borrowers in a house price deflation which is what we have now. >> let's bring in the awd yes, - audience for some questions. and, ed, if you want to come back and join us as well, we'll put ed up at the podium. i think there's a microphone over there, and is there one on that side too? anybody have some questions from the audience? about either the discussion here or the poll from before. yes. identify yourself real quick. >> jeff lister with the realto. alex, i've heard you say before that the government's never

adequately priced risk or credit, and fha is an example where there's never been a subsidy since the '30s. better than the private label securities that did much worse without any federal guarantee. so what do you say about the success of fha that looks like it's not going to need federal subsidy? we don't know for sure yet. >> fha has, of course, had several periods in its history which it's gotten into deep credit trouble and been a large source of foreclosures and vast tracts of fha foreclosures, notably in the '80s, also in the '60s, and its driven delinquencies are high recently. but if fha is the best example, which i agree it probably is, unlike flood insurance, unlike savings and loan deposit insuranc unlike gses, since on my view the fha would continue to play an important role, then i appreciate your point very much.

>> all right. while the audience waiting, the next question from the audience, one thing we did not get to and which the poll, i thought, was striking when we had the question of what to do about te mortgage interest deduction which has not really been a subject of political debate. there really hasn't been anybody out there, political leaders, making a case against it. and i think that's often a cue for public opinion, obviously. even so, we still have 43% of the country saying limit it, roll it back or elinate it even without kind of getting a cue from, from political leadership. um, to what extent do you think there will be a debate, particularly in the context of tax reform and deficit reduction, about either retrenching or eliminating the mortgage deduction? >> i think there will be a debate. i think the likelihood that we'll see dramatic change is relatively limited at the end of the day. but i think the size of the

deficit problems that we face mean that every tax expenditu is on the table, and this is an enormous one. the amount that fannie and freddie has lost is less than we spend on the mortgage interest deduction in a single year. and the fact of the matter is the way the deduction is currently designed is that its value goes disproportionately to those who have larger homes and are in higher tax brackets. so it seems to us that it is like hi to have a debate -- likely to have a debate. i think there is some possibility that it may be redesigned and things like second homes and other things may eventually, the top macome down a little bit. you know, jerry's absolutely right, those decisions have economic consequences in particular geographies. i can anticipate the argument. and i think he's right about that, and i think that's why people will be very reluctant to do that, especially now when the economy's so weak. but it may be something that we start to talk about now and talk

about imposing before the year's out. >> ed, who is the audience for that kind of change? what groups were most open to considering -- is it a basic ideological role of government divide, or are there any other meaningful fissures? >> obviously, those who are in the market who are renters are more likely to want and see change in that, and those who are, those who are, you know, from an ideological perspective, republans are more willing to accept that even if they are, even if they do have mortgages and do use the deduction. so i think -- but i do think the one point about all of this is that there were very strong population groups on both sides. while there was a consensus on dispairtive owning, what you saw here was a divide, and i don't think that's a recipe for swift legislative action right now given the nature of our diourse. >> shanna, alex, what, to what extent do you think there will be a debate, and in your mind,

you know, a blank piece of paper, where would it end up? >> i think there should be a debate, and i think what we need to see and i think someone mentioned last night the carrying of the access to the mortgage interest rate deduction. i think low and moderate inco people, it helps them. i think people with second homes, they have rental income, they're able to depreciate the property, so they have some other benefits that they receive from that. and i was thinking, you know, in the mid 1980s when the tax reform came through and we were no longer able to deduct our credit card tax, our car interest tax, our other taxes, we still bought cars, we still used credit cards. so i think, you know, there's always an adjustment period, but i agree with sarah that we have to have some reduction in it, but have it benefit low and moderate income. >> jerry, i'm going to l you back in.

alex, is this a treadmill where the deduction costs government money, but it simply raises the price of housing and, basically, buyers are, might not be any better off tha they would be without it only we've spent a lot ofoney in the meantime? >> y. but, given the fact that the tax advantage gets put into house prices, this is one place jerry and i do agree, i wouldn't do anything now to put further downward pressure on house prices which knocking this out now would do. two other things we might think about. one is there's another very important tax change which is relatively new historically, the 1990s, and that's the exemption of capital gains on houses. from tax. that's also a very important tax effect which probably fit the bubble alodge with other changes -- along with other changes. second is from an overall point

of view you don't need the interest deduction on mortgages to have a housing finance system. our neighbors in canada don't have it. they have a home ownership rate which is now higher than ours. but that isn't where we are. where we are now is with the structure of prices having included this. so it's a fine time to have the debate, but i'd say it's not a fine time to change anything. >> where would you take it in the long run? would you eliminate it? would you convert into it a credit? what would you do? >> well, among all the other ings i would do in the long run, that would be on my list, but that's long run. >> eliminate. >> that's sometime after 2016. >> jerry. >> i think the concept of tax reform, i draw the analogy there's a scene in the movie "the godfather," where michael corely krone is making spaghetti sauce in the kitchen, and he says, you know, how bad is this war going to be? and one of the godfather's guys says to him, you know, it's going to be bad.

this has to happen every ten ars or so, we have to clean out the bad blood. and i think that's exactly like a tax reform debate. [laughter] every ten years or so there has to be a war. we have to clear out the bad blood. in the end, the mortgage interest rate reduction will remain the way it is. in the short term, because it's ludicrous to do anything to further destabilize the housing markets, and in the long term becae of the polling numbers of the people who say they want to beco homeowner and view the mortge interest deduction as an important component in their efforts to become homeowners. >> could i just make a comment, please? is. >> yes. >> the great financial writer in 1873 pointed out we have a financial crisis every ten years. there's another -- he's the godfather of central banking theory. it's every ten years, so get ready. >> so would your position be as is, no change? >> >> yes. >> now and forever? >> now and forever. [laughter]

>> you were talking, you would do what, you would make it -- >> i agree with alex that doing, that the mart is very, the housing prices are very stable. particularly be if we're talking about withdraw liquidityn any way as we bring loan limits down, there's going to be very tricky stuff happening to home values, particularly on the coast where they're high. so i think there's got to be a great deal of care and concern abou coordinating. in the long run, i would turn it to a credit because it's more equitably distributed, and i would probably reduce its value over time so that you're really hitting middle class homeowners and not subsidizing the prices of houses beyond that. but i would not begin to phase that in for quite a while until the economy is on much sounder footing. >> um, all right. now f we -- let's see, do we have a question? one more from the audience. >> is this on or should i just talk loud? >> no, you're good. >> we talked about fha from the perspective of, you know, the government exposure to the ri and are we pring adequately

for the government backing, but i wanted to ask a question from the borrower's perspective. when someone asked about access to credit for people of color, you know, jared bernstein kind of went to that's fha. although he talked about it in the low and moderate income terms which are not necessarily the same thing as i think people of color in this room would probably recognize. my question, if you're a person of color or moderate income and you want to be a homeowner and fha is the only product available for you, is that a good thing, a bad thing or, you know, indifferent? >> >> shanna? >> everybody talks about competition in the market, and i think there always has to be that competition. right now fha, you may your mi, your mortgage insurance, for the life of the loan. and if you're in the private market, you can get that 80, you know, get 20, 25% equity, and you can get rid of that payment which is a very high payment right now. i think fha should just be one of the alternative products that are available, and people should

not be pigeon holed into a particular product. i don't think it's the cheapt product. >> jerry? >> i agree completely. >> i worked at fha for five years, and i think it plays an essential role, but we don't want to see a world in which we have fha neighborhoods and private market neighborhoods. that has been in the past, as alex alluded to, an opportunity for the bad guys to sort of swarm into the program and to have a depressing effect on home values in the those communities. and i don't think we ought to have a world in which the government deals with low and moderate income neighborhoods and the private sector sevens the rest. serves the rest. seems to me we ought to be able to find a way to incent the private sector into serving all of our markets because, ultimately, there are plenty of completely profitable, affordable loans that can be made without subsidy in those communities if people learn to underwrite them, and if they're not in those markets, they'll never figure out how to do it.

>> we've always had a dual housing market, and the report came out and said there's a black and white america in the mid '60s. fha in the '80s was in detroit, and it came up because appraisers went in and real estate agents went in and sold hos whose furnas weren't working, they sold them in the summertime, and people bought homes that had no heat. and so fha was the only financial market except for some mortgage brokers in the '80s in neighborhoods of color, and we can't go back to that dual market. >> we're slightly over time, so i want to ask a final question, and if we can maybe a sentence or a yes or no or pick an option. all of you, alex made the point before about trend versus cycle. do you think we will as the economy revers in the next few years, do you think we will return to a housing industry that, basically, has looked fundamentally as it did before we went into this downturn with recognizable products like the

30-year mortgage and a steadily rising percentage of people who aspire to and, in fact, own homes, or do you think we are at an inflection point where the market andhe way that people choose between owning and recollecting and the way that they would try to buy a home are all going to look very different even as we recover? >> uh, we will have more diversity, thereill be changes, but some of the old will return. >> okay. >> home ownership is still the american dream. it'll remain the american dream. and the market will recover eventually. >> i hope we have a blend of the two issues you just discussed. >> the trend will continue. we'll cycle back up out ofhis down phase, but, of course, in the future we'll continue to have cycles, especially in real estate. >> all right, well, great. it's been a terrific panel. would you join me in thanking them? [applause] and we have one more treat for you, henry cisneros, former mayor of san antonio is going to join me on stage for a conversation about where this --

how this push on home ownership began and where it's going. thank youment thank you, that was great. >> this forum continues with former housing secretary henry cisneros. during his speech, he called for eliminating the home interest deduction. ave hoped we've best for henry cisneros, former secretary of housing and urban development under president clinton, former president and see owe of univision and today, chairman of citi view companies which work with developers to build affordable housing across the country. as dean acheson might have said,

you were present at the creation of the really two administration long push to expand home ownership, and to really kind of force this into debate as not only an economic, but a social goal. what was the thinking at the beginning of this effort? what were the benefits that you saw from increasing home ownership rates? and then we'll talk about the lessons you take from this experience. >> ron, thank you for the question because i think it gives me an opportunity to really kind of frame the moment where some of this began. before i do that, let me just thank the national journal and the atlantic company for this effort. i have participated in a session last night and was present all this morning, and it struck me that this is the first of many, many, many postmortems on the economic issues and the housing issues that really focuses seriously and hones in on the efficacy of home ownership.

because it's right at the heart of what we need to decide for the future. what do we really believe as a country about home ownership? so this is a very important conference, and thank you for your role in moderating as much of it as you have. i remember the moment in 1994 when the head of fha and who now runs the harvard joint center for housing studies came in and said we're looking at economic data that suggests a very strong and potential long expansion. and the opportunity to harness that expansion and make it work for average families through home ownership exists. in retrospect, we know that that expansion was the longest expansion in american history, that it produced levels of employment, reduced unemployment, resulted in the formation of new businesses, reduced poverty to the lowest

numbers that had been on record since poverty statistics were kept through that period. and i remember a moment later in the rose garden talking to president clinton the morning that some new numbers came out on a very obscure statistic which is the distribution of income, and we actually had moved the distribution of income in a positive way. >> you had a good coefficient? >> exactly. you know the ratio. >> yeah. >> but the long and short was that the argument was being made that one way to have the benefits of this reach people -- aside from jobs and incomes -- was to create the conditions in which home ownership might be expanded. the previous high in home ownership had been 66%, and that was achieved in the about 1966. at that -- in the early '90s we were about 64% or so. >> when you came in, right. >> when we came in.

and can we didn't do a -- and we didn't do a lot. but what we did do, for example, was we pulled together a coalition of 45 organizations, a home ownership coalition that included the community bankers, the american bankers' association, the mortgage banisters' -- bankers' association, many, many other advocates like shanna's group, for example, on fair housing, many groups, and said tell us what needs to be done and what we can do to advance the home ownership rate. the goal was, basically, to create opportunity, and the thought was that we might get to the 66% which had been the all-time high. but at that time there was no thought that we would, you know, move into is stratospheric levels that we saw later. and, frankly, i think looking back at it it was completely the right thing to do. and as we get through the questioning, i can talk about what happened later after 2000 when a lot of other folks

discovered -- >> well, let's talk about that first period. what were the principle levers that you used? there was tough, there was renewed attention to the community reinvestment act, there were some changes in the rules for fannie and freddie in terms of what kind of mortgages they purchased. what were the levers that you used? and, perhaps, how did it change after 2000? >> >> well, the levers -- the two that you mentioned are real, but they've been exaggerated since by critics who say somehow that cra only -- obligations prompted the banks to do things they shouldn't have done. the cra obligations weren't changed, just stressed, just enforced. and the other dynamic that was at play here was previous to 1992 and the start of the clinton administration there'd been no oversight of the gses. but legislation in about 1992 created what then was called, odd name, the office of federal enterprise, housing enterprise

oversight, ofeo. a woman named alvarez came in from first boston to head that, and she did a fabulous job of oversight. but you can imagine a small hud office, an assistant secretary level person, she later became head of the sba, overseeing the massiveness of the gses with their lobbying power and their, you know, strength. >> they didn't like being overseen. >> they didn't like being overseen, but she did a good job. we were in constant fights with them about the oversight. and they had strong congressional voices, and it was a very tough environment. but one of the things that she was required by law to do, the same law that created the oversight, was to stipulate moderate and low income housing goals for them. and that was always an annual exercise when her office came to the hud secretary and suggested what the numbers ought to be for that year. i was very cautious, it's just my nature having been a mayor, that you work with the private

sector and you try to strike kind of a middle ground and never push the recommendations to the max. so i don't think we overstressed the gses, but we did for the first time impose some goals on them that required them to be active. so those were two of the levers. the principle lever, however -- not really a lever -- was kind of job owning. we had home ownership summits all over the country with these same 45 partners and their local counterparts, the american bankers' association, home builders and others. basically arguing for regional and local analogs to our national effort to encourage opportunity in home ownership. one of the principle dynamics here was the recognition that while the home ownership rate in the united states was 64%, the african-american and latino home ownership rates were 42% at that time. fully 22% below the national average. later, as both rose and the

minority home ownership rose faster, that is to say it closed more points in gap, the home ownership rate for the country got up to 69, the white home ownership rate got up to 74, but the minority home ownership rate got up to 49. never got to 50, but that seven-point gap from 42 to 49 was faster than the -- was greater than the 64 to 69 for the average. and white homeownership rates got up to 74. but that was a 26 point gap or 25-point gap from the white home ownership rate to the minorities even at the highest point. >> let me ask you about the overall that correct ri. a couple years ago you said to "the new york times" noting the 69% level; you think you have a finely-tuned instrument you can use to say, stop. we're at 69% homeownership, we should not go further. there are people who should remain renters. but you really are just given a sledge hammer and an axe. blunt tools.

>> that's been a theme of what i've known about government for a long time. when i was mayor of san antonio, i thought i had a fine scalpel to do sort of surgical public policy or a rheostat where you can turn up the lights in the room to exactly where you want them when all you really have is, you know, a sledge hammer, this very blunt instrument. and some have criticized and in some self-interested ways the governmental initiative in the home ownership as having created this. but i would argue that there's a dramatic difference between the measures that we took and the levels that we achieved and then what happened later. >> all right. talk about the difference in your mind. >> well, i have to talk about what happened later to do that. >> right. >> but i think what happened was the momentum was recognized and then hijacked. and several of the presenters this morning have talked about the elements of it. but there came into existence

really abusive retail interests, companies like aher quest, for example, that no longer exists and others, highly publicized in all the books that have been written about it. they came into existence for no purpose other than subprime lending and even predatory lending. you had people who came from other businesses to do this at the retail level. they did this in part because there was demand from wall street that had discovered this and was beginning to package in the form of special investment vehicles cdos and other devices that they created, the intricate tranches they would split out of risk to sell into the international market. so you had all kinds of wall street companies making obscene amounts of money, as we know, with compensation systems that encouraged people for how much they could package irrespective of the quality of it. there was almost no concern for the quality as it moved into international markets. we know there was a kind of a glut of money in world markets.

chinese money, petroleum money, european money and countries like iceland and germany and others bought this. we had the rating agencies rating it the way that they did, aaa ratings for even the most dangerous tranches. we had the federal reserve continuing to express concern about the earlier dot.com bust and keeping interest rates low so there was a world awash in capital. and i think the fed has not ever been sort of held to account for the dimensions of their complicity in this. we had chairman greenspan, for whom i have great respect and worked very closely with. i was once a vice chairman of the federal reserve bank of dallas. but who was advocating a deregulatory mindset that didn't recognize the immensity of what was building all this time. >> you were on the board of countrywide -- >> later. >> later. >> and i'm happy to talk about

it. >> and they, obviously, became enmeshed in much of this. i'm interested in what you're kind of suggesting. the mindset was, obviously, there wasn't a lot of attention to the quality, the loans are being sold off as securities, it would be securitized, no t a lot of attention to the quality. did that ultimately, basically, when you talked about kind of moving beyond the boundary, you know, in your observation, is that essentially what happened? basically, you had to go to people who were more and more credit risks and, ultimately -- >> i think what happened -- >> not in a position for home ownership? >> i think the government, and i'll go back to your point about blunt instruments. we started a process, and you never -- one of the things i regret about this period is not knowing what form it would take, where it would go, who would, who would abscond it, you know? so there's that. you tried to do the right thing, you neverñí

we had people who really knew nothing about mortgage lending who are now in the business who were telling people it doesn't matter what your income is. the buyer would call them on it. they had say believe me. it is going to be fine.

we're going to get you the mortgage. don't worry about it. then of course there was the element of predatory higher pricing in that. so, yeah, there were a whole series of factors that kind of took over, a maelstrom of factors that took this to a higher level. we ended up with a higher homeownership rate. we ended up with higher than it should be. we ended up with people who could not stay in their homes, as we know. we ended up with companies who whose books were bloated with toxic loans and we know all the other dimension of the chi sis. -- crisis. officials as a of n a had difficulty in -- >> the "new york times" put me on a cover of a piece about two years ago as the face of the crisis. that's not a pleasant --

[laughter] >> the full sunday picture. [laughter] >> and one other dimension that you informed us of last night that you live in a very working class immigrant neighborhood in the home of your parents or grandparents. >> grandparents. >> i mean, you've seen this from many different angles. let me ask you -- >> let me go to the countrywide angle for a bit because there's an intersection that's kind of interesting. first of all, before i go to countrywide let me say about fannie and freddie. first of all, let me tell you the business i'm in. today what i do is assemble constitutional capital and invest it in middle incomed housing and i've done that since the year 2000. we built about 7,000 homes across the country in 12 states, about $2 billion worth of housing value. very focused on the middle man in the city. so it's a little bit exempt from the crisis because that tends to

be suburban large track homes. i say that because auas i -- as i return to the housing field, in 2000 and started this company, which is what i want to do the rest of my life, i was asked to go on fannie's advisory board, which is not the governing body and which is not compensated. but it gives you a kind of insight into the way fannie and freddie operate which i'd known from a distance being the head of the oversight body, but not as a filter. so i'm at a meeting about 2002 and frank rains is making a presentation on the efficacy of subprime. in effect, he had a white paper done by, you know, ph.d. rocket scientists who said that subprime is not a bad thing. subprime is just a way to price risk. so if you extend to people who are -- in categories that would

not have been qualified before, you simply price it higher. and you can be fiduciariarily responsible to your company and not create potentials for huge default and get more people involved. so he was making kind of a politically idealistic and socially relevant case for subprime being a viable instrument if you think about it as a mathematical device to price risk. and expand -- and expand homeownership. so that was clearly a kind of decisive moment in the thinking of fannie and freddie. and they were motivated not only to expand homeownership but because they saw others going there and felt the need to -- to be relevant in the market. >> were you convinced at the time? >> well, i was skeptical but there was -- there was -- i'm not in that business, so i was -- so it didn't strike me as completely right. it struck me as something to

watch and be careful of. but you may remember there was a group called fm watch that came into existence which was the private providers of mortgages, and they were pressing fannie and freddie on the market side and i think fannie and freddie at that moment felt like they needed to get into this business or they were going to lose market share. so that kind of tells you kind of a little bit about fannie and freddie's entrance into spheres where they had not been before. and it's not the government that forced them there. despite the critique that's the case. it was market factors. and then they took it to the extreme and they had their own expense issues and accounting issues and mismanagement issues that created the crisis. >> before we bring in the audience, the question i want to ask you, though, is as i said having seen it from all these perspectives, do you think the gap between the minority level of homeownership and the white level of homeownership can be significantly reduced? and if so, what is a more sustainable way of doing it?

because obviously the method that we tried over the last two decades ultimately ended in tears, however, it started. >> wrong it's not what we tracked it's what happened. as certain elements decided it was a pertinence on the ground force. >> how do we get back -- >> we avoid that for sure. i mean, we deal with credit standards that are more responsible. we encourage people to become homeowners but on a steady basis recognizing that not everybody can at any moment. i've never indulged in the game of what the homeownership rate ought to be. but sort of the facts on the ground tell us it's probably around that 66% hike that we have been before and about where we are now. i mean, the interesting thing is, we're at 66% now after this crisis and 66% was the all-time high in the history of the country before this. >> uh-huh. >> so we're -- we're still at a very high level compared to our historical norm.

and we're at a point where -- you know, it seems sort of reasonable, a clearing point where homeownership rate ought to be. clearly, it takes a while for immigrants to become homeowners. maybe an entire generation. maybe the first generation can't be homeowners. but their children can. but the kind of effort we have made in the past where communities are involved and churches are involved, minority organizations are involved -- in order to get people prepared through homeownership counseling, intensely working on the ground in ways that are fair and responsible -- i think those are the kinds of mechanisms that have to go forward. >> i want to bring in the audience in a moment. >> i was just going to say we clearly don't want to unleash those forces that were unleashed before without supervision. and that tell us that the derivatives market needs to be overseen. that tell us that you can't have

this kind of on the ground retail operation without some sense of professionalism of what people are maybe even licensing or certification for mortgage brokers. it tell us that the rating agencies have to operate according to better standards and we know that's sort of en route to happening. and a lot of other elements of this that just got out of way because the way our system works. >> two policy areas and maybe a couple of questions. some of the panelists on the previous panel argued and there was a debate about this. would retrenching the role of the gse's reduce access to homeownership for moderate-incomed families? >> well, it depends on how far you retrench. if we eliminate the role of the gse's i think the comments made by shanna and sarah and jerry howard are correct. we would have trouble sustaining the 30-year fixed rate mortgage. we would have trouble in times of economic retrenchment

offering and continuing the strength of the housing sector which is so important to the economy. so the answer is, yes, if we eliminated them. i think what's going to occur is that we're going to keep some of the essential function. they won't be known as fannie and freddie and i don't know what happened to the buildings on wisconsin and out in mclean and all the people who were in them but some kind of different structure will exist because the function of securitization of collecting mortgages at the -- that's what happens when you talk about fannie and freddie. [laughter] >> yeah, yeah. [laughter] >> i think that the function of assembling mortgages, securitizing them and creating liquidity so that money could come back into the housing mortgage system is absolutely critical. other countries that don't have it seek it. and if we didn't -- if it didn't exist, we'd have to invent it because it's been so powerful. and we have to separate the good things that that system produced

from the abuses that followed. one of the critical things we have to do in this episode is disaggregate the lesson and make sure we're not reacting to the wrong set of facts, the wrong lesson. i think what caused this problem is not the fact that we had securitization of mortgages for the last 30-plus years. >> i want to save one policy question for the end and see if there's any questions from the audience. you've been very patient. anybody -- yes. just identify yourself real quick, please. >> i'm ron clark. and i want to get back to the question that was asked of jared bernstein when he was asked what the connection between education policy and housing policy is. he answered primarily through an education policy, i think, but i was wondering if you could explain how you see the secondary market working to provide affordable rental housing opportunities in areas that do have higher opportunities in the terms of jobs or schools or anything along those lines?

>> well, it's an interesting fact, not discussed much today but fannie and freddie have been absolutely essential to the provision of rental housing over the last five years or so. through the buildup of this crisis and during this period, you really could not build a partner in the united states without fannie and freddie. we just wouldn't have had construction lending and support for the multifamily sector without fannie and freddie's presence. i think that's another element of what we need as a function of the government of the gse's going forward. and that's -- and that's critical because we need more balanced housing policy, and we need more apartments. yes, homeownership is important but for the first time in many, many years, over the last several years, there has been very little production of apartment. a company like tramaco residential that has built hundreds of thousands of apartment units across the country, last year, in 2010, for

the first time in its history, started zero, not one new apartment in the united states. so we're going to have a problem on the apartment side. apartment, multifamily people are happy that prices are going to rise but already we know that there isn't a single market in the united states where a family earning the minimum wage can afford the rent -- fair market rent on a two-bedroom apartment. it doesn't exist. families are both overcrowded. they are finding, you know, unsafe -- finding themselves in unsafe substandard apartments. we need the gse's involved in that as well. >> you spoke about education on the outset -- >> well, i guess -- my question was kind of a question of geography and opportunity and making sure that you're getting the right kinds of rental options in places -- >> okay. >> i guess the lights go out

when you talk about frannie and freddie, the sign fell down. and just making sure there's an appropriate distribution of rental housing opportunities so you're not having reconcentration of poverty. >> right. >> you're not having concentration of affordable housing in areas that have a high concentration of people with color. that type of thing. >> it's a very hard problem and you talk about your situation in san antonio in a historically depressed part of the city. that was homeownership. >> home development. >> but the issue you raise of building apartments at moderate prices and affordable prices is a very tough one in most places because of opposition on the part of communities. but we've seen some progress in recent years, frankly, the progress we've made in eliminating the worse of public housing through the hope 6 program has allowed mixed income multifamily in central city neighborhoods across the country that's generally regarded as

very, very positive. places like atlanta where they have now -- the only housing authority in the country that has eliminated every single one of its old-styled deteriorated public housing projects and replaced them with mixed use multifamily apartments. >> let's go over here for a question. >> if homeownership and house prices are tied to the unemployment rate and we have a high unemployment rate right now, i think you have to ask the question, is the employment rate sustainable? because if you look at our unemployment rate right now, we say it's high but on a historical basis, based on the percentage of a sort of adult-age working -- people that could be working, our employment rate is actually higher than, you know, if you look at the 1960s or so with more women entering the workplace. so, you know, i really have to wonder, are there going to be jobs that will continue to

support sort of two-incomed families, you know, jeremy rifkin wrote a book "end of", you know, are we getting to that point? >> you're right the unemployment crisis is more severe than the statistics indicate because in addition to the fact as you mentioned are people who have fallen out of the labor force. that is to say, they've been in it -- unemployed so long that they fall out of the labor force and they're not even counted as unemployed. so some suggest the unemployment rate is really probably 11-plus right now. it's a very serious problem. and clearly, it is a problem for the -- the housing industry. but there's a kind of symbiosis there because not only is unemployment keeping people from having the confidence to buy and be able to rent, but the failure of the industry to restart is

hundreds of thousands of jobs. in ordinary times, the housing industry and all its elements, construction, finance, transportation, materials is up to something like 17, 18% of gdp. so it's very, very important. we have not had an economic recovery since the end of world war ii that wasn't led in a significant way by the restarting of the housing industry. we're not getting that in this economy. so there's a real connection there. and, you know, i remember as mayor talking to a builder of a major developer in my city, the one statistic i have to have to know how much i will build, whether i will build this year is the employment numbers, the employment growth numbers. so that's -- you know, unless we suspend sort of commonsense economics, we've got to get the jobs machinery started again if we're going to get the housing sector. and the housing sector has to restart in order to get the jobs machine regoing. so it just points out how

important it is to this administration to focus on things like eliminating the foreclosure overhang and other things that was talked about this morning and others in order to get this jobs/housing relationships right. the other element is the other one the gentleman spoke to which is, of course, education and we now know education is so critical to the nature of the new jobs that must grow in our society. there's kind of a new iron rule i have heard described as high skills equal high wages, low skills equals low wages. and to prepare our people for international trade professional services, health care biosciences, new media, all of the elements of the new american economy, education is clearly important. >> let me close by asking about one other hot button policy

area. and we heard on the panel that the mortgage interest deduction should not be revisited now today or changed today while the housing market is so depressed. but you were on a panel, a bipartisan debt reduction panel, sponsored by pete dominici, that reform with a refundable 15% credit. talk about why you were able to endorse that proposal and what effect you think it would have on housing going forward? >> well, i think the principal motivation for my signing on to the whole report we have a massive problem in the country with respect to debt. it struck me in the very first night of deliberations of this commission that we were told this cannot be solved through the normal mechanisms. it can't be solved by cutting programs. it cannot be solved by raising taxes. it cannot be solved through growth. in fact, we have to have all of the above, on a major scale. big time cuts, substantial

increases in revenues. and stimulate the growth that will grow our way through this. and failure to do that is -- let me see if i can get the numbers correctly. we have presently a ratio of debt to gdp in about the 60s. where the traditional norm has been about 35, 36% since the end of world war ii with one blip in there which was world war ii itself, right? we're now on a path whereby 2020 we'll be at a 100% of gdp and by 2030, 200% of gdp. we've never been there before. no successful industrial modern economy has ever been there before. so even as a democrat, as a progressive, as a mayor working at the local level, i understand the immensity of this challenge and what needs to be done to get it under control. so that commission in the final analysis recommended a lot of things that are very difficult. like a value added tax.

like cuts in defense and tweaking of entitlement programs. we didn't get into the social security age. we did it in some other ways. but one of the things you have to acknowledge is that the home interest -- the home mortgage interest deduction is a huge tax expenditure. it's a massive number. and while i don't advocate fiddling with the fundamental mechanism, it's certainly viable to me to think in terms of second homes, vacation homes and boats and all the other things that are covered. so that's kind of where i was coming from. in the final analysis, we opted for a credit as opposed to the present structure and many advocates think that's a superior way to do this because one of the things we did to make the tax increases palatable in this report was to simplify the tax code.

we got tax reform and elimination of a whole lot of special interest credits, corporate credits and so forth, for a simpler tax structure, and this fell in that. >> we're going to go -- we're going to let everybody get out, jerry, on the previous panel was pretty confident that the mortgage deduction would remain as it is, even as the deficit conversation grows louder. are you confident? >> i think how serious the congress ends up being about the debt and deficit overall. if they're really serious and they put something on the table that hurts a lot of interests in order to get the, quote, big deal that's been described, then i think there will be changes to the home interest deduction. but it will not be eliminated. it will be things like second homes, vacations homes, boats and other things that would probably be taken out but as jerry howard said in a private conversation earlier, all of those are there for a reason. there are interests and powerful interests that protect each one of those so it's not an easy

fight. am i confident that we're going to have a big deal? no. do i think we're going to somehow muddle through this? i hope so. muddling through would be a victory in this case. [laughter] >> well, we have hopefully more than muddled through three hours of pretty stimulating conversation. we appreciate all of you staying with us. i don't know if john has any final words. i hope that you will join us in the future for further discussions in the heartland monitor series. every quarter we try to explore how average americans are navigating the economy in both the poll and a supplement which you have with you and thanks again for joining us and we'll see you in a future media atlantic event down the road. thank you. and i thank secretary ci

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] clucks in just a few moments, secretary of state hillary clinton a bit on the situation in libya. in about 10 minutes, a forum on public education with kevin johnson, the mayor of sacramento and michelle reid, the former chancellor schools in the district of columbia. after that, the forum on the future of homeownership. on the "washington journal" tomorrow morning, we will focus on the military situation in libya with meghan sculley and

mr. ryan and wesley clark. "washington journal" is live on c-span every day at 7:00 a.m. eastern. friday night on c-span, female bloggers, writers, and activists from the middle east discuss civil unrest within their countries. you will hear perspectives from women grappling with political and religious freedom as they take a role in changing the political system in egypt, iraq, iran, and saudi arabia. >> the situation is bad for women and for everybody in iran. but that is one side of the crime. we live in a very dark area. nobody knows about us. our stories have never been heard because we are very strong in terms of oil. we support the west with the oil.

and is lamp, it is the homeland of it is lamb. >> watch fright -- and islam, it is the homeland of islam. >> we will feature the top you winners of this year's studentcam competition. it focuses on an event, issue, or topic that helps them better understand the role of the pro- government. meet the students who created them. stream all the winning bid is any time online at studentcam.org. >> secretary of state clinton spoke with reporters for a few minutes this evening on the situation in libya. this is a little more than 10 minutes.

>> good evening. i am just returning from the white house where i met with the president and the national security team. i want to give you an update on the international community's efforts to implement u.n. security council resolution 1970 and 1973 and protect the civilians of libya. the events have moved very quickly, so let's be clear about where we stand and how we got here. the libyan people sought to realize their democratic aspirations and were met with resistance from their own government. the libyan people appealed to the world to help stop the brutal attack on them and the

world listened. the arab league called for urgent action. in response, the u.n. security council mandated all necessary measures to protect civilians, including a no-fly zone. but the regime's forces continue their results. last weekend, they reached be nghazi itself. we face an imminent humanitarian disaster. hundreds of -- millions of libyans were in danger. french planes were the first to reach the skies over benghazi. cruise missiles from the united states and the united kingdom followed striking air defenses and clearing the way for allied aircraft to implement the no-fly zone. many in other nations have now joined this effort. after only five days, we have made significant progress.

a massacre in benghazi was prevented. the coalition is in control of the skies above libya. humanitarian relief is beginning to reach the people who need it. for example, just today, we learned that at least 18 doctors and nurses from an organization funded by the united states agency for international development had arrived in benghazi and were beginning to provide support to the city's main hospital. gaddafi troops have been pushed back, but there remain a serious threat to the safety of the people. from the start, president obama has stressed that the role of the u.s. military would be limited in time and scope. our mission has been to use

america's unique capabilities to create the conditions for the no-fly zone and to assist in meeting urgent humanitarian need. as expected, we are already seeing a significant reduction in the number of u.s. planes involved in operations as the number of planes from other countries increase in numbers. today, we are taking the next step. we have agreed, along with our nato allies, to transition command and control for the no- fly zone over libya to nato. all 28 allies have also now authorized military authorities to develop and operations plan for nato to take on the broader civilian protection mission under resolution 1973. nato is well-suited to coordinate this international effort and ensuring that all

participating nations are working effectively together toward our shared goal. this coalition includes countries beyond nato, including arab partners. and we expect all of them to be providing important political guidance going forward. we have always said that arab leadership and participation is crucial. the arab league showed that leadership with its pivotal statement on libya. they joined the discussions in paris last weekend on implementation. and we are deeply appreciative of their continuing contributions, including aircraft and pilots. this evening, the united arab emirates announced they are joining the coalition and sending planes to help protect libyan civilians and enforce the no-fly zone. we welcome this important step. it underscores both the breadth

of this international coalition and the depth of concern in the region for the plight of the libyan people. in the days ahead, as nato assumes command and control responsibilities, the welfare of those civilians will be of paramount concern. this operation has already saved many lives, but the danger is far from over. as long as the good doctor regime threatens its people and the fis -- as the gaddafi regime threatens is people, we must remain in focus. i will travel to london to attend an international conference on tuesday convened by the united kingdom. our military will continue to provide support to our efforts to make sure that security council resolution 1970 and 1973 will be enforced. this is an important effort that

has garnered the support and the active participation of nations who recognize the significance of coming together in the international community through the united nations to set forth a clear statement of action to be taken in order to protect innocent civilians from their own government. it is an effort that we believe is very important and we will look forward to coordinating closely with all those nations who are participating. thank you a very much.

>> i am a numbers guy. >> charles below expresses his opinions using charts and graphs. >> i do not decide that i will talk about a subject and then go out and look for data. early do search for data first and see if it says something interesting and see if it agrees with an opinion that i have. it is something that surprises me and surprises my readers. >> in a few moments, a discussion on public education with the mayor of sacramento kevin johnson and former washington, d.c. school chancellor michelle read. and then a form on the future of home ownership which includes

comments from vice-president biden's economic adviser sharon bernstein, a panel of experts on the future of fannie mae and freddie mac, and a speech from former secretary henry cisneros. a couple of live events for tomorrow morning, friends of the earth posted discussion comparing japan's nuclear situation with what happened with the power plant at chernobyl. a few minutes after that, at 9:45 a.m. eastern, we will be live on c-span 3 when the national association of community health centers hears from dr. donald burr with -- donald berwick. >> live, saturday, possible gop

presidential candidates, haley barbour, newt gingrich, rick santorum, michele kaine, at the conservative principles conference. on "road to the white house" on sunday, our interview with rick santorum. >> next, a discussion on public education with sacramento mayor kevin johnson and former washington, d.c. school chancel michelle rhe. after leaving the d.c. school system, michelle rhee founded "student's first." from the clinton school of public service from the university of arkansas, this is

one hour and a half. >> in his 2011 state of the union address, president obama mentioned the words "educate and education" 14 times. it underscores the need for real, lasting reform in our education system. the president asked us to do what is necessary to give all children a chance to succeed, but in doing so, he is admitting that we have too many kids in this country who are born into circumstances where success is not a legitimate option. our guests tonight are out to change that. michelle rhee is a former classroom teacher and a founder of the new teacher project that certifies and supports teachers in high poverty schools. she is known for her tenure as the chancellor of washington, d.c. public schools. in her new role as founder of "student's first" the stated mission is to pursue transformative reform.

sacramento mayor, kevin johnson, is a former nba star with a commitment to education. in 1989 he founded st. hope, a community development corporation to revive sacramento education. he has made education a top priority. putting students first can make an incredible difference. take, for instance, patrick. i met patrick in the first month as a teacher in new orleans. i came upon him violently beating another student. patrick was from new orleans, but had moved up river post- katrina. he looked fairly menacing and he had a reputation. he was assumed to be an 18-

year-old sophomore in danger of falling behind. i learned he was a good basketball player. unfortunately, his grades had left them ineligible. however, our basketball coach promised patrick that if he worked hard and stayed out of trouble, not only would he be on the team, he would graduate from high school. two years later, patrick was a varsity starter. in class he worked harder than his peers and he graduated last may. his senior project was a children's book about the importance of teamwork and dedication. last month, patrick sent me a message telling me he is attending community college in baton rouge. he is the first person in his family to do so. there are many patricks out there -- good, smart kids needing a chance, a few teachers or coaches who make it a priority to ignore their past and focus on their futures. teachers or coaches who find

what motivates their students and use those passions to connect students to their education. it is my hope that people like michelle rhee and kevin johnson can inspire us to put all students first. we want to get every patrick out there the chance to reach his or her potential. nothing less than the future of our nation is riding on it. would you please join me in welcoming two education leaders who are working to ensure a brighter future -- michelle rhee and mayor kevin johnson. [applause]

[laughter] >> welcome, everybody. thank you for being here. michelle and mayor, thank you. this has been one of our most requested programs. thank you for being here and being part of it. let's start with a little bit about what you are doing in education. could you give us your thoughts on the state of public education in america today? >> i will go first. she is the boss. the real answer is it sucks. we are nowhere near where we need to be.

there should be an outrage. there should be a national crisis. we should all be waving the flag and doing everything we can. the children in schools today will be the first generation that are less educated than their parents. that, to me, is alarming. the richest, most powerful country in the world is losing its competitive advantage. secondly, if you go out 10 or 20 years, there will be 120 million jobs that will require highly-skilled employees. at the rate we are going, we will only have 50 million kids to fill those jobs. that means 70 million will be filled by children from china and india. that is not a good state. thirdly, we are spending twice as much money as we were 30 years ago and the results are not any better.

as a country we need to make this a top priority. it is not just for washington. it is all of us doing our part whether you have kids or not. there are too many kids who are languishing in schools that are not doing well. there are also kids who live in nice neighborhoods. their schools are not serving them. >> i concur with him. we are in a position right now in this country where if you were to tell me the zip code a child lives in and the race of that child, we could with pretty good accuracy tell you what their achievement levels are. that is one of the most un- american things i can possibly imagine. it is betraying the ideals in which we live and we were founded on. the idea that how much money a kid has or what area

they were born into -- they will only rise to a certain level. nothing else serves as a cry to the american public to engage to fix and transform this system as that fact. i also want to say that i think we are at a unique moment in time. over the last few months education reform has begun to seep into the mainstream with the movie "waiting for superman." abc focused an entire week on education issues. because of those sorts of things, they are bringing education reform into the mainstream. they are bringing the issues to everyday people. i think there is a moment in

time that we have never seen before in this country where we have the opportunity to actually fix the problem. i am feeling somewhat heartened as well right now. now is it. >> both of you have experience in public school districts. what role do cities play in terms of leadership? >> there is only so much that can be done at the federal level. there is only so much that can be done at the state level. the real work in education happens at the local level. in terms of governance, to be quite frank, i do not think the current governing structure of the vast majority of our school districts works. you have nine, 10, 11 school board members all representing

their local neighborhoods. oftentimes they are elected with union dollars in a very low turnout election. you have a body of people who are not experts in the field who are determining policy. mostly if you have ever seen a school board meeting, not that you would want to go to one, what you would see is there is very little or no mention of children, schools, or student achievement. everything is about adult issues. that is a huge problem when you have this accountability where basically there is no one person in charge. then you have low academic achievement levels. you have decisions being made for no good reason whatsoever.

at the end of the day, no one is held accountable. i am a huge proponent of mayoral control in schools. we need a great mayor who is ready to prioritize these issues. where we have seen the most significant movement in this nation is in cities like boston, new york, and chicago. they have had in my oral control. >> they have had mayoral control. >> you have the mayor in little rock and the mayor in north little rock. they care about their public school system. they do not have a choice. we cannot have a great city without great schools.

any mayor says that is not in their job description is being foolish. i head the mayor's task force on public education. i am trying to get mayors to understand that there is a spectrum of [inaudible] it is mayors controlling schools. at the basic level, it is mayor's taking their city services and aligning them with the school district. no matter the appetite, a mayor has to be involved in the public schools. i am proud that the u.s. congress of mayors came out strong on a policy. michelle will talk about it later. it is the third time we have done it.

the first time we supported president obama's agenda -- race to the top. then we supported common core standards. we think that is important especially if you want to compete internationally. the last one we did this week was called "last in, first out." it was a significant policy that is not good for children. it is seniority-based layoffs. you lay off teachers based on seniority. that is not in the best interest of kids. you are talking about teachers who had been there forever who may not be doing well. the quality of work is not considered. because they are the last in, they are the first out. that is not putting a child's interest ahead of adults. that is a common theme you hear us talking about. anybody who cares about reform will say students first, the kids first. mayors have a responsibility to play an active role. at the end of the day, you can lay out things that are very important on the state level and talk about legislative policies. but the real work is on the local level. >> i have served on the school

board and been to several meetings. we attempted to set up meetings with the city board. it was a struggle. the city board and the school board were not communicating very well. many students in urban areas -- you talk about the role of cities and accountability -- they walked through unsafe neighborhoods, and drainage ditches that are full, sidewalks that are not there, crime on the streets -- yet you talk about cities and control of the schools. the neighborhoods surround the schools in many areas are dismal. >> go ahead, honey. you can go.

[laughter] in my last year on the job, one morning i decided to visit one of our high schools. it was one of the lowest performing high schools in d.c. when i show up at schools, i never stop by the office and tell someone i am there. otherwise everyone would be on their best behavior saying, "she is in the building." i would just go and walk around without being announced. i wanted to know what was happening in these particular schools. on this one morning, the first classroom i went into had five kids. the second classroom had nine kids. the third classroom had seven kids. i was trying to figure out where all the children were. i asked the teacher, "where are all the children?" she said, "today is friday." i did not think that was a very good reason for kids to not be in school. i said, "is that it?"

she said, "it is raining, too." since when is the weather and the day of the week a determinant of our expectations of whether our children come to school or not? i walked into one classroom full of children. 35 kids in the classroom. some kids were sitting on the radiator. i was watching this class. it was a very dynamic teacher. he was very engaging. i asked one of the students, "what do you think about your teacher?" they said, "this is my best teacher." i said, "why?" they said, "he will explain something to you if you do not understand it." i thought that was a low bar.

[laughter] i watched the rest of the lesson. it was a very good lesson. after walking out of the building, the young man i had talked to and two of their friends were walking out of the building. i said, "excuse me, young man. where are you going?" he said, "that was our first period teacher." >> that is not what america thinks of when they think of a truant. you think of a kid who stays in bed until noon and then gets up. you do not expect that the children are making the conscious decision to wake up early in the morning to show up for class because they know they would get something right from their first teacher and then leave.

where are you going to spend your time? what are you going to get out of that? it gives you an indication that things are not always what they seem. kids will make conscious decisions. i was in harlem a few weeks ago. i was meeting with a group of students. i believe in talking with kids about real issues. i said, "lots of people believe that because kids are poor and because they are black or latino that they cannot learn because of all the environmental factors and the violence in your communities. what do you think about that?" the students disagreed. they started telling me all the reasons why. one little girl said, "i want you to tell the american people that it is not about where we come from every day. it is where we are going to that counts." this is what the kids want us

to know about the quality of education. they will persevere through all the challenges on the way to school as long as we are making what happens within the school building worthwhile for them. >> a couple of things i think are important. we have something in sacramento. it is the city of sacramento sitting down with the superintendents. we have four different school districts in the city of sacramento. we asked them how we better align our services to meet your needs? there are three areas. one is school safety. the route from school, to school. the second area is around facilities -- joint use, libraries, community centers, pools, parks, a host of things. the third is after-school programs.

as a city, we do a lot of these things. we are doing them willy-nilly as opposed to doing what works. i think there is a responsibility for all of us as mayors to align our services to make sure they are making sense. michelle talked about mayors controlling schools. it really makes sense because america takes all of the resources at their disposal and works with the school system. that way it will not be disjointed and incoherent as it currently is. you do not need to come to the clinton school to realize some things do not make sense. we live in it on a regular basis. we have frustration on one hand, but we also have a sense of -- we are transformational leaders. our mentality is to change things and not accept them because that is the way they have been. if it is working, let's replicate it and let's invest even more in what works. if it is not working, we do not have time to make excuses. there is no city that will

reach its potential without taking care of its most valuable resources. that is its children. it is not happening near enough in this country. [applause] >> today, providence dismissed 926 teachers. do you agree with that? let me follow that with what do you think is the role of teacher's unions in education reform? >> this is about to get exciting. [laughter] >> i think that is my cue. [laughter] people ask me if the unions should change. how do we get the unions to do this? how do we get the unions to do that? i think we are focused on the wrong things.

the job of the teacher's union is to protect the priorities, the privileges, and the pay of their members. they are doing a really good job of that. we cannot begrudge them because that is their job and they are doing it. they are doing what they are supposed to be doing. the problem is not the teacher's union. the problem is that we have created an environment in this country where we have allowed this particular interest group to have a tremendous amount of influence over policy and legislation. on the other side, there is no national organized interest groups advocating on behalf of children. >> are you going to do something about that? >> that is why i started my organization, "students first." it provides balance in the landscape. the teacher's union has about 4

million members across the country. you cannot tell me that there are not at least twice -- 10 times as many americans in this country who would be willing to join an organization that is looking out for the best interests of the children. i believe americans are ready for this. i believe people are tired of the poor performance of american kids and the fact that we are not serving our children well in schools. i think they are ready to make a difference. my organization has been up for about 10 weeks. it has been amazing. we have over 170,000 members. we have had millions of dollars come in through the door for a member saying, "we want to help." we will be able to build this into one of the most influential interest groups in the country. one that is an advocate on

behalf of the interest of kids. once we do that, what the teachers unions decide to do or not do will be irrelevant. the american people will be saying it is important to put children first. [applause] >> bravo. >> i have not heard the news out of providence. i will say a couple of things. i do not think it is the best move i have ever heard. there are hundreds of thousands of incredibly hard-working, very effective teachers who work way too hard for way too little money every single day. anything that we do, we cannot

make sweeping judgments about an entire profession or entire group of professionals. i think that is wrong. i think that people need to sort of tone down the theatrics a little and actually get to the root of the issue. if we have a better evaluation system in this country for teachers where we could differentiate and we knew who the top performers were and we knew who the promising people were and we knew who the ineffective ones were, then we could make decisions based on performance that will benefit kids. these sort of sweeping things cause a lot of drama. it is not good or healthy for a district. it is not good or healthy for the children. i think what we need to do is be much smarter about how we treat teachers as professionals, recognizing and rewarding the best and most effective.

for those who are not doing their jobs or adding value for kids, you have got to improve your performance or you have to go. [applause] >> i just had a couple of points to what michelle said. this is a misnomer on the work we do. there is no group of people who should be esteemed more than teachers. it is the most noble profession. we believe you should be rewarded, recognized, professionally developed. we have to do everything we can to lift the bar. other countries are taking the brightest and best and putting them in the education field. we do not do that in our country. do not confuse when we are saying take on the union. we do not believe the union speaks for the rank-and-file. that is the first thing i want

to say. if the teacher's unions are going to be an impediment to a child learning, that is problematic. my grandfather was a sheet metal worker. he said the union's job is to protect and create an environment where you have good wages, benefits, and retirement. that is the union's job. if the union ever gets in the way of preventing children from learning, we have a problem. my grandfather was a card- carrying member of the local. i grew up in oak park, a poor part of sacramento. what do you call it in little rock? >> i am not going there. [laughter] >> ok. the poor part of sacramento, unlike little rock, is called oak park. i went to college at uc- berkeley. i played in the nba for 12 years. i came back to my home town and

started running charter schools. we started an elementary school. my high-school, the second oldest high school west of the mississippi, was about to be taken over by the state of california because it was underperforming. it had underperformed for 10 years straight. only 20% of seniors were graduating and going to college. i ask if we could treat sacramento high school like a charter school. they said, absolutely. you can do a better job than we can. there was probably 100 teachers in the room. i told them what we wanted to do. we wanted high expectation for our kids. we wanted to create -- create

private school education for free. we want a rigorous curriculum and a longer school day. by the time i finish, i got a standing ovation by the teachers. when teacher ran up to me and was crying and said, "thank you for restoring the faith in teachers." came back we later and follow up on my same spiel and i got booed by the same group of people. what happened in a week's time? the teachers' union started spreading propaganda. your jobs will might be safe. you will not get paid what you were making before. it really turned a very promising opportunity into something very negative. let's fast-forward. the next 10 months, we were at battle with the teachers' union over whether or not we would allow them to preserve the status quo or try something different because the children's lives are waiting in the balance. they spent $750,000 to prevent

us from running this school as a new charter school. a law firm in the community give us $500,000 of pro bono legal services. we ended up prevailing. that is where we are today. 20% of seniors are graduating in going to college. now, the same group of kids, 80% are graduating in going to a four-year college. 80%. [applause] so the point is do not tell me kids in certain neighborhoods cannot learn. do not tell me that your zip code will determine your future. do not tell me that, if kids do not have access to a high- quality education, they can do legally as well or better than their counterparts who live in affluent areas. if anyone will prevent kids from having that opportunity, then we will fight like crazy to do our part. i think that is what our commitment is about and that is why we need your folks to participate. >> let's talk about charter

schools. some people think it is the and all to be all. others think that they are way overrated and they're not much better than public schools, in some cases worse. i have heard lots of people talk about look at the charter school and that it will be automatically great. not all schools will be charters. no. 2, how you monitor that charter schools? >> does everyone know what a charter school is, first of all? >> raise your hand if you do not know what a charter school is. >> a charter school is a public- school that use of light -- that utilizes the taxpayer dollars, but is free from all of the bureaucracies and rules and regulations at most public schools. it is run by its own board as opposed to a school board. i think the problem and debate

in public education today is that people want to frame things on one side of the extreme or the other. charter schools are the answer to all the bills or charter schools are terrible. the fact of the matter is that we do not want to paint all children with the same broad brush strokes or teachers with the same broad brush strokes. you cannot paint all charter schools with the same broad brush strikes. some are doing with traditional school directors have never been able to do, which is making sure that poor minority children are achieving the highest levels. they're closing the gap between white and black kids and poor and rich kids. however, there are in this country some extraordinarily bad charter schools. the problem that we face right now is that we have not been diligent about closing down poor performing charter schools.

bill whole notion, the whole premise behind charter schools is higher degrees of authority and autonomy for higher degrees of accountability. we have given them the authority and economy, but we do not have the accountability side. meaning, if you do not perform, we will close you down. some want to say, on average this and on average that. that belies the point. the point is that there are some amazing charter schools in this country who have actually figured out how to do this and to do it extraordinarily well. we cannot mask the incredible results that they have seen simply because there are poor performing ones. we ought to be shutting down the poor performing ones and give the higher performing once more resources so they can go to greater skill and serve markets. >> charter schools are not the panacea. they just are not.

however, competition is a good thing and we do not want our school districts to run unchallenged. when you create a competitive them armed, then use the people try a little bit harder and those who do well will attract more kids. those who will not do well will have less kids in terms of enrollment. that is what you see happening around the country. in california, you have some really bad charters here than most of the charters and then you have some really great charters. so it is a u-shaped curve in california. a lot of bad ones. these are the regular schools, pretty much the same. and then you have the outperforming. the challenge for us, in california, anywhere, is that we have 152 charters in california. the bad ones you have to close down. you cannot let them continue on. if you do that, then all we would be talking about are the high performing charter schools.

in our community, our elementary school is called pf7. we have 95% african-american kids in a poor neighborhood. it has the her third highest discourse in the whole city. water -- it has the third highest test scores in the whole city. what are we doing there? we had the opportunity to run this school as a charter because the school district said, but what we do not know how to educate black boys who are bored." we felt -- do not kids need good teachers and high expectations? do they not need longer school visit there for the behind? thune data to determine if students are learning and teachers are teaching? it is not rocket science or a silver bullet. she finishes most of my sentences. [laughter] we created a different environment in this community.

the school the minority kids are outperforming the white kids in the whole city a in a poor neighborhood. if you go to a kindergarten classroom, it will say outside the classroom "class of 200027." you cannot tell these kids even though their parents, grandparents, and great grandparents have never been to college -- you cannot tell these kids they are not going to college. they have probably visited the clinton school more than i have. they take field trips every few weeks. when you create that environment of high expectations and you create freedom and autonomy you do not happen in school districts, you will get a different outcome. that is what we want.

we also want the accountability -- to be held to a standard and accountable for what goes on. that is not what you see in most school districts around the country. our schools are teachers work longer school days. they volunteer. in other school districts they cannot work a longer day. they file a grievance if you ask them to stay an extra few minutes after school. i am done. go ahead. [laughter] >> when you are in the public arena and you take controversial stance, he faced criticism. that is true of anybody. michelle, you have come under some criticism about what people have alleged about your performance as a teacher. i wanted to ask you about that and give you an opportunity to respond to that. >> hold on.

[laughter] you have to tell them about your mom and your personality for criticism. then you can justify yourself. >> my first year on the job in d.c. i made the decision within the first 100 days were so that i would close 23 schools in the district -- 50% of schools in the inventory. if you want to become the least popular person in the city, just tell someone you're closing a school much less 23 schools. the city went nuts. my mother was visiting. she woke up one morning and opened the "washington post." it pinpointed all the schools i was closing. she turned on the tv and there were pictures of people picketing outside my office and screaming at me. i got home that night after lots

of community meetings and she said, "are you ok?" i said, "yes, i am fine." she said, "when you were little, you never used to care about what people thought about you. i tell you grow up to be antisocial. i see now that this is serving you well." [laughter] i said, "yes." it is interesting because in the middle of my tenure there was a columnist at the "washington post" to read a piece that said, "i'd like michelle rhee. we are seeing results. i just wish she would be nicer." i read the piece and i called the guy up. i said, "what is this all about?" he said, "if he were a little nicer, you could stay longer.

i said, "you need to figure out what you believe is the most important characteristic of the schools chancellor. if you think being nice, friendly, and accommodating or the most important things, you should be advocating for my ouster. if you want warm and fuzzy, i am not your girl. but if you like the results and the we are headed in the right direction, you should be advocating to put personalities aside and focus on what we are producing for kids." let's stop what we are doing right now which is turning a blind eye to what is happening to kids every single day in the name of harmony among adults. it may cause a little controversy -- [applause] it may make the adults uncomfortable, but the kids are better off. that is what we need to focus

on. that is the story. test scores. about 20 years ago i taught elementary school in baltimore. i taught for three years. in my second and third year of teaching, i was fortunate enough to work with a group of students. i had some of them in the second grade and the third grade. at the end of that third year as i was heading off to graduate school, my principal called me and said, "i just want you to know that the kids not be cast out of the park. -- knocked the tests out of the park." now 90% of them are scoring at the 90% tile or better. i thought that was great. i put it on my resonate. i was very proud of it. 20 years later i became a public official.

people were calling my resonate. they said, "here are some statistics about how our kids did." but wanted to know if i had the proof -- they wanted to know if i had the proof. they called my principle to testify in front of the city council. they asked if that was the case. my principal said, "yes." they asked if he had proof. he said, "no." they asked if i had proved. i said, "no, but this is what we remember." and old study was found on schools in baltimore. they said it showed michelle rhee was lying because they pulled up the data from my school and look at all of the children in the second and third grade, not just the kids in my school. they said that group of kids

cell growth, but not at the 90 percentile. that proves she is a liar. in fact, it did not. they were looking at the entire great of kids, not just the kids in my class. baltimore told them there was no exact way to choose the kids in my class. what is actually visible in this test scores is the fact that a group of children that went through the second and third grade the years i taught -- out of all the schools in the treatment group and in the control group, the group of kids we talk at our school started out with the lowest test scores when they began as second graders and they ended up as the highest scorers in reading and math. the highest test scores. even though they cannot go back and pulled the individual kids and showed that, what is

unequivocal is that some of the kids in my classroom saul unbelievable games. from a public policy perspective, this is one of the reasons it is so important where we are now in being able to give teachers a student by student information and report back about exactly how much their kids are growing were not so there is not speculation. you have the evidence right in front of you of whether or not you are moving the student achievement levels. >> in california, we at 300,000 teachers. we do not use data in california to determine whether teachers are teaching effectively. if you look at the top 10% -- 30,000 teachers -- if you look at the bottom 10%, you cannot tell who is to in california. you would typically what you're taught teachers to mentor your

bottom teachers to hopefully develop them. but we do not allow data to be used that way in california. that is why we are one of the worst performing states. you have to look at data. test scores are not and and all. you do not evaluate teachers only on test scores. the rest to be a mechanism to determine if our kids are learning. then you can have other ways to evaluate teachers effectively. >> a good discussion. now it is your turn. those who have questions, would you please raise your hand? we will get a microphone to you. let's see. right here. >> my name is hillary. i am a public school students. cross is for being here. my question is about parents. we talk about teachers and holding them accountable and giving them resources. i know a few teachers in d.c.

despite their efforts, sometimes they would fail. a lot of the challenges they ran into were the parents. where do you see the role of parents changing with this new initiative? thank you. >> i think it is very clear. i do not think anybody would argue with you that we need more parental involvement. parents need to be engaged. when parents are engaged, student learning is going to increase. anything that school districts can do to encourage more parents to come into the schools and be and bald is absolute -- involved is of critical importance. my worry is that a lot of times in the education reform debate people say, "the reason kids in poor, inner cities are not doing well as the calls -- is because

parents are not involved." that is extraordinary problematic. in the last few months in this country we have seen some very stark examples of parents who have been trying to be very involved in their kids' education. if you sell the movie "waiting for superman," use all parents desperate to get their children into a decent school. they are doing everything that they can to make it happen. you have a group of parents in compton, calif. to were the first parents to decided to use a new all the mayor felt put forth. 51% of the parents sign a petition -- they can force a

restructuring of the schools. the last example is a mother again akron, ohio to had to falsify her residency documents so her kids could go to a higher performing school. we have three examples of parents who are trying to get involved. look at what happened. in the first case we said, "there is no room for them here." the second group of parents were threatened with deportation and harassment and everything else because of the decision they made to pull the trigger. the third lady was thrown in jail. i do not think we are communicating to parents that we want them to be involved. i think we are communicating to them that we would like to continue to blame them and we do not what your involvement. we cannot dictate how parents will get involved.

we cannot ask them to get involved and they get mad when they do get involved. we are going to radicalize the moms of america. the education system better watch out. if you want parents involved, we are going to get parents involved. you better be ready to deliver. [applause] >> let me pull that parent trigger. the you see that as part of a national movement? the sea that lot spreading to other states? >> absolutely. it is already slated to half a dozen other states. it gives the power to the parents. parents should be able to demand a good education for their children. oftentimes that is not the case. california started an organization called "parent revolution." there is a group of people

talking about repealing it already because they do not want parents to have the power. the role of media plays a critical role. in sacramento, we are hammering away at everyone who is opposing apparent trigger. if you cannot afford a private school, if you move into a good neighborhood, we have good public schools. if we do not have a good public school, he moved into another community. if that does not work, you have to use someone else's addressed to get into a good school. parent trigger starts to level the playing field. it is spreading around the country. >> if yes, right here. hold on just a minute. >> hi. thank you.

i am a clinton school student in my second year. your goal is to change the social environment within the schools. you talked a lot about the determinants of the environment not just within the schools, but surrounding the schools. where does community development fit into your plan? to do you see -- to d.c. -- who do you see promoting that said the schools or reformed? >> who are you asking that question to? [laughter] >> you guys have heard of geoffrey canada.

president obama had something called a promise neighborhood initiative where you are creating an environment where schools are the center of the community, but everything around it plays a vital role from baby colleges to work development. michelle and i met many years ago. i had an organization pulsate hope. its mission is to revitalize inner-city communities through its economic development, public education, and the arts. i grew up in a poor neighborhood. i knew the schools were very important, but i do not believe you can improve public education without economic development. if you do not figure out a way to create jobs and train people for the work force, if you do not figure out how to way -- figure out a way to get your dollars to circulate within a community, it will be very difficult. our goal is to revitalize the community.

they go hand in hand. >> you have to tell your story really quickly. >> i am any election commissioner. will you address of voter apathy? in arkansas, school elections are held on the odd years. this is not tied into who is running for governor or president. as election commissioner, school elections or the most important elections. apathy in my county -- we have 80% voter registration. during school elections, i have seen as few as 19 people vote. that is ridiculous. would you address voter apathy please? >> i alluded to this earlier. part of the reason why school board structures are so problematic is that oftentimes

there are very low turnout elections. you're talking about a very small number of people making the determination about who is on the school board. that means not a whole lot of money from a teachers' unions influence those elections. the reason why that is problematic is that if you look at the vast majority of states across the country, the policies that govern staffing of schools and who teaches which kids and when are determined to the collective bargaining process. when you have a slate of school board members who are elected through human dollars, -- through union dollars, then you had the union on both sides of the bargaining table. it the union got me elected, i will not go hard core after the

union for a better contract. that is what is problematic. we have to find a way to get the public more engaged in public education. you have to know when your school board elections are. if you have to know exactly what those people stand for and who they are going to stand for when it comes to running the school district. >> yes. right in the front row. >> i am -- programs like city year antis for america select from a select group of students. had you make sure all students can serve their country? >> first of all, i love city year. >> how about that for an

endorsement? [laughter] >> city year was a huge component of our success in washington, d.c. i went to an opening ceremony and got to see all the excitement. i came back and said i had an idea. i want a city your core member in every one of my schools. they said that was interesting. they had a better idea. they said they had a new program they wanted to start. it clustered groups of city year court members into failing schools to help turn around the environment. if we had 10 or 12 members clustered together, that could help change the culture of the school. we started back in d.c. it had an amazing impact on the schools they were in.

they were there early in the morning and late at night. there were tutoring children during the day. it was unbelievable. one of the things i found the most heartening was the young people who had exposure to the aspire to belks like them. we had people in our schools becoming city year corps members. that is a good situation. they see the power that individual young people can have on people like them. they want to contribute back to their community to the same type of program. >> we have a question. let's see. right here. >> i just wanted to thank you for identifying the problem, identifying the solution, and

enacting those solutions so that we can visibly see how we can make a difference. i truly want to applaud you on that. my question is to the mayor. we recently had a school board issue in the little rock school district where our school board's superintendent was pushed out. it was a buyout. i happen to be one of the leaders of the community. over and over again, might issue was they were missing the mark because the students were doing better and achieving better with the current superintendent. i reached out to the mayor and to the governor of the state of arkansas and never heard from either of them. it was quite disappointing. how can we press the mayor in our city and state government officials to be more involved in our education? we say we want to improve our economic standards, but you cannot do that without greater

education. >> thank you for the question. my answer will be pretty brisk. one, the mayors and the governor has to be involved. if you did not hear from them, then i will say we did not try hard enough. we have to go down there and wait for them to come out of city hall. if one or two people get enough attention, at some point all of us want to solve problems in our community. i can tell you your mayor is a very committed person in terms of public education. i wish i would have known this sooner. i would make sure he followed up with you today. in fact, i will make sure he follows up with you. that is my commitment. think about the history of the little rock nine. you people have the richest history in the country. i came from sacramento -- i heard one of the little rock nine speak in sacramento.

carlotta -- an amazing lady. just listen to her story. i had been in little rock a dozen times in my lifetime. almost every time i am here, a wrecked a car, i go back to my hotel, then i drive out to central high school and just sit there. i jog around that beautiful campus and the images in the pictures start to come to life. i think about the battles that went on at that particular school so that someone like me could go to an integrated school. now my responsibility is to make sure the schools do their job. in some cases we were better off when we did not have integration. i am not satisfied with that. the last thing i want to say to you is that it is important to note -- and i challenge everyone in here -- you would think that

results would be enough. you saw all the results occurring at at school. she entered washington, d.c. -- the worst urban school district in the country -- turn it around in three years. had the biggest gains out of any urban school districts in the country on an english -- double digits -- and did not get to continue her work. the special interest groups and the politics that go on oftentimes the override the results. [applause] >> last year from an elected official, the mayor of north little rock. >> welcome, kevin and michelle. i do not know how lucky we were,

but "waiting on superman" was something i had not heard of before you presented that film and then had a panel discussion. the other point as we go down before i get my question in, adrian finney, your mayor, michelle, did not survive the election. someone quoted what he said afterwards. they wanted to know if he had done everything it -- anything different. he said, "absolutely not." i have grandchildren in the public school system. i want to applaud you, but i also want to tell you how your heart goes out when you watch " waiting for superman." ec help parents are committed to their kids, yet at the same time iraq 300 or 400 vacancies

and 20 -- at the same time you have 300 or 400 vacancies and 20 spots. my question is, when are we going to have a more general distribution to be able to see "waiting for superman?" the second thing, we are all concerned about where we are as a country. some of those facts that were cited in washington day before yesterday about how we are 18 and 19, 20 and 21st in terms of what is going on globally -- we cannot wait. al or we doing -- which is not very good? >> give the mayor a round of applause. he came back in challenges to be here today. [applause] >> i will deal with the first part. we participated in a panel

discussion a couple of days ago in washington, d.c. raise your hand if you're seeing the movie "waiting for superman." impressive? awesome. david guggenheim was the director of this film. he has an unbelievable ability to take issues that are important and make them relevant for a mainstream audience. that is what happened with al gore and "inconvenient trees." he took a complicated issue and made it mainstream. it was in theaters for three months. now it is fully distributed on dvd. anybody in here can get the dvd. it is out. we are both in urging people to have eight viewing party at your home. invite people over to your house and watch this movie and discuss it. the power of this movie will outrage you. it will take you off.

you will be ready to join the organization immediately. this is what it is all about. it is all of us fighting together for our children, or somebody else's children, even if we do not know who those folks are. it is a tragedy what is happening in our country. that film is being distributed across the country now. >> in terms of the second part, we absolutely are not competing when it comes to our education system versus others. one statistic that is very interesting is that they tested schools in developed nations in mathematics. the u.s. was at the absolute bottom in terms of how their task force work -- what their math scores were. then they ask the kids how they thought they did on the test? u.s. kids thought they were number one. [laughter]

this shows you that we had a significant problem. one of the problems we are facing as a nation is that we are so busy trying to make children feel good about themselves that we are not actually spending the time building the skills so they are good. [applause] i look at my own household. i have two little girls. they both play soccer. they sought at soccer. -- they suck at soccer. [laughter] if he were to walk into their rooms, u.s. the metals, trophies, and ribbons. you would think of was raising the next mia hamm but the looks of it. i got to tell them they are not so good. in order to be good, you have to practice every single day. even if you do that, i cannot guarantee that you'll ever be great. it is hard for them to reconcile

that with all of the trophies. we have to regain our competitive spirit in america. [applause] we have to teach children that you got to work hard to be the best. we have to stop allowing the children of our country to the prow of mediocrity. that is the only -- proud of mediocrity. that is the only way we can do it. [applause] >> next question. wait for the microphone. >> thank you. i am also a student at the clinton school. i am very glad you are here to join us. i want to go back to teachers and results. you mentioned the need for great teachers and great results for our schools. in a school where it is split between black kids and whites with other ethnicities --

asian, the growing hispanic population -- what does a teacher look like? you talk about the kids results, but i am interested in hearing the other ways of evaluating teachers? >> first of all, it is important to note that a teacher here is a great teacher for a black kid is not that different from a great teacher for a white kid, and asian kidd, or anyone else. great teachers set high expectations for children. they do not let children make excuses. they hold them to those expectations and they give them what they need to be successful. i think that children know when

you believe in them and when you do not believe in them. the thing that used to make me so mad when i was in d.c. is when kids would tell me stories about adults to say to them things like, "i get paid whether you are learning or not, so what does it matter?" or, "you're not going to amount to anything." students would come to me and tell me that the adults in the building were saying these things to them. it is not rocket science. if you have high expectations for the kids, if you know that each child is an individual and you have to treat every child as an individual -- communication, right? understanding what is interesting to them. all those things are what makes a great teacher. i will say this -- at the end of the day, the children will tell

you without any equivocation that what matters most to them is having a great teacher in the classroom every day. they are willing to put all the other stuff aside in terms of what the school looks like. they know when someone cares about them. >> i just want to ask one real quick question. she talks about high expectations. there is something before high expectations. the teacher has to leave the kid can learn. that is where your high expectation comes in. that is the most important thing. the teacher bills a meaningful relationship and that kid will do anything for that feature. if the teacher raises the bar higher, the kid will find a way. that relationship is so critical. that is not what we have as often as we like, unfortunately. these teachers that are really good our competitive. they want to look at data and

determine whether or not kids are learning. they go after the goal. they failed, not the kid. they are accountable. they are problem solvers. if there is a problem, they will solve it. they will come up with a solution. their goal is to have a student 95% of the time. the teacher will get it done. the will find a way to get those 20 or 30 kids to learn. that is critical. we have kids in elementary schools that take cell phones so the kid can call the cell phone number if they are trying to do homework at night. a lot of markets do not have two parents in the household or no help to do algebra. the kids will call the teacher. their husbands and kids understand that that is part of their job. it does not stop when they leave

the campus. if the kid is having problems on a saturday, the teacher will find a way to go to the school for a couple of hours and go back to their families -- that is commitment. it is tiring. it is exhausting. but those teachers who are great figure out a way to make it happen. they do not make excuses. [applause] >> up here at the front. >> thank you for coming. i am a first-year student. my question is about how we are going to reincorporate the arts within our school district or within the school system? many times we find out that teachers teach for the test and there is a little emphasis on other things that enhanced learning. how can we reincorporate arts

and extracurricular activities to enhance education? >> you will hear from but the bus that reading and math are important. we all know that. but we believe in the whole experience. art, physical education, all those things are equally important. on the duncan is talking about -- it is secretary of education -- or any duncan is the secretary of education. the first thing cut in schools is or is programs. i have to figure out ways to supplement the school budget so we can provide our young kids with meaningful experiences that are relevant. we do not learn the same way. some people use their creative expression and then can learn how math connects the dots by looking at art. we have a pilot program in sacramento called "evening -- "any given child."

we have all arts curriculum in all of our k-8 schools in sacramento. in a down economy with less resources, we know the value. the school district and teachers love it. if you have arts in school, attendance goes up. kids do better academically. thirdly, these young people become patrons of the arts. everybody wins. as mayor, i have to make sure i do my job to make sure that arts or central again a young person 's education, even if -- arts are central in a young person's education, and even if there is

no money in the budget. >> we were facing a huge budget deficit i in my second year on the job. it was $700 million across the city. we were trying to speculate about what would get cut. the mayor, my boss at the time, decided he was not going to touch the school budget. people went nuts. the schools make up a huge percentage of the budget. they have to shoulder their fair share of the bargain. the mayor said, "know they do not." we are in the economic crisis we are again in this country because of adults. we are not going to put this on the back of our kids. only 20% of the population has school-age kids. what we managed to do when we went to the school closure process was we had the exact

same amount of money, but we had fewer schools to spread it over. that means that every school for the first time in the history of washington, d.c. was able to have an art teacher, a music teacher, a librarian, and a nurse. by saying to the schools and the children that it is not an option whether or not you have an arts teacher -- every child in the city must have access to a broad-based curriculum. art cannot be considered extracurricular activity. it is part of a broad-based curriculum that every single child should have access to every single day. [applause] >> where was the student asked about holistic education? there you are. she wanted me to tell the story very quickly. it is black history month, in case you're not aware.

[laughter] we were trying to get a coffee house to come into the community. i called magic johnson. i used to play in the nba in another lifetime. i said, "in los angeles, you have a starbucks. how did you do it?" he said, "i called up the ceo of starbucks. he did not note magic. they went back and forth on all the pleasant stop for a minute. magic said, "i need you to bring a starbucks into a poor part of los angeles." that change the whole conversation. howard was like, "i used to love you at michigan state.

you beating larry bird." magic said, "that is all right, but i need you to bring a starbucks to los angeles." he said he would call him back in a few weeks. the call him back and said, "you have a great smile. your so charismatic. you beat the boston celtics. i won a lot of money off of you." magic's said, "i need a starbucks in los angeles." harris said, "can i tell you something off the record?" magic said, "of course." howard said, "i had 19 do a feasibility study and a marketing analysis of the committee you are talking about. demographic and the profile of the starbucks coffee drinker does not fit the community that you want me to go into."

magic said, "give me a little more." howard said, "you have a lot of black people and black people do not drink coffee." [laughter] magic said, without missing a beat, "i appreciate your honesty. let me know when you are in los angeles." tel work goes to los angeles and magic takes into his theater. magic point to the concession stand. he said, "look at all those black people. they eat popcorn. they drank soda. they like raisinets." howard said, "i see where you are going with this. if you want to do a wager, let's find out if black people drink coffee." have said it cost one again dollars to do a new store. he said he would put up $500,000 if magic would put up $500,000.

they would find out together if black people drink coffee. magic said, "ok." howard said, "i will work on the business operation aspect of this partnership because that is what we do really well, and you work on the community and the outreach and will play to our strengths like a good team." now you know because of the margin is not little. it is big. typically, a starbucks store takes four years to get a full return on its investment. for years. this store -- six months. magic gets a call from howard schultz six months later. he said, "i have good news and even better news. the good news is you made $1 million back in six months. the better news is black people drink coffee." [laughter]

what is the moral of this story on black history month? people in every neighborhood what the same thing everybody else wants. but what good schools, safe streets, teachers that care, they want jobs, and, yes, black people what coffee. -- black people want coffee. [applause] >> you talk about the arts. i want to give you a name. good to a website and looked up the thea foundation. if you can incorporate that into your program, it is a marvelous organization that does exactly what you are trying to do. i just want to elevate that. ladies and gentlemen, let's thank michelle rhee and kevin johnson. [applause]

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> this weekend on the american history tv, the special counsel to president nixon talked about the watergate break in, the white house tapes, and his relationship with the 37th president. ruth simmons on the role of slavery and the history of academia. also, remembering the father of the constitution. james madison should also be known as "the father of american politics." good to c-span.org/history.

you can have our schedules e- mail to you. >> if a forum on the future of home ownership that includes comments from vice president joe biden's economic a visor, jared bernstein. a panel of experts on the future of lenders at fannie mae and freddie mac. after that, a speech by henry cisneros. >> on "washington journal," we will focus on the military situation in libya. retired general wesley clark, the former nato supreme allied commander in europe. washington journal is live on c- span every day at 7:00 a.m. eastern. tonight on c-span, female blotters, writers, and activists from the middle east discuss civil unrest in their countries. you will hear from women

grappling with political and religious freedom. >> it is really bad. the situation is bad for women and for everybody. this is one side of the coin. the other side is the darkest side. we lived in a very dark area. nobody knows about this. our stories have never been heard. we are very strong in terms of oil. we support the west with oil. it is the homeland of islam. >> that is tonight at 8:00 eastern on c-span. >> beginning april 1 throughout the month we will feature the top winners of this year c- span's studentcam competition. students submitted videos on the theme "in washington through my glance." what's the winning videos on c-

span and meet the students that created them. strain the winning videos any time on line at studentcam.org. >> over the next several hours, a forum on the future of home ownership posted by the atlantic magazine and the national journal. later, you'll hear from henry cisneros and a panel discussion on the lenders' fannie mae and freddie mac. first, vice president joe biden's economic advisor, jared bernstein. >> tom wilson joined allstate in 1995. he became ceo in 2007.

he serves as vice chairman of the chicago federal reserve. we have been fortunate enough to do away number of events with all state of the past eight years. we are very pleased to be partnering with them. all of you have been touched by allstate in your lifetime or know of them. they have 7000 employees and 17 million customers. if there is a company that is surely in touch with many of the american public, they are. tom is regularly on cnbc. we have someone who is a player in this community. tom, we welcome your partnership in this.

>> good morning. thank you for joining us today. we are glad you are here to share some thoughts and have a good dialogue. i like to thank jared bernstein who is here with us. the as the economic policy adviser to vice president joe biden. it has been two years since we started these polls. our goal has been to give the american middle-class a voice that is heard above the ideological and political rhetoric. and to let their view be heard all one needs to be done in america. we have had great team work with the national journal. we have raised a lot of good issues. we have raised new issues from very interesting material. i would like to share some of our own views. there are very interesting things that show up in this poll. first, americans are optimistic

and believe in self- determination. believe in the american dream is alive and well. that is a good thing. this is a generation that is what with having a hard time getting a job. they are still optimistic in face of all of that that they can live the american dream. we sought 60% of people believed it is their own skills and hard work back and help them realize the american dream and it is achievable. what was interesting to us about this poll is that home ownership remains a critical part of that dream. for 73% of the people saying that owning a home help them achieve the american dream. that is despite the fact in our power poles they said a number of things. they said this recession was a game changer. they say they are more risk averse.

they are saving more and spending less. 27% of americans are under water on their homes or mortgages entry into dollars of wealth has been lost. 70% of americans would still recommend to my friend or family member that they should buy a house. 89% of them would make the same decision to buy a house. what are the implications? what do people know that we do not know? data in total? well, it makes sense because the underlying consumer demandor housing has not changed. it's still part of the american dream, americans still want to own homes. so if you have that underlying demand has not changed, what you have today is a current supply in demand imbalance. it's a temporary imbalance, it's worse in some states, the sun and sand states than it is in places like new york. but you have a temporary supply in the balance, not a permanent

shift in consumer demand. so now you could ask, there's a legitimate question to be asked, you know, what about the studies that show owning a home is not a good deal? it's a 1 president real -- 1% real rate of return, but by a margin in this poll of 4 to 1, people would prefer to own a house than to buy a stock. at these studies don't capture, i believe s the number one rule of investing which is what americans know which is buy what you know. don't buy what you don't know. at allstate we have $100 billion portfolio, we try to buy what we know. as a consumer, you can know your local real estate market, you can know the houses, you can know the neighbors better than you can know what stock to pick. second, there's less downside in buying a house because you can always live in it, right? it's part of the american dream. in this poll you saw a number of people said they wanted to buy because of financial reasons, but a bunch of other people said it's where my families come, i

can have memories here. some returns come in dollars, some returns come in memories. and americans are willing to invest in money to get that american dream, some of which is economic wealth, some of which is their personal welling well . and then there's a forced savings component which helps people. while lots of economic wealth has been wiped out, most people in america are either in the money or close to being in the money on their house. so of the people who are underwater if you look at the population total, about 10% of homeowners are really underwater. they make up aut 450 billion of the $750 billion of underwater. everybody else is reasonably close. so a couple of years of inflation should be able to bring you back to whe you want to go. lastly, there's high transaction costs. so if you want to get out of a house, it's not like a stock where you can call schwab or somebody and pay nine cents a

share. you have to pay somewhere between 5 and 6% commissions, legal fees, or if you choose to default, the costs are even higher because when you want to get back in, nobody's going to lend you the money to buy. so it makes perfect sense why americans are stay anything their homes. so demand continues to be very strong. so as a result my personal view then is what we have is a housing oversupply is temporary and that owning a home continues to be a good financial decision. so the question for most consumers today is not if they should buy a house, it's when they should buy a house. and so, you know, now why i've said t supply and demand balance is temporary, that means it's not permanent. permanent's a long time. anything short of forever then becomes temporary. so nobody really knows how long it will take to work through this bubble, but particularly in some of those states that have been harder hit. but today the negatives still

outweigh the positives which is why you don't see a number of people rushing into buy even though there's this demand there. let me go through a few stats which are not in the poll. first, there's about two years' worth of supply on the marketplace if you add in homes that are about over 90 days deliberate, so -- delinquent, so there's a fair amount of supply, plenty of opportunity to buy. there's no reason to have to rush to buy because there's plenty of stuff availle and will be for some time. secondly, there's a lot of uncertainty in america. all of our polls show consumers are concerned about their job. ron described this as the blast radius of the recession, like 70% of the people have a friend or family member who have lost a job. so there's this uncertainty of will i still have a job. as a result, they're spending less money. there's also uncertainty over the near term direction of prices. so, you know, why buy today if you think the price is going to go down 5 or 10% in the next year? you might as well just wait a

little while, there's no incentive to keep buying. household formation rates have dropped in this recession. some of that's due to the economic problems we have, so you don't have a bunch of new houses, people needing to buy houses, and average income has been flat for over a decade, and what will eventually drive long-term housing prices will be that average incomes go up. if average incomes don't go up, it won't drive housing prices up. now, there are some positives. affordability relative to income is certainly better today than it has been in the last four or five years, and it's about to where its average is. secondly, housing costs, buying a house today is actually cheaper than building a house today in many markets, so it's cheaper than replacement costs. and lastly, interest rates are low. nobody can predict exactly how long it will take, but i do believe this is a temporary shift in that because the underlying demand and desire to own a house has not changed. let's shift, though, our fus then from housing to really

trust in t role of government and business. and as in our prior polls, we continue to see the opinion that business and gernment are not trusted and that they need -- and americans want people to continue to work together. they think we're not, democrats are not working with publicans, business is not working with government, and they're sort of tired of watching the ideological and petty fights. my view is ideological fundamentalism is out, it no longer popular, and we need -- and they want us to get on with it. so one of the interest things from this poll which ed talked about is that, is the lack of belief in how this is actually helping them. so let's go true that. the trust deficit is bigger than our fiscal deficit, and it's growing faster, and it is more dangerous than our fiscal deficit because a participant democracy is based on the fact that people trust their institutions. unless we fix this trust deficit by working together and show we