fraudulent loans fed into the system. as the side that maintains all of this was brought on by fannie and freddie, they have the lowest rate of seriously delinquent loans among the large financial institutions. as of march 31st, the default rate on freddie's mortgages of 3.6, and the market rate was 8.1%. put another way, freddie andman -- and fannie has have of the mortgages. the other guys have the other half and 70% of the defaulted loans. in case you didn't notice, that was an unpaid commercial announcement. but i couldn't resist because there's important information. i should also made that while the over all quality of their mortgages were better

than the banks, it certainly would have helpful if fannie and freddie hadn't lowered their standards. it's hard to swim against the tide and not losing market share or profit. either was able to do that. back to my house at the atm. the fact that to pay attention to here is that from 2000 to 2005 while wages were increasing modestly and the bubble was developing, housing wealth increased by almost 85%. it would have been a different story if it had stayed, and in the old days, it would have, because you could barely get a second mortgage, and if you got one, it was a sign of financial trouble or weakness and nobody advertised they were just taking out a second mortgage. as banks allowed buyers to refinance with a bigger mortgage in light of the increased value and take the additional amount of the mortgage out, someone said why require people to go through all of those

complications. the home equity loan was born. under a home equity loan, you could treat your house as an atm and draw money down as prices went up. extensive use of home equity loans added to an increase of almost $600 billion a year. it was great fun while it lasted. then the music stop. housing wealth declined by 30% in 2005 and thyme which translates into a reduction of $240 billion annually and consumer purchasing. the lost is part of the reason the economy is having difficulty recovering. and for future planning, it's clear it's going to be a long time because houses are going to be able to provide people with excess funding for personal use. another thing that you need to know before looking towards the future is

notwithstanding all of the numbers, it's a mistake to assume it's what caused the collapse in the world economy. the housing bubble was not unique to the united states. many eu countries saw greater house appreciation than the united states with the declines that were just as large or larger. denmark experienced a 103 administration rise in price appreciation and a fall of 20%. aye rand saw an appreciation of 162% and decline of 30%. some of those countries may ring a bell. they are the ones in deep trouble with the sovereign debt. the policy questions we face about what to do about housing in the future are important in light of the role that housing has played in the economy in the past. to begin, we have to decide how much support as a government we want to provide to our housing to attract

capital to the industry. we provide incentives in a lot of ways. particularly for home ownership in the tax code. the deduction for mortgage and property costs us about $1.4 trillion. then years is the relevant because all of the debates is about what happens. talk about cutting or ending was always one of those third rails in politics, until the debt crisis came crashing down. dough the de -- now the deductions maybe on the table. the next question is whether we want to have the government guarantee at least some of the securities in the secondary market. the government guarantee of fannie and freddie which has moved after they were privatized, clearly attracts capital that the lenders cannot provide themselves. if we are going to have the guarantee, we clearly need to charge for it, which wasn't

done in the past. without a government guarantee of some securities, we're unlikely to continue to have 30-year fixed price mortgages. investors are not willing to take the interest rate and default risk over that lengthy period of time. but that's not illegal or immoral. canada does just fine without a guarantee program and has home ownership rates about as high as ours. but in canada, you have 15-year mortgages with variety interest rates and significant prepayment penalties. people have talked about covered bonds as an alternative to the secretary market. for this product, the bank takes it's mortgages and sells bonds, secured by the mortgages that would stay on the balance sheet. while there's experience in europe with covered bonds, there's never been a covered bond market the size of our mortgage market. give you a feel for the magnitude of our market, the annual size of our

mortgage-backed security market is about 1.3 trillion euros. as you can see. the size of the covered bond market in europe is relatively small compared to the 1.3 trillion number. even though in some countries covered bonds make up a reasonable percentage. those are much smaller mortgage markets than in the united states. there's also the question of how to resolve the conservatorships of fannie and freddie, some way to go to a private sector without any involvement or guarantee and we should simply wind down or end fannie and freddie. they would be known as republicans. [laughter] >> because the question is what happens during the next crunch? there's basically been no private market -- i'm sorry, there's been no

private mortgage support of the mortgage market for the past three years. without freddie, fannie, and fha, there would have been no mortgages. they are now 90% of the market. this isn't a good thing. the question is how do we restart the private market? one possible move suggested that would be a good indication of what appetize for mortgages exist out there would be to lower the conforming loan limit that caps of size that fannie and freddie can buy. they are as high as $727,000. it's set to go to $625,000 this fall, and we'll see what happens at that time. because every mortgage above that side will have to be financed in the private sector. a final question is what support, if any, should housing entities provide for so-called affordable mortgages. there's a theory that it was the drive and the push for affordable mortgages that encourages freddie and

fannie in particular to issue mortgages to people who are otherwise unqualified. some years ago, lending institutions were foragedden from red lining urban areas for mortgages and excluding them from financial activity. clinton administration, while i was there, decided that since increased opportunities for home ownership was an important social goal, why not require freddie and fannie to ensure that a given percentage of their purchased supported that goal. the initial supportive housing goals were in the range of 30%. the theory was 30% was good, why not 35 or 40%. since the goals were set by the administration through hud or the congress through legislation, it really was a free good since no one had to answer the question how much, if anything, does it cost? nobody ever delivered a bill. to its credit, the bush administration also supported a home ownership society and affordable housing goals

suddenly were about 50%. as i noted, nobody ever sent a bill for this until recently. we've now sent one, but it's probably not the way we ought to do it. part of the problem has solved by the passage in 2008 of the legislation that gave the government to put fannie and freddie into conservatorship. it moves the federal housing goals from hud to the newly empowered regulator. this means that the agency responsible for the safety and soundness is also the one determining what affordable housing goals are consistent with the safety and soundness. barney frank last fall when he was running, pressure, for re-election, talked about the progress they have made with the election. don't say that. if you kept quiet about it, since we could then include this provision

in whatever legislation is passed and point. if it's already in the system, you don't get credit for it. they will have to come up with some other way to change the requirements. some change is going to be required. but at least we ought to get credit for the changes that they had made. our position at freddie mac, since i started three years ago, all of the questions floating around has been not to have a position. once you have a position of what ought to happen, you then are discounted in any views that you have on it, any other options, because you are the supporter of option a. we will freddie, fannie mae have more information. we can tell you a lot about how mortgages perform in any economic circumstances in markets all overthe united states. but to be honest, brokers analysis of the various options proposed it seems to me we ought to be very careful not to have a proposal ourselves. so we are prepared and have been prepared in discussions with the administration and the congress to consider any

option from one end of the spectrum of putting everything into a huge federal, to we go away and you have a private sector solution. thus far, it's worked well and people have been comfortable that we will give them a straight answer as to the pros and cons of any permutation on those themes across the spectrum. what's clear in the politics of washington and has been for some time, there won't be much movement on the question until after the presidential election. which means we have another two years to go. even the republicans talking about l.e.t. get rid of family and freddie have a footnote that says we shouldn't do it too quickly. everybody is concerned about the fragility of the housing market and everybody understands the numbers that we've looked at today about the critical role that housing plays in the economy. notwithstanding our no position, position, i think it's clear we will end up with a strong

secondary and appropriate amount of capital available for freddie. the challenge is keeping them happy and productive while the congress and even the administration continue to talk about the need to wind down the companies and it's clear that the state of limbo is going to continue for another two or three years. the only reason the company hasn't folded is the dedication of the employees to the mission of providing and supporting housing for people across the country. and the fact that we keep them very busy and hope they are not paying close attention to this. even resolving the questions don't be enough. there's the $14 trillion challenge and the deficit growing as we speak. as noted, we know now a lot more about the deficit than we do a few weeks or months ago. we are also confronting that government spending is critical, but we can't keep spending at the rates that we are. government spending accounts for 20% of the

gross domestic product. interesting enough, it's just more than housing. deficit spending, presently accounts for about 37% of those expenditures. when i was at omb in the mid 1990s, when we were confronting $200 billion deficits, we cut federal employment by $200,000, we worked to make the agency more efficient, cut nondefense, and none of it made much of an impact on the deficit. today we're in the trouble into some extent for the first time in history during the 2000s, we tried to run a couple of wars without paying for them for the first time. as the wars wind down, the expense will shrink. there's no easy fix. the simpson-bowles in december was an artful and balanced approach to the tough issues that no one wanted to touch. unfortunately when it came out, no one wanted

to touch the report here. there are only six or eight things to do to deal with the deficits. you have to do them all. social security and medicare account for 33% of our government expenditures. defense is 20%, medicare is 8%. the short answer to the debate is that if you set aside social security, medicare, medicaid, and defense, and sell the rest of the government, you still have a deficit. and if you decide not to sell the rest of the government and only deal with entitlements, it's clear that you cannot realist click cut enough from entitlements and defense alone to solve the problem. you'll have to end up with cuts to entitlement, cuts to defense, and tax reform with improved revenues. the ticking time bomb, in fact, is the interest cost that has to be paid on our debt. debt. the biggest beneficiary, and they are abnormally low is the federal government. even with these interest rate that is are low and in some cases that are

in effect paying the government opaque their money and keep it and give it back to them, because it's easier than putting it under your matress and making it lumpy. the cost is $200 billion. the cost could easily go up another $200 billion if interest rates return to normal levels, not exaggerated levels. i think the public is ahead of the politicians on this issue. when you read the polls, they are always asking the wrong question. if you ask me, would i like to pay more taxes, the answer is no. would you like to get less social security or get it later in life, the answer is no. but the real question is if we have a problem that needs to be dealt with, that can only be dealt with across the entire spectrum in which everybody needs to make a contribution, would you be willing to make your fair share of the contribution? the answer from the vast majority is yes. as long as it's fair.

[applause] >> as long as it's fair and as long as everybody plays in the game. with a little luck, standard & poor's rate cutting will cause people to soften the rhetoric and work together to find a solution which i think the public will support. beyond that, why am i optimistic? because of the attention i mentioned earlier in terms of population growth. we will now find population growth. the census bureau projects that the u.s. population will grow faster in the next 20 years than in any other major economy. i knew we were doing better than japan in this area, because everybody is better off in japan in population terms. but growing faster than mexico, brazil, india,

and china, i must say i find that really amazing. legal immigration is an important driver, legal in the decades of the 90s and 2000ed -- 2000s exceeded the immigration wave. without the immigration, we'd be more at risk looking like japan, italy, and europe with a declining population, increasingly asian with not enough people working to support growth in the economy. one the most important impact a population has, along with household information is the creation of a more dynamic and expanding housing market. the data shows that echo boomers, i love the way that people get generational names. why don't we ever hear about the baby busters in any event, they have

delayed household formation for all of the obvious reasons. eventually they will form new households once they have more confidence in the economy and get tired of living at home with their parents. judging by the generation here, i assume those are parents who are applauding. [laughter] ironically, we'll also get increased sales when prices go up. i learned when i was the chairman in the downturn of the 70s, when housing prices decline, as they have recently, people stop buying to wait for even lower prices. of course, it becomes a self-fulfilling prophesy, that has fewer people buy, the price goes down further, and that's how you get to deflation. the problem for the last three years for the first time in history, house prices and origin rates have been declining at the same

time. usually house prices decline because interest rates are ricing and mortgages are more expensive. so people have had two reason to defer a house purchase. and they've been rewarded for waiting. with lower house prices and lower mortgage rates. once prices start to price, people then want to buy to avoid having to pay more later. oddly enough, we should be rooting for not only higher prices, but higher mortgage rates to get people who have been waiting on the sidelines for a better bargain to understand that bargains are behind us. now is the time to buy. back to the increase. recent immigrants will account for about 1/3 of the new households in the decade. which will average growth of about 1%. to keep pace with immigration and population growth, housing starts will have to average about 1.7 million a year. to give you an idea of

the impact, housing reached $29,000 annually to tell how far down we've been. at some point, we're going to increase housing starts by $1 million which will provide a stunning increase in economic activity. the only things in our way are about four million homes -- [laughter] >> -- still in foreclosures or past due in their mortgage payments by 90 days. while the rate of delinquency is declining, the overhang continues to be a drag on housing prices and new construction. they are firming and the housing will move through the market one of these days. but it could be another 12 months before things begin notably to pick up. that may not seem like such a long time in history, we are very impatient people. pushing for things to be done faster is why productivity goes up. expecting or demanding the gang of economic downturn that dwarfs thing we've seen in 80

years can lead you to make more policy prices. there's risk as we gear up for the 2012 elections. this bring us to the role of education and the future of our economy. this country has always met it's economic challenges through the development of intellectual capital that allows us to lead the way in areas, such as building cars, planes, trains and electronic limit. as they caught up, we moved on. the irony is as education becomes more important, we are more challenged to provide it. we've all heard for years about the challenges of educating students in our inner cities. when i over saw the daily operations of the city of washington, it was clear that poor schools for a pipeline to crime or welfare for our graduates. either way, many of the studentses were lost to our economy in terms of becoming productive citizens. our economic future

depends on more than solving energy problems. 27% of degrees with the u.s. awarded in 2007 and 2008. 51% of math and statistics doctorates. historically large numbers have opted to stay in the united states and have made contributions. civil can -- silicon valley is full of them. they have made it difficult to come to the u.s. and stay here. in the inevitable that more fortune graduates would return home as economic opportunities expanded. as foreign universities get better, they will attract more of their st. s to -- citizens to stay home, rather than come to the united states. we have exacerbated the

reversal of the drain brain, by pois -- policies in particular. when bill gates said they might have to open an office in canada to be able to hire the skilled workers he needs, you can see the problem. the intellectual ability needed can be kept by the schools, of course. they still produce bright, energetic college students that move into productive roles in the economy. as the irony is that as the need for more education as the age of technology grows, the cost of higher education is moving beyond the ability of many studentses to afford it. tuition growth has out paced inflation, growing at an annual rate of 7.9% since 1979 compared to overall price increases of 3.5%. when i was chairman of the board of trustees in

the mid '90s, we worried because it was obvious even at this time that it was $20,000. we had a vigorous debate as we set tuition levels. arguing about whether we were giving away a product if the tuition didn't go up. on the one hand. and on the other hand, were we going to lose that provide not only through the university, but the economy, by foreclosures the possibility of an education. our debates got to be so regular, i suggested this we assign numbers as the joke went that people in favor would get numbers 1, 3, 5, and 7, and people against would have acts 2, 4, 6, and 8 and we'd have a speedier decision. the rate doubles in nine years. so in 2020 at this rate, private school college education that costs $50,000 today will lost

already $100,000 a year. those are after tax dollars. change may not come in forcing tenured professors to teach more than one course a semester. [applause] >> i assume that laughter and applause is not from anyone in academia. there are developments going on in technology and web and information flow that are exciting and may prevent an revolution. there's a young man that's not a educator, he's a graduate from m.i.t., educating his niece. he was giving her advice and sending it to her by e-mail. he discovered it was easier to send it over youtube. everyone on youtube saw the lessons, 10-15 minutes solving a particular problem. and the audio began to grow and grow.

there are now -- he quit his job, started doing it, there are now 2400 microlectures on the web for free from his site. he's had 69 million visits. at the same time, major europes are making videos of their best professors teaching important courses and making them available. with a little luck and continued growth of our intellectual capital and innovation, the education students need maybe as available as youtube videos. there will be appropriate concerns about quality, but my hope is that we won't let that interfere with the development of this new technology in way of pursuing education. ultimately, in the long run, it's going to be critical for us to provide as much education as we can to those that are able to absorb it. notwithstanding the people that maybe something their what happened, i don't see anybody. we must be all right.

some the things we need to do in the country in the days ahead are clear. we need to support the return of a vibrant housing economy. we need to take realistic steps to solve the growing deficit problem, and we need to do whatever it takes to continue to develop the intellectual capital that will allow us to lead the way into the future. :

he will let the ushers are what tom called mattingly a tight in their lovely mur moonves. they will bring your questions to emily who will bring them up to me. i must confess that i was a little questioning how you were going to tie housing, education and immigration altogether, you did. and in a wonderful package. but where do you start? >> where you start is -- and that works. magic. see, technology. we have to start across the board. as i sit, population will not happen unless we some how take some of the measures, and that will influence the housing market is effectively over time almost no matter what we do. again, we need to be patient and make sure we don't screw it up in the meantime trolleying to come up with short term solutions that actually aggravate the problem over time.

the deficit obviously needs to be dealt with and is an important warning and hopefully this isn't a harbinger of things to come. this morning and got a note that freddie mac securities in the aaa and aa platform and the risk is the standard and poor's is correct, that is that we are unable politically to deal with the deficit problem at which point things will get much more difficult. and in terms education and the capitol, people have been dealing with that problem and we need to understand that it is a high priority. i used to find when i was running washington that everybody knew the schools needed to be fixed but we also moved on somehow something had happened. and my view was a few convicts one thing in the city of washington there were a lot of things that needed to be fixed i said i would fix the education system because the critical role that it plays in preparing young people to be productive members of society. [applause]

i would say my philosophy and the question and answer sessions as the nice people bring them and there's no question is off-limits so feel free to ask any question you would like and i will answer it. now i've done that for years ever since i went into the government 20 years ago, and i decided that what happens is i've never gotten into serious trouble with an answer which leads me to conclude nobody is paying attention to the answer. [laughter] so until that changes, have at it. >> this person notes 71% of college students have student loan debt of $55,000 asks want this damned in the housing recovery since graduates have less money to pay for a home mortgage? >> we are all worried about the dead students have and especially at the graduate level if you incur a lot of it as an

undergraduate and in business school kuhl law school, medical school you end up with a couple hundred thousand dollars in debt. not only does it impact your ability to have a house but in practice your ability to buy anything. so while universities increased significantly their financial aid -- deutsch is one of those that still has the admission -- the way that happens is because people take out a lot of loans. and i think is going to be a drag. there is no simple answer to that except i think having spent a lot of time on higher education we are going to have to figure out a way to make it a less expensive undertaking because if you measure it by the relative cost -- when i went to duke for four years i once on a scholarship and i can't close track because the a.d. $800 for four years. there was a long time ago but you could have brought for chevrolet's for that amount. now it's 200,000 you can buy a lot chevrolet's we have to come to grips with that problem. >> freddie mac and fannie mae

have also just been downgraded by standard and poor's. can you comment as to what this will do to the home market? >> in the short run, it will increase incrementally our borrowing costs and therefore it may increase mortgage rates. a will not i don't think have in our analysis of a significant effect by itself. the risk is as i say that if we get another of the two remaining agencies that as a downgrade and investors start to not flocked to the treasury's but go elsewhere and rates go up, that in the long run is a problem. as i noted ironically, i thought that if we could get mortgage rates to stabilize and increase somewhat it might get people off the dime - talk eclectic. my daughter but her first home this spring with a mortgage rate of 8.5. she left the house and they don't think of it as an investment so they aren't paying attention. i hope they aren't listening. when their rates are back down to 4.5% your fault is i should

have waited and bought a house with a mortgage rate lower. so we've really got to break that cycle of the people who are waiting on the sidelines, get them out of the habit of making them think they will go to 4% slide on wait another year before i buy a house. >> this person says i'm not planning to move for my home and i'd still working on my job. why should i be so concerned my mortgage is temporarily under water? >> you shouldn't be. there was a good question. all right. actually, most people -- notwithstanding their experience with the house as any team -- most don't calculate the value of their house every year, every week or every year. you get an assessment from the city every year and they tell with the assessment is because the people that bought the house are going to live in it, they live somewhere and understand values go up and down, so if you're going to be in the house a while, house prices will rebound over time. so i've always thought that the idea that men and somebody's house is under water they are going to walk away from it is a failure to understand human nature and how people respond to these things be big if you are

way under water and there are condos in florida you might have a $250,000 mortgage on a $100,000 house some people have a legitimate question july keep paying on this mortgage when i'm going to end up owing the think a lot of money but we didn't see a significant increase in people walking away. those do terrible things to your credit. but most people are comfortable in their houses and are not going to in fact be microtimers and say i'm getting out of this house and then i will wait and get back into the housing market another time. >> this probably falls under that category of "ask anything." >> walz. i was just kidding. [laughter] >> is anyone going to be held accountable for the economic problems? [applause] >> for those of you that saw the documentary quote coat the inside job," -- [applause] which i thought, by the become a was a very thoughtful analysis

of the entire suite of the problem. obviously everybody has this everybody ought to suffer. one thing to bear in mind is a lot of people have suffered who worked in the companies. most of the people for instance which as i see participated were not necessarily a leader in this, had that compensation in their savings tied up in their company stock, which at one point was at $70 a share and is now about 70 cents a share. so a lot of people have had significant declines in the personal wealth because the invested in their 401k and pension plan and the company stocks and if they are in a financial institution, they got wiped out pretty effectively. the other problem the sec and the justice department has is not a crime to be dumb or ignore what's going on. you have to intentional we intend to commit, lead a criminal statute and so there have been very few successive

prosecutions. tayler whiteaker is going to jail for clear fraud. his was not the question of just ignoring the bubble gum it was actually fraudulent beating at freddie mac and others. i think in some ways it's been aggravated by the fact that after the bailouts in the t.a.r.p. program which is making money for the government in the long run, bankers and investment bankers and wall street were tone deaf enough to decide the issue large bonuses. and i think people have actually paying a really large businesses and lobbying against the regulation and i think that's fair. [applause] estimate my advice would have been to keep the bonuses down and the argument is if we don't pay them somebody else will pay

them it is not the most astute political move on their part. >> this person wants to know an irony in the title is a non-executive chief executive officer. [applause] >> good corporate government people have argued for years that the ceo of the company ought not be the chairman of the board at the same time. [applause] that's an investor and not a ceo who is chairman. the argument is the board ought to be independent and run by an independent executive. about 70 per cent of the fortune 500 companies have the ceo and the chairman has the same person and about 30% last 15 years or so have segregated the duties. fannie and freddie have a combined ceo chairman. so when zakaria calls and asked me to come in and restructure the board and to go for the company as they went into conservatorship, the regulator

asked them that they wanted to segregate the title for the first time so you will see the determination and the chairman of the board the vana executive chairman which is i'm not the ceo, the executive leadership of the management is the ceo, chief executive officer. the, executive chairman is an independent board chair who actually controls the operation of the board of management. i've never seen the term either until i was one to be on was the chairman of the board which is what i normally see people and don't know we might the ceo or just the chairman of the board soon on executive is in fact diminutive and i am just the chairman of the board. >> what do you think about reverse mortgages offered to senior citizens? >> well reverse mortgages to the senior citizens are attractive, a little like the trademark phenomenon. you've got an equity built up in the house and you would like to rely on its for retirement

planning to read it think the property is well structured they work well for people and i think they are an attractive way to enhance retirement. your children may not appreciate it that much, but it does seem to me all we have to do is be careful and some people did get caught. you don't get carried away and suddenly the government to create a mortgage significantly under water and at some point you created interest rates that are going to shoot up more of the equity in you plan on. >> what about the credibility? >> another discussion can be what about the rating agencies clacks as people discover the rating agencies, standard and poor's, moody's and fitch, all else this debacle and sold it were paid by people to read the documents and securities and that sort of sounds like a conflict if he says here is my security give me a reading and i

will pay you would not lead you to expect you're going to get a bad reading. so as a result, she's very complicated securities, straightforward. i have mortgages it to the medical it's pretty easy to understand. it's when you start slicing and dicing them and leaving the securities on top of those securities it's hard to figure out what they are worth. clearly the rating agencies would tell you they didn't really understand the level of risk and clearly provided ratings that they quickly tried to unwind all through 2009 and 2010. so the question as how credible are the ratings. people noted much of the guys in new york who were they to say that the rating of the united states credit rating of to go down and there is a move by some people who say we should get away from credit-rating agencies doing that. in this particular case the reason it's thoughtful and sound and it doesn't tell you anything it doesn't know basically we've got this huge deficit that's

growing at a rate that is unsustainable and we have a political system that seems on capable of dealing with the of the fed therefore, sooner or later the treasury securities are not going to be as risk free as they used to be so whether they are credible and other ways or not the reasoning was sound. >> apparently david brooks has written that fannie mae is the greatest political scandal since watergate. would you agree with that? [laughter] we competed vigorously for 40 years against them. so now is my chance. i think there is a book out that gretchen has that takes jim johnson who was the head of finney in the early 1990's who built the political machine to task and what they did if you haven't read the book is basically if they were purely a private-sector company and said what is wrong with because everybody else is doing it, you provide the financial support to

the campaigns for legislature, legislators, you announce programs in the districts and try to ingratiate yourself with them and fight against stronger regulation of try to get people to leave you alone. you wrap yourself in the mantel of homeownership as the public good and try to preserve the bargaining advantage you have over to slightly lower rate because of the implicit guarantee. if you are a private sector company everybody would say that's what they all do. i think what discourages people that are not happy about fannie mae is there was an era in the kind of what we are really doing god's work, the ship is important people should leave us alone and the implicit guarantee of their relationship was such that people felt they ought to be held to a higher standard. so, i don't think it is the greatest political scandal since watergate. it's a little light penalties. when you have the president of the united states conspiring against the country that is when

you call the scandal. what fannie mae was engaged in you might say was disagreeable, ana fortunate, and why is that it wasn't the watergate scandal. most of my friends appreciate the fact that i did not go forward. >> why are we talking about growth and the sustainability? [applause] >> gereed question. >> i think that's the right question. the way that we got out of the problem in the 90's was true growth the and in my years as a managing turnaround you can't shrink your way out of a problem you have to grow your way out of it so the question was right we ought to sustain where we are and not go backward if we can afford it but what we have to figure out is what is it that will move us forward and how well we grow everybody knows we've lost a lot of manufacturing jobs and we need an appointment to sustain that growth, and that's why i think you're going to hear a lot about

-- you heard about job creation and you're going to hear more about it and infrastructure development and infrastructure banks but it's one of the reasons i feel strongly that the intellectual capital. we formed a lot of companies and a lot of jobs by being smarter and being the first mover in a lot of areas. and if we don't pay attention to that and lose that vantage that we are going to have trouble sustaining growth. >> some questions about unemployment. how can we look at growth of the housing market with so much unemployment, and what you equalize the gap between the minimum wage salary earners and professional salaries clacks spin a lot of questions here, all right. the problem with unemployment for hiring is not just the number. although it is larger and clearly over the last year, year-and-a-half the delinquencies we've had in the mortgage market have not been the subprimal and the lighter ones, those all got washed out some time ago. the challenge now comes to people who've lost their jobs or

had some normal reason they can't pay their mortgage and the unemployment problem has exacerbated that. but my experience watching over the last 30 or 40 years as the the actual number is not what is important. what's important is not who was unemployed, it's how many people think they could become unemployed. and when you have going now -- there are not a lot of people very secure that they can guarantee themselves that six months from now they necessarily should have a job, because companies continue to retrench and continue to reorganize and continue to restructure. and so, until you can get people confident that unemployment is stabilized and coming down as a general matter, and therefore, they are more secure in their jobs, it's going to be harder to get them comfortable making a major commitment. so i think we don't have to worry about can we get on the planet from 9.2 to five before everything starts. all we have to do is start to show progress and growth in the economy where people feel, after comfortable and confident things are great to get better. in terms of wealth prosperity,

we are back to wall street. and to a large number of companies where everybody says you what to measure the gap between the guy on the front lines or the woman on the front lines and whoever the ceo is. and clearly the last 20 years that gap first hatfield has widened substantially and if we take a harder look at what we are paying people of the entry-level do have to be competitive worldwide and the other issue is we ought to look at what the people are worth the multi millions of dollars they are paid costs and that is where part of the regulatory reform is getting investors say on pay and telling them to voice their views and hold them accountable because they set up the ceo pay and everything else follows underneath that. so my experience on the different parts is that directors are starting to take that more seriously, but likely to have more focus on that and again, the public needs to what people understand that it's hard to know who's worth $30 million a year.

[applause] >> we have an announcement here with a thing to do half of the market has increased by 50 points since you started speaking. [laughter] >> well i will be invited back tomorrow. [laughter] >> the question is will you continue to speak for another six hours. [laughter] >> how should underwater mortgages the results from of the freddie mac prospectus? >> that's a good question. you've heard a lot of what can we forgive debt or should there be a way to recognize the debt goes down. there's the question on the moral hazard in that, and that is how do you distinguish between the people who are hard

working and paying their mortgage even if it is under water and sustaining their obligations from the people what the reason the site to throwing the towel. one kind of behavior and not another. i've always thought, and we've done a lot of that and we can probably do more that equally important for people a lie for them to refinance even if they are under water as significance because we are exposed to the mortgage as it is now. you can refinance your mortgage to buy tickets now 120%, 125% under water. but there's no reason you shouldn't be will allow wider body to refinance if they are too wondered% under water because we are stuck with that on any way and might as well have somebody that has a stake in it. [applause] >> and the advantage of that when we have done literally hundreds of thousands of refinances under the president's program the average refinances saved people $200 a month in the mortgage payments which is a 2400 dollar and that is an

ongoing stimulus for an answer to some extent if you want to get more money into the hands of people, you would in fact refinance the mortgages. the question is why doesn't everybody do that? the only people unhappy with the better the people who bought the mortgage securities and assumed there would be a certain flow of income out of the securities and if it gets refinance down their income goes down. but on balance i think we've moved to some extent in that direction and i think that is an easier way to proceed pish than trying to figure out how to write mortgages down and to get interested get the money back of the house goes back up. >> there are several questions about people who are being left out of the system and there are some disagreements about who they might be. whether it is the lower class, lower and middle class will citizens need fuel to have food and these questions are asking if the population increase really is a solution. you have said it is that people

want a little bit more clarification. >> well obviously one of the issues about particularly immigration is the concern that immigrants come to this country from mexico in place great demand on the social infrastructure increase the cost of food stamps and other issues and at the expense of people who've lived here longer who have the same challenges and i think those are significant issues also historic plea the lesson and that immigration has been that anybody who has the wherewithal, the initiative and the strength to lead their home and leave all of their friends and families and move to a new place to start a new life generally make a significant contribution to the economy. and i think over the years -- over the years i always thought, and it's not coming true, we had a great advantage over europe because we were a much more open

society. in europe immigration and citizenship have been much more tightly controlled. it's very hard to break into the system and therefore their societies stagnated in a lot of ways. we had a tremendous amount of energy flow into our economy with immigrants and the guy that does our yard is from central america and started to years ago and he has three huge trucks and seems to stick of the world. he's bought houses had made investments and he's the guy that came with nothing, spoke broken english but is a wonderful human being and has made the most of his opportunities and has hired now he's got i don't know, probably 30 or 40 people and seems he is kind of a role model flight that kind of infusion of energy will continue to help us as we go forward. >> these folks the que are very

smart about the issues that you've spoken about, but you haven't spoken about the deterioration of the environment and health care. so i think there are folks who want to know everything. [applause] scud freddie mac is wonderful when you read each week the mortgages put together she's helped me with the information to read i told him i was going to have a slide that says the satchel information and the presentation was prepared by intelligence people if it got lost in translation it's not our fault. now what's the question? [laughter] >> they want your comment. >> i told frank tiahrt for here was to speak fast enough and get off the stage before people figured out how really delighted know. i actually know something about health care and on the positive

about health care i grew up in ashlawn kentucky, a small town of 35,000 people on the ohio river which it had a huge rolling mill, six chemical plants and turn out to be a terribly unhealthy place to live, but on the other hand it was economically dynamic and all that industry has gone away. what saved the city is it has become the health care center for all the appalachians and what was once a half block castle has to get over two blocks and there's clinics on every street corner so health care has been a great job creator and it's not just an ashlawn kentucky but it's been in cities across the country. on the other hand, health care costs are obviously rising exponentially in a way that is not sustainable and that we have got to deal with and it's not again one of those if you ask anybody would you like to have a constraint put on what to do with health care the answer is obviously know if you ask somebody to see the whole system is collapsing and here's a rational way across the board you are more likely to get

positive response. it clearly is a challenge. on the river had, what you need to understand is we pride ourselves on our health care system. it used to be the best in the world but if you look at the industry's, we are in the mid teens in terms of dealing with children's illnesses that generate the body politic and so it's not as if all the money we're spending has us number one in the world. all the money we are spending in the world has us in the midteens so there is a lot of work to be done. the environment on the board of a power company international power company in 29 countries so we spend a lot of time investing in or developing solar and wind power and a lot of alternatives to coal and gas there again looking for a quick fix if it were only that simple. a significant amount of power produced in the country by coal

and if you shut it down everybody would actually get to sit with no electricity so you have to move in a regularly from here to there. a lot of power plants are now closing which out of the oil deposits is better than coal but still provides about half the amount of co2 but that's a lot better than the coal so you see a lot of closing of the coal plants if they are not closing just for a final reason their closing because they are no longer economic in the price of gas. so the markets to some extent are helping but it is clear if we don't do something about it and in an organized way over time we will live to regret it. the biggest problem is we got people to quit driving them all morning. we would solve a significant percentage of the environmental problem. one way to help it is to get the

50 miles down in 2010. all walk around rather than driving their car. but they are both big problems. the of the potential, tom friedman years ago talked about the environment and the potential to be sources of growth rather than decline if we are creating an imaginative and how we deal with the problem which means we need to support here development of energy and put more intellectual capital into the fields of those are both worth 50 minutes of row so we will stop there unless you are ready to go for the six hour version. [laughter] >> there are so many wonderful questions here. i'm going to ask to more by going to announce to the group that she will be of the women's club on wednesday so some of the questions that you have that didn't get asked can be asked that time. 3:30 on wednesday. a short question, how much money as freddie mac to lead to political candidates and lobbies? [laughter]

>> zero. [applause] >> i was disappointed i told the ceo who was with me for six months before he left i said koschel kitfield for your grindle to the perks of the there were no country clubs or airports or stuff we could get rid of and claim victory because they were running a tight shift. >> you asked to be have the will and the patients. what do you think? >> i think we do. i spend a lot of time in the government and the senate at the white house. i worked in the private sector and i do have a strong view that the underestimate the intelligence of our body politic. i think the people fortunately don't spend their lives the way we would washington reading the paper to do not who is ahead of how first base politically. but with the vendors to the issues costs to the two and people generally come up with a

pretty good dancer and they are willing to do whatever it takes to go forward. it's one of the things that has made the country great is that people are willing as long as the system is fair to become to be sure we have moved away from that. we generated kind of an entitlement society that everybody wants everything now and nothing should ever be taken away. but that is to ask the narrow question would you like another flat screen high-definition tv answer is yes. we all grew up with one if we had one instance four or five every house has a tv it seems. so people will win that maximize their own situation she but if you ask people direct questions broadly people are prepared and willing to make the tough choices to be patient with them and to see us through what i think will be a better future for us and more important for a were kids and grandchildren. thanks very much. >> ladies and gentlemen, john

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> guest:"is next. "washington journal"is next. a 4:00, we will be live from the national press club with an event and how unmanned drone technology is being used outside the battlefield. in about 45 minutes, we will be joined by radio and television host tapis smiley and professor cornel west to discuss their poverty tore that is traveling to more than a dozen poor