offs there. a lot of girls don't used fixed- rate 30-year mortgages at reject a lot of borrowers and don't used fixed rate 30-year mortgages. >> i thank the gentleman from >> thank you very much and let me thank mr. demarco for his presence today to come and testify on your draft legislation. title 3 of the discussion draft prevents federal departments or agencies from engaging in forced principal writedowns. i am not clear whether or not you're talking about a ban on principal writedowns as it applies to new loans or existing loans. this is with respect to any

securitized mortgage loan. you have said that given the calculations of fhfa, fiscal writedowns on freddie mae and fannie mac loans are not possible at this time. do you think that a statutory prohibition or principal write- down is appropriate or should be director of fhfa have the flexibility to pursue future writedowns should data demonstrate it is appropriate? the reason i ask this question is that -- it has been stated that one of my colleagues, that many of us are very sympathetic to the homeowners who are under water. we do believe principal writedowns make good sense. we believe principle writedowns will keep many of our homeowners in their homes.

but for principle writedowns, they will end up foreclosed on. my question again is what i already stated -- should this be in law? should we ban or prohibit principal writedowns in what? would you like to have the flexibility in dealing with this issue? >> with respect to the first part of the question, i believe it is equally legitimate for the congress of the united states to legislate that the use of taxpayer funds to write down a principle of other mortgages is an appropriate public policy and to provide for that. it is equally legitimate for the congress of the united states to pass a lot to say that is not an appropriate use of taxpayer money. at this point, it is a question for lawmakers. i have made clear, given my

current responsibilities and source of funding, i have made clear my view of what i am not doing it. i believe it is up to lawmakers to make that determination grid we are talking about the use of taxpayer funds. that rightfully this as a determination of lawmakers. >> let me segue to another issue. i am interested in the timing. i and other members are very pleased about the request for ideas that you put out relative to disposal of the 300,000 reo's that you have on the books. could you tell us something about the timing about that? when can we see requests for proposals go out? >> thank you for that. the subcommittee is aware that we made an important set of announcements regarding the finance program. the agency has been focused on

that as the first priority. now that that work is just about complete, moving to this reo question and finalizing our review of these 4000 submissions is our next priority. i would hope to be at least making some movement forward over the next few months with that. i believe that we need to get going with it. >> thank you very much. i yield back. >> the gentleman from florida. >> mr. demarco, first i just want to set i applaud your written testimony on page 3 where you say that you're going back and attempting to recover some capacity or damages. the question is, yes or no, are any federal law enforcement agencies working with you to recover punitive damages? >> i can only speak to the

action that i have taken. what we have done is undertaken the public complaints. i am not in a position to speak for the law enforcement agencies of the government. >> so you are not aware if they are then? >> i cannot speak for what law enforcement is doing. >> i am not asking you to speak for what you are doing, i am asking if they're working with you, behind you, beside you, or and if you have an interest in it? >> from time to time, we are approached by law-enforcement about things we are doing and we always give our full cooperation. as a general matter, are there issues out there that law enforcement is pursuing in the mortgage area? the answer is yes and we're providing our support to them when asked. >> do you notify law enforcement

when you discover fraud as you attempt to uncover damages? >> we have a mortgage fraud reporting regime that fannie mae and freddie mac have. there is a great deal of reporting that is done. there will often come back to us and ask for additional information or guidance and we do provide that. >> last time, we heard the defense these for the freddie mac and fannie mae defense fees were about $162 million. do you have an updated number? >> i do not have an updated number but i suspect it has not changed much. >> a court has ordered at least one of the executives to pay some bonuses that were received. yet not deserved. could that be viewed as any type of adjudication of guilt and may be a reason for the american taxpayers to stop paying for

these crooks? >> i am not aware of the particular issue or circumstance that you just described. i would have to find out exactly what ruling was made that you are referring to and then i suggest that. i am not aware of the top of my head what you're talking about. >> i'm going to make a couple of statements and asked you to tell me what is wrong with them. for about 60 years, we have had fha loans, 3% down payment loans which require an extra 0.5% insurance premium. to a large extent, the extra 0.5% mortgage insurance premium has paid enough through its accumulation for the losses that have been incurred for the loans. it has been a sound system.

the aid, which has a down payment of about 2%, which is incredible because of the job they do working with their clients, that is one argument for not reinventing the wheel. the bubble was not caused by mortgage limits or low down payment. i would wager at least three people in this room bought their first home on a 3% down fha alone and did not the fault. most people did not. most of that was caused by fraud enacted between the bars and lenders. if we are sure to eliminate that fraud, the system should work with that additional regulation -- without additional regulation, red tape, and so forth. do you see anything wrong with those statements?

>> i apologize. in mortgage fraud has been an important element of the debacle of the last several years. i would not say that borrowers generally -- let me set at a genocide. that a small -- let me set at h a aside. they had a small business during these acquisitions. but the acquisition of houses with 0% down is a contributing factor to the housing bubble and the losses the taxpayers having absorbed. i would go further to your point about fha and say that these are credible, explicitly government guarantee programs with targeted populations of eligible borrowers. i fully expect that wherever we

end up in housing, we will continue to have a robust fha and va program. one of the decisions for lawmakers in a post-fannie mae freddie mac world is whether there is consideration to be given in altering any way the program or eligibility of fha or va. >> i do not want to cut you off but i am running out of time on my five minutes. >> actually, you are overtime. >> can i get one quick follow up? it has been my impression that congress pushed freddie mac and fannie mae to make many of the loans the we now regret. i hope that congress is accountable for that. do you think that is a fair assessment? >> i think that congress, in establishing certain expectations that drove fannie mae and freddie mac -- i will

not relieve the executives for making poor business decisions. >> thank you very much. >> the gentleman now yields back. the gentleman from california. >> we have seen some bonuses at fannie mae and freddie mac. do you have a comment about that? >> first is that the compensation programs that are being reported are the same compensation programs that have been in place since 2009 at the same levels that i have extensively testified before congress about. i will say that a number of executives have turned over to companies that we see in any -- in every instance to be bringing in new executives at lower compensation than their predecessors. finally, i believe this compensation problem will be solved when congress gets on with coming to a final revolution of conservative

ships. >> this bill we are talking about today is either a very small bill in its importance or a very large one. it is useful to have standards of weights and measures 4 ounces and pounds. it would be good to have federally published standards for mortgage-backed securities. this could be an enormous bill if it is somehow a step toward abolishing betty mae and freddie mac and not replacing it with anything similar. what does the secondary mortgage market look like to you if there is no government guarantee of a long-term fixed rate mortgage? >> i have said earlier in the evening that i do not see the fha or va going away.

i further believe that in the constant that is here, it would certainly be an opportunity for mortgage investors to price into being willing to accept 30- year fixed-rate mortgages without a government guarantee. >> what does it look like -- to the average home buyer right now, if they have a qualified loan, a conforming loan, they are paying a certain rate of interest. how much higher is that going to be without the government guarantee? i know what it was in my area five years ago. before mortgage-backed securities got an ugly name. but what kind of increase are we going to see for somebody who is borrowing and not borrowing from fha or va. >> that is a complicated question.

i can make a general observation for you. we continue to have a mortgage market that is outside the fannie mae and freddie mac realm. looking at past history, it suggests that we are somewhere in the order of 38621 half of a percentage point in difference. those borrowers also reflect a different credit profile, not just -- >> let's say we were talking about 75 basis points to. what does it do to be about to of homes in this country if, for the vast majority of bought -- vast majority of buyers, the interest rate is in a 75% of a point higher. >> there is a connection between mortgage interest rates and house prices.

the incredible subsidize asian of -- over a long period of time through fannie mae and freddie mac with affecting mortgage interest rates have been capitalized into the value of homes. >> you have any evidence or studies of would disagree with what i have seen, another 15-20% decline in the value of palms? >> i do not have studies 2.2 with regard to that. >> what does it do to the national economy if the average home in this country declines by 15-20% over the next year's as a result of action taken in this room? >> a substantial decline in house prices would not be good for the economy or taxpayer. we will see how this actually evolves, what kind of transition there is and so forth. >> the gentleman yield back. the gentleman from new mexico is

recognized. >> thank you. mr. demarco, nice to see it. last time you were here, we had a little dust up. for the record, i came into the office and made it professional presentation on the status of the institution and i appreciate that. i am still working on those notes. i want to get that into the record here. if we pursued the line of questioning that mr. posey was on, what would be the definition of fraud here? a great% of the loans are fraudulent. what would be the definition of a fraud? i will go ahead and give what i am thinking about. i have been in discussion with one of the bottom lenders from wall street. her performance bonuses were

based on making loans out the door. you have got to get them in and kick them out. she would not compromise standards to the other people sitting on the desks making loans did. their bonuses were higher. her supervisor get bonuses if she gets bonuses so she is under pressure to make loans. would that be fraudulent or is that just -- it does not cross the ethical line, but it is up there. >> as yet described it, i would not perceive it to be fraud as long as those credit characteristics are being appropriately reported to the buyer or investor in the mortgage. >> do you -- where i'm going with this is that any market is going to have that same pressure, whether it is this bill in front of us or the market that is operating right now. it is a pressure that is going

to be there. is there any way to regulate that pressure? any way to deal with it? it is not technically fraud, but they're putting mortgages out there that maybe do not -- are not going to perform as well and are not categorized that way in order to get their bonuses, that is a problem in the system that i do not know how you get around. >> instead of some compensation programs, what can be looked at is creating a positive or adverse incentives for hultgren markets are functioning. incentive programs are critical here whether we are talking about executives or rank and file of employees. it can run quite a wide gamut of participants. a cannonball appraisers, lenders, borrowers, companies that are actually equaling and secure sizing mortgages, fraud

can occur in any number of places, including the house. >> the second continuing drumbeat of concern from the house is that if we go to some private market, they will never get the rates of return that they can in the large markets. they are suspicious of movement away from -- they do not like the expos and guarantees with the implicit guarantee. what reassurances could we give the people in new mexico, the lenders, that they will be ok, that a private mortgage market will actually provide liquidity to them? is that every assurance that is possible? is it one that is advisable to give? >> that is a great issue. it is one that concerns me a lot. i would answer slightly differently. as we consider housing finance reform, whether it is the

chairman's discussion draft or any other for a work that is put forward, one of the things i would suggest policy makers and lawmakers should be assessing is, what does this framework offer to small and mid-sized lenders? there are community banks, mortgage bankers, and so forth, to be able to be active for dissidents in the mortgage market so you have a more competitive marketplace and one in which it is not dominated either at the mortgage origination point or the mortgage servicing point. it is not dominated by a handful of very large institutions. >> i yield back. thank you for your responses. >> the gentleman yields back. before we go, the gentleman from california raise good questions with regards to the compensation issues and what needs to be done

about that. we do have legislation hr1221 that was sponsored by the full chairman of this committee which would try to address that and says thank current compensation packages. that is consistent with the executive schedule, which would be less than what was out there. it passed the committee 27-6. the gentleman from california voted no on that piece of legislation. just for the record, we are trying to address the situation. with that, i yield to the lady from new york. quarks welcome mr. demarco. we welcome your comments on what is the 15th proposal the subcommittee has reviewed in the area of subcommittee mortgage markets this year. i know that this question is not exactly on point with what we are reviewing today, but since you are here, i wanted to follow up on something i have been

involved with your with your office in the past several months. a recent story was in the october 19 issue of the new york times entitled "rush to drill for natural gas create conflicts with mortgages." it has raised important questions about how many of these new gas leases on private property is in many states that do not have a history of such releases -- such leases and how this will impact mortgages. the article reports there are concerns that these leases do not ensure compliance with certain standards set by secondary lending institutions and earlier this year, i sent you and your staff questions on this area. i appreciate your response. but your counsel's response raises questions in light of the recent story. there seems to be conflicts between these gas leases and

mortgage rules which could become a problem with investors. now that the technical default that these leases could create on mortgages, it may force freddie mac and fannie mae to buy these mortgages backed writ if this happens, it could be incredibly expensive for the u.s. taxpayers. 90% of residential mortgages are owned by freddie mac and fannie mae. so many people have already signed these oil and gas leases. my question is, as the regulator, what is at h e a doing to audit to understand the scope of such a threat? >> as you know, my staff has been working with you and your staff to better understand this emerging issue and its

implications including its risks for fannie mae and freddie mac. we have provided one set of responses. with regard to the more recent developments that you reported, i will confess that i am not up to speed on that and if you would indulge me, i would be happy to get a more full response and get back to you at your office regarding the latest developments and to make sure we provide a real answer to your question. >> thank you. your agency's letter said you were waiting to see what the epa determines about whether tracking is environmentally dangerous. i believe that that determination is irrelevant. something does not have to be environmentally dangerous for it to negatively impact property values or violate mortgage rules. take the example of a landfill. it is not considered dangerous,

but it definitely lowers the value of property. most people would not like a landfill in their backyard. regardless of what epa fines, most research says that drilling negatively impacts property values. as time documents show, drilling leases violate fannie mae and freddie mac rules. the question remains -- is fhfa or fannie mae or freddie mac going to do an audit to see how many mortgages across the country have non-compliant leases on them? this is a serious issue. it costs billions going forward. >> as i said, i would be happy to go back and take a serious look at whether an audit is in order, whether that is feasible and practical, what it is we would expect to get out of it.

i am not prepared to give you -- >> are there any efforts in fhfa to see how many mortgages in the united states are overlaid with non-compliant leases? is there any effort to look at that? >> i am being advised that these leases that you're referring to may or may not be recorded. our ability to be able to effectively gather this information is uncertain at the moment. i am told that the staff is looking at this and will continue to. i would be happy to follow up promptly with your office to advise you of where we stand. >> thank you very much. my time has expired. >> the gentleman from texas. >> think you for holding this hearing and thank you for putting forth a very interesting proposal for

bringing the private market back to mortgage finance. it is a very important thing for the long-term housing that we have a robust market. mr. demarco, thank you for coming. you have one of the most difficult but most important jobs in our country right now. the taxpayers and you have some bad news this morning. it looks like freddie mac need another infusion of about $6 billion. what i found troubling about that is that they lost $6 billion in the previous quarter. if you go back one year ago, the only loss for $1 billion. with the amount of origination have got, you would never expected their earnings to start showing some improvement. i find that troubling and i assume that you do as well. >> i certainly do. i would say that a portion of these, there are three key

contributors to this. one is an additional income and credit loss continuing to reflect both the pre conservatorship and the difficulty of markets are having in stabilizing. it also reflects losses due to hedging in terms of the financing of hedging the financing risk of the retained portfolio. 10 $6 billion of that is the dividend owed to the treasury department. >> on september 30, the loan limits have temporary increases. it was expired so the new lowland -- the new loan limits are in place a. has anybody done an analysis of how much that would affect overall origination for that to move from the 729 down to the 605 #?

>> i know we have how many mortgages freddie mae and freddie mac have originated in the particular markets that were affected by the change in the loan limit. i am afraid i do not have that with me. i could easily provide it. it is not a huge number. but we can get that for you. >> in texas, it is a relatively strong -- a relatively small number. >> relative to their book, it is a small number. >> the question is, and mr. scott has a great proposal of bringing some certainty to the market, but will be the incentive in the private market to have originated any thing in the current space that the gsc's are allowed to operate? and what would be incentive for the private market to let the federal taxpayers guarantee that? >> is pretty hard to compete

with the federal government and the degree of support that is being provided right now. >> if you're going to get the private sector back into markets, you're going to have to create some space for them to operate. there is no incentive below 625 for the private sector. >> is hard to compete with the government guarantee. as long as there is a wide put print or that, that is going to be a wide space in the market. it will be hard for private bridges as to compete in that in terms of financing. >> and you think the fact that we did create a little more space in the market by letting those limits expire gives us an opportunity to see? and the private sector is operating in the jaumenow. a good opportunity to create additional space without giving up a lot of origination?

as you just said, it is a very small amount of all origination. >> is an opportunity to provide a modest amount of additional running room, if you will. for the jumbo market to be able to reestablish itself. >> so you would support that? >> i have remained faithfully agnostic on the question of whether -- of what the loan limit should be, viewing that as a decision of lawmakers. to your premise, that by having this well-announced, a gradual decline in loan limits in certain areas, would that create greater opportunity for the private sector to reestablish itself? the answer i would say, is certainly yes. >> here is a final question. recently, we wrote you a and we were anxious to your response. freddie mac and fannie mae, insurgents bases, basically have

a monopoly. what would be the reason to give certain originators different these than others? why would you have the spectrum? if your not competing for the business, you're getting all of the business. >> there is no question. i would say a couple of things -- those gaps have been declining since publicly in september, when i said what remains in the space i am looking to eliminate. >> thank you for your time. >> the gentleman yield back. the lady is recognized. >> i want to thank our guest for taking this time. i want to mention that i'm really happy to see that you have filed losses against the 18 financial institutions to recover the losses suffered by

freddie mac and fannie mae and to seek damages for the losses of the -- the losses that the enterprises have suffered. there has been a lot top -- a lot of talk about the malfeasance of freddie mac and fannie mae. we too often forget that they were victims themselves of criminal activity. how much do you think you could recover from this? compared to the exposure that freddie mac and fannie mae have? >> i appreciate the question, but that is something, given that i'm in a litigation, it is impossible for me to answer. we are seeking to recover appropriate funds. >> thank you. right now, the fhfa is funded through the fields -- through the fees that the tse has

received -- that the gsc has received. you would need considerable staffing up to fill the space. under this bill, how would you fond the gsc's? >> i'm not sure there would be gsc's. it is not determined in this bill. that would be something that would have to be figured out. >> is it a gap or a tavern? a small gap or a significant thing? >> for me, it is a significant thing because i want to know where the funds are coming from. >> how much as a cause right now? >> our budget today is on the order of $180 million.

i am being told it is probably less than that. but we are funded to assessments on freddie mac and fannie mae but also on the 12 main banks. >> thank you. right now, the investors in fannie mae and freddie mac securities are basically rate investors. under this bill, they have to add credit risk as well as the rate. if there is any indication that we could attract the kind of the investors and privatize the market's without the gsc's. >> that is right. we are in a rate market today. what the pricing of this credit risks would be is going to depend on market appetite for credit risk and the clarity and

resiliency of the standard structures that have been put in place. >> what would a bore, a mortgage bar or -- what would a borrower, a mortgage borrower have to look like? in order to raise the appropriate amount of funds? we want our mortgage market to be able to come back. we have to be able to fund mortgage securities. what is your assessment of the tolerance for this credit risk in the private market only? >> i believe that there is certainly tolerance for private capital to fund this risk. they're going to want to know what the rules of the road are and do they have cleared the in order to assess the amount of risk there would be undertaking. >> not mentioning loans, would

be the standard, do you suspect? >> in terms of the underwriting standard? >> yes. >> and the discussion draft would require us to -- >> would it be 20% down? >> the bill does not require that kind of thing at all. the buckets of mortgages that are defined by the risk characteristics. >> my time is about to expire and a sense you are not going to answer the question. the largest insurance and guarantee your -- a character is located in my district. what would this have on the more -- what impact would this have on the mortgage insurance industry? >> there are some investors to look into having various forms of credit on mortgages or pools of mortgages. it creates a market opportunity for private guarantors' to

replace what is currently a federal guarantor. >> thank you so much. my time has expired. i yield back. >> and the lady yields back. i appreciate the gentlemen's answer. that is one of the variables that may be considered by the fhfa as well. the gentlemen is recognized. >> i like to yield a few minutes to my colleague, the gentleman from new mexico. collapse to the gentlemen from the other side of the aisle who is talking about the negative impact of drilling off properties. if that was really the case, you would not have any property in my district. we have gas wells in backyards, schoolyards. a you're going to create freddie mae dead zone if you're going to limit loans to private

residences in areas where they drill, be careful in new mexico. we do not mind out there. thank you. >> reclaiming my time. [laughter] i have a question on economics and a question about the past. the question is, one of our colleagues talked about how the subsidizing of federal government into housing has helped keep interest rates low. all of a sudden, if it went away, interest rates would climb through the roof. having a rudimentary understanding of the laws of supply and demand, would it not work that the government subsidize the housing market purchases, that would mean there would be more available to more people and the more people that there are for the limited number of housing, the higher the prices would go for those houses, which would then reduce the availability.

is that not how it would work? >> imposing a system in the short run, yes. in the long run, you see a change in the supply of housing. >> you would see prices come down, and which would offset the homeowners, but not the people purchasing them for it which could make the down payments smaller because the 3% asking price would be lower than it would be with government- inflated rates. i just want to make sure that i actually read the book in cali -- in college as some might have skipped through. a practical question about the past and would be, as you have stated, and everyone can conceive, there were mistakes made by this board and the people in charge of operating it. is that a fair statement? >> yes, sir. >> thank you for much for try to go in here and fix it and working with us to do it. this is not directed at you in

anyway. this is a matter of curiosity as well as public record. is there anywhere we can go and find a sink list of who was on the boards and what that decisions these boards may? these people made a whole lot of money to screw this thing up. i think that under giving credit where credit is due, i know a lot of people like to thank them personally for their efforts. >> since these are public companies, in your annual disclosures and reports, the leadership of the companies is a matter of public record. >> that is heartening. that is very heartening. i was also curious -- though -- that are public entities. is there anyway we could find out how they managed to get these jobs? these are important jobs. not something you would want to see go to a political crony without the best of motivations

and active and in terms of dealing with these things. so you could say, not only are these the people who should be credited with these decisions, this is also the compensation package. here is out there were chosen to be on this board. >> i believe that that is available information. >> can you send me the link and give me a concise sheet of that so i can share with that all the people in my district who are wondering why this thing got so badly so quickly and people were compensated so much for so little. >> we can provide to informational the public record. >> thank you. i yield back. >> the gentleman yield back. i appreciate the gentlemen's question. and also the book he read in college. i used th ckl -- i used the cliffnotes.

thank you for all your answers to the questions. at the end of the hearing go- moku it is open for an additional 30 days or additional questions or. i am sure there will be additional questions. i think you for your time today and your work as well. crops thinking so much, mr. chairman. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> 0 do the right -- wrote to the white house coverage this weekend includes five republican candidates in iowa and this weekend. in rick perry, newt gingrich, michele bachmann, ron paul, and rick santorum will deliver remarks. live coverage at 8:00 eastern on c-span2.

and herman cain and newt gingrich square off in a debate hosted by the texas tea party patriots committee. that is on saturday at 8:00 eastern on c-span. >> this is the formal part, going off the declarations for candidacy. that has been completed. >> all i need is a signature on there. i can do that. >> this is the filing fee. >> we have got that. >> this is some kind of slogan that you might want to leave. we do this every four years. >> and you have a great secretary of state. you have a great job and will

have it for 40 or 50 years. you are going to make sure that new hampshire remains first in the nation trade is a responsibility and honor which new hampshire deserves. i am happy to be part of that process and put my name on this paper, hoping that this time it will take. and i will be able to become the nominee of our party and hopefully the next president for it collects the new hampshire primary is set for december 10. you can follow the trail online through the video library. the c-span video library, it is washington your way. >> a house committee voted today to subpoena the white house for documents given to the solyndra energy company. after that, a pentagon briefing on the transition leading to the withdrawal of u.s. troops from

my rack. here is some background on the solyndra loans. >> with us is the reporter with the national journal daily. why are they interested in these documents? republicans have been interested for almost nine months. this set of documents are of the once going back to president obama's inauguration. they have said this is not a realistic practice. republicans had voted to subpoena the white house. >> they said it is not a realistic request. what is there a legal argument? >> they say it is a long standing privilege.

it this is in terms of not allowing this. this is something they pointed out and that they are serious about. >> the president made a high profile visit to solyndra's factory. what has happened since then? >> it has taken a complete nosedive since then. documents have shown that downward spiral. in august, they filed for chapter 11 bankruptcy. fbi're facing an investigation. it has taken a nosedive from w hen obama touted it.

>> what has the failure of the company done to the efforts? >> it has been a huge political blow. people people and the knowledge to it. there are tax credits and grants. >> this is for documents. what happens next? >> the house republicans were a little bit vague. they have not officially sent over the subpoena.

they have a sense yet. they are trying to work out what they want. they originally said they wanted this. they are trying to narrow its somewhat after a meeting. the next meeting will be on november 17. i highly anticipate a hearing. or>> you can read your report at the nationaljournal.com. white house subpoena for documents related to the loan given to solyndra. the chairman is from florida.

>> good morning. the subcommittee will come to order. statement. >> the purpose of today's meeting is to authorize the issue of two subpoenas to the white house and the office of vice president for documents relating to the loan guarantee for solyndra. this is only the second time this subcommittee has considered a resolution authorizing a subpoena. earlier this year, and they repeatedly failed to copper with our investigation. we were assured that engaging in a dialogue would resolve all the problems without the need to resort to a subpoena.

that was a stalling tactic. the same continue to buy the administration. on september 1, of this committee requested documents relating to the solyndra loan guarantee. in the as the white house to produce all documents containing communications relating to solyndra. between the white house and solyndra's investors, the white house began to produce electric communication. the senior advisers were discussing solyndra. we sent a second request to the council on october 5 for all internal communications that were relating to solyndra. we requested they engage in a

dialogue about how best to manage the production of documents. the office waited until october 14 to respond, informing us that in the opinion of the white house, the committee did not need to see such documents. on the october 18, they informed the office that it needed to invoke a valid privilege or produced the response of documents. when asked to contact staff to start a dialogue, at the white house counsel office refused to engage in any discussion. one week later, they sent another non-responsive letter, refusing to produce documents because the committee did not need to see such documents. only after repeated failed attempts to engage the white house did the committee notified the white house and

the administration that it intended to note is a business meeting to pertained the requested information. this time i got the information of the council. the white house was an able to answer even the most basic questions. do you have any responses documents? are you going to be asserting privilege? what quality of documents do you have? have you conducted internal investigations into what type of document you have? without the answers to these questions, it is nearly impossible to limit the scope of our request. as the president has stated,"the government should not keep information confidential because officials may be embarrassed by disclosures.

errors might be revealed." my colleagues, i regret that we have reached this point. we have been investigating this for over eight months. it established the legitimacy of our investigation. two of the first three companies have now filed for bankruptcy protection. just yesterday d.o.e. stated that the program has been mismanaged. he said it could not demonstrate how it resolved are mitigated relevant risks prior to learn guarantees. this is troubling. we have a right to know who was involved, what decisions were made and why. i am not confident that we will have a good faith response from

the white house without issuing a subpoena. the committee does not take this action lightly. this is a necessary step in carrying out of the constitutional obligations. we cannot allow the executive branch to pick and choose what they will produce or whether they will produce anything at all. public officials might be embarrassed by disclosures, is inexcusable. we have a duty to pursue this investigation of the loan guarantee program to further play a legitimate role in conducting oversight over how the executive branch has spent taxpayer money. if the committee needs to understand what it was.

if the white house has nothing to hide, is to simply cooperate. the president owes it to the american people what happened to their tax money. i recognize my colleagues for five minutes. >> this is a sad day. in my 15 years, we have forged a strong bipartisan tradition of pharaoh and meaningful investigation. that could have been the case with the cylinder investigation. we have a loan guarantee paid with taxpayer funds that went bad. we need to learn the circumstances of the original bill. we need all the facts and documents. i do not believe they share this goal.

in the last hearing that we had, there were e-mails by treasury employees suggesting this be set to the department of justice. in every isn't the average 20 to talk about why they did not give an opinion from the justice. the administration has provided this on a 800,000 pages of documents. the department of energy in treasury have all produced documents on the matter.

the white house has already produce a thousand pages of documents regarding communications with solyndra and investors. did the majority of action moving forward was a subpoena resolution. it is an act of irresponsible partisanship. they will advance the legitimate oversight needs. it is a serious step. it should only be taken after alternative avenues have been exhausted. in contrast, the subpoenas to the white house has the potential to reach communications of the way up to the president's desk. that is why is a longstanding practice of this committee to engage in meaningful discussions with the white house

to that of mutual accommodation -- to meet mutual accommodation. i am unaware of any subpoena to the white house ever from the committee on energy and commerce. but democrats and republicans -- with respect to the subject to subpoena the white house, the starting point was the october 5, 2011 request of the white house for documents relating to the solyndra loan guarantee. the white house propose the committee narrow its request to the following areas. the influence of campaign contributions on the decision to whether or not grant or restructure the loan guarantee. involvement by the white house in a decision whether or not to

make a conditional commitment to solyndra. and, by the white house in the decision whether or not to close the solyndra loan guarantee. involvement as a decision to support the government interest as part of the solyndra loan guarantee. the white house never said they wanted to keep documents cry because they embarrassed people. they offered to produce all these documents. i knew this investigation did not mean getting all the evidence. when i receive the media advisory they sent out, it said despite committee leaders bipartisan outrage to avoid a subpoena, they failed to turn over requested documents. they said a quote that the white house still refuses to

turn over solyndra related communications. i sat there in that meeting yesterday. our staff sat there with the majority and the white house. the white house said they have turned over documents. they are willing to turn over more documents. last night we wrote a letter to you respectably asking me to post upon this subpoena issued in and it sent to work. i would ask unanimous consent to put a copy of that letter. i would implore you to please postpone this hearing so that we can continue working with the white house and avoid this subpoena.

>> >> it will be part of the record. the chair reminds members that all opening statements will be made part of the records. i recognize the full committee chairmen. >> thank you. >> i do wish that it not come to this. oversight is a core congressional response ability. it has a proud tradition sometimes in the course of an investigation we find yourself unable to secure necessary evidence. house rules give us the power to compel cooperation. it is a tool we will use sparingly and only as a last result. today is a last resort. we began reviewing the loan

guarantee made by the federal government. several news accounts that identify problems had question whether the business model was sustainable. they were not chosen at random. we had a responsibility to look into the loan and understand how and why it was made. we have nothing but a months of frustration. it was a natural tension between the legislative and executive branches. what we have seen is downright obstruction. they administration has touted the documents. most are highly technical. they never mention that producing those documents was by extracting a tooth without amnesty zia. -- without anesthesia.

the department of energy turned over several boxes of documents probably sharing them with the press long before bringing them to our investigation parent these and not responsible. there are long overdue. many documents were delivered only after being compelled by a subpoena. we repeatedly reached out to the administration in an attempt to release necessary documents. they refused to accede to your -- refused to give the documents. the ministration has put up a roadblock in virtually every turn. we are forced to contemplate a

subpoena went before. we did everything to avoid it. we had no choice but to subpoena the record. we had to issue it over the objection of every member of the minority. we cannot get to the bottom of this mess without white house cooperation. we're hearing the same excuses about the need for more time. for no details on basic questions like what the white house house, when will they let us see it. we met with the council to try to broker an agreement. they joined us for that meeting. what they offered was the open end of pledges that were given to us before the subpoena. we still have not received all the response of documents.

they are using the same tactics now. it means we have no choice but to expect the same outcome costs and move forward. a little bit before 7, after the house had recess, they contacted our investigators with a last-minute attempt to narrow the scope of our request. they made no commitment to produce documents. the lawyers did express a willingness to conduct a search for only those items in the category they identified. it is insufficient. is to not have occurred on the eve of the subpoena. any sign of cooperation is better late than never. they work with the white house on this document.

this proves we are on the right track. we established this with the initial loan guarantee. we have established that advisers have closed out to the cylinder of loan. we felt pressured to approve the loan. we have made our case. the white house has refused to produce them. we have no choice but to a authorize this. i wish and not come to this. it has ai.-- it has. i hope members will join me. >> thank you. i recognize you for five minutes. >> thank you. i agree with the statements that he made.

we should not be having this business meeting today. this is a serious step. it should be a serious resort. it is an impasse between the branches. none of this is true today. i wish chairman of the subcommittee when his father and president reagan or president. i never issued a subpoena to the white house. i sit down with the white house counsel and worked out an arrangement that met the oversight committees and an need while preserving the rifle provinces. this is what we should be doing here today. this is what the committee has always done. he never issued a subpoena either.

he always worked it out. the council met with the chairmen yesterday. she said the document request was so broad that it would include everything from the logistics of the president's trip to solyndra to his personal blackberry messages. she offered white house communications voluntarily if the committee would engage the in good faith negotiations to narrow its request. the white house counsel offered to provide the committee with documents that would show whether the white house would intervene on behalf of contributors and what involvement the white house had in decisions to issue or restructure the loan. that is a lot different than what we just heard from the republican leadership. they said they would only pick

and choose what to produce a whether they would produce anything at all. these are central issues the committee is investigating. apparently what the committee really wants is a confrontation with the president, not information for the investigation. no wonder the public calls as congress in solo regard. our focus should be jobs. our attention should be rebuilding the economy, not manufacturing controversies with our president. this is an important investigation. it is hard to avoid the conclusion that the committee is abusing its powers. this looks more like a rigged process. let me go through this. in june, we invited the deputy director to testify with just

four days' notice. he was not available the day the committee wanted. he could not testify any other day. the committee held a hearing with the empty chair. i asked the committee to invite solyndra's executives to testify. when they testify, the republicans publicly humiliated him for asserting his constitutional right. in last hearing, they accuse the department of energy of violating the law but refused to allow anybody from the department to testify to defend the agency. the republican majority resisted releasing information. today we're being asked to give chairman upton a blank check.

this is no way to run an investigation that should be bipartisan. it is an unprecedented departure from the practices of this committee. we have heard that there is no other choice. i think there is another choice that reasonable people would take. to get the white house documents. we can always go to a subpoena if that is insufficient. instead, we want to go to a subpoena first. then we can see what request are out of balance. -- bounds. i think a subpoena should be sparingly and only as a last resort. this is not the case that we see today. we are entitled to advance our legitimate oversight needs.

i think it is sad that we are seeing what is going on. >> the gentleman's time has expired. we recognize the full committee chairman. >>these are facts and documents. we should not argue over whether the american people have the right to get those documents. he voted against the initial subpoena. it appears he will vote against this issuance. that is that. to be have a long history of

four together -- we have a long history of working together to get the facts. we are here today because since early this year we have been trying to get the fax from the obama white house. they have refused to cooperate. that is a fact. that is not a supposition. we want to know what changed in january of 2009. the bush administration department of energy made a decision not to proceed with the solyndra loan. two months later, the obama administration department of energy made a 180 degree turn and not only decided to find this particular loan guarantee, but they decided to expedite its and required whether the president and vice-president

might participate in some type of a full opportunity at the announcement. what happened? what changed? what made this turnaround occur? that is why we are here today, to get those facts. it's took chairman upton making a personal phone call to the chief of the white house to even get a meeting yesterday that they participated in with the council of the white house. in that meeting, the white house has not claimed executive privilege or that the subcommittee is not entitled. they just have various reasons not to produce them. omb has produced documents. the department treasury has produced documents. the private sector has produced

documents. until six or 7:00 last night, the white house said done nothing but issue press releases. last week they introduced independent counsel. this subcommittee has been participating for almost a year. we now have a billion dollars of taxpayer money has gone down the tubes. we know there have been repeated contacts within the white house from outside forces that were very active. we know pressure was exerted from various officials. we do not have an e-mail. we do not have a document. that is why we are here today. we can argue over what the documents mean.

we will. we should not argue over whether the american people have a right to what the facts are. this has tainted the entire alternative energy program. i happen to be a supporter of loan guarantees for alternative energy. i was chairman when this was authorized. we now have people on my side of the aisle making serious recommendations to terminate the entire program. it is not being well run. we need to get the facts. to get them, we need the documents. the only way to get them is to subpoena them. we have the authority delegating to get those documents. i would hope that once the white house receives them that they will comply. then we can work together to determine what if anything can be done to prevent future

activities from occurring. >> thank you. >> i did not roll off the cabbage wagon yesterday. i was chairman of this committee for 16 years. we always got the information on the white house. they required that exercise a certain amount of patience and not that we come in with resolutions like this, which gives power to rival that of nero.

we think this should be properly aired. i sometimes threaten the use of the subpoenaed during my time as chairman. i was always able to negotiate with the administration. we consider this only as a last resort. it racist executive privileges, an area that has much area for them to lose power. we worked with the white house. we had very few confrontations over whether subpoenas would be issued. the democrats ordered them almost overwhelmingly that were suggested by the republicans when they ran the subcommittee.

i have been told of the efforts have been made by the majority staff to do what i have described, to work with the democrats. we do not see it that way over here. it appears that the republicans are having a hard time understanding what the meaning of the word "yes" is. what part of it do you not understand? getting information is a careful work that has to be done. why have we not? they provided tens of thousands of pages of documents without being issued a subpoena. they refuse to deliver nothing more on the request for this committee.

the subcommittee heard jointly. they invited solyndra officials. then we also heard from treasury officials. to we had no background in energy. they testified they and a decision making authority. why are we doing this was so little permanent testimony? i am concerned with the president we're setting today. this is without any real basis of misbehavior. i have said earlier i only use subpoenas as a last resort. we always brought the republicans in at the earliest moment to discuss the business of the community including what information we want, what would be done in the hearings, while is the purpose of the investigations, and whether subpoenas would be needed at

the earliest. i hope the members will take a minute to think about what effect this will have on future subpoenas on either republicans or democrats. i have not agreed ofttimes with republican presidents. they serve live is chairman. i have respect for them. i have respect for the white house. the process of this committee so far has showed a great inclination toward haphazard behavior and shows a lack of respect for the president. the base is conducting an event here that forces us to this conclusion, that this is politically motivated.

information has been offered by the white house, more or less formally, to deliver what you want in the wake of papers. mike advice to you is to take that opportunity and let us get these back to the point where they are bipartisan rather than have they become vast haggles about what we're going to do. i yield back the balance of my time. >> to recognize you for 1 minutes. >> thank you. thank you for calling this business meeting. the said committee started this nine months ago. we have been patient. today the white house has refused to give the subcommittee any documents

relating to the loan guarantee to solyndra carried the american people deserve answers. did they footed the bill. we know the white house was closely involved in monitoring the loan application review. we need to learn how extensive the white house involvement was in approving the loan and whether they place political pressure to approve it. at the end of the day, $535 million of taxpayer money has been lost on the solyndra loan guarantee. there are questions about how this was allowed to happen that need to be answered by the white house. as a longtime critic, i will vote in favor of the subpoena to make sure it complies with the investigations. i yield back the balance of my time.

>> you are recognized for one minute. >> this is the way it is going to be. we need to determine what happened with solyndra so the program can be more effective in future. the white house has a marching with the committee. -- has been working with the committee to produce all the relevant materials to the solyndra loan guarantee and the white house counsel to produce a more targeted request that addresses the issues relevant investigation. this is a majority that will not take yes for an answer. why not you asked for more documents relating to the place

of his birth or some numbers? it seems this is the political trend that we're going to. it is a real shame. >> the gentleman from pennsylvania. >> they called it a fishing expedition. now they're seeking a tarnished. they accuse them of hypocrisy. none of this is true. why rush? @ think they had some small -- i think they had some smoke and mirrors. no loan can be guaranteed unless they can get paid back.

if it is not broken, and the taxpayers want to know why the money is gone. this must go on and not be delayed any further. nothing we do is more important than protecting taxpayer money. we'll back. >> i respectfully disagree with the characterization by the majority that the executive branch has not cooperated. this committee has made a formal document requests. to the treasury department, to the office of management and budget. over 80,000 pages have been produced.

they have a review of documents. these of the representatives we have had. i do not know how you can see how the a ministration has not cooperating. i think the committee has the responsibility to be straightforward. i regret that they have not done so today. that is to the detriment of figuring out the matter. >> i think he for the recognition. they say this is unprecedented activity. it is unnecessary had the white house not practiced pay the

mantra of "delay, delay, delay." this would have been a one day story. the white house has fought every step of the way. this seems to be the management plan. the ranking member said it is no way to do this. they might do well to follow the counsel. the white house has refused to assert executive privilege or that they might have documents that would be covered. the white house might have been much more cooperative. that is the real shame. i yield back the balance of my time. >> thank you.

i'm disappointed on the way this investigation is being conducted. i agree. we must investigate. the unprecedented action will be conducive on both sides. our former chair, this program was traded in 2005 when he was chair of the committee. we ought to have this available. we ought to see what happens with this investigation. we could be doing better. today's hearing is more about

the generating since they stopped headlines instead of living of to our constitutional authority. my opposition has nothing to do with protecting the president our politics. let's get the investigation started and start turning congress to do something that we really do not need. today the committee is like during chun to the sharks. i yield back my time. >> the lady from tennessee is recognized for one minute. >> and a 2008 presidential debate, they received a question about executive privilege. president obama responded "richard nixon mounted similar

arguments. that is not how we operate. we are a nation of laws and not men and women. you know, that is the precedent i do not mind living with as president of the united states." since she first began back in february, we worked diligently with our friends across the aisle. we tried to be cooperative and throw in conducting oversight. they would deem it were the of responsibility they have given us. this administration has delayed the release of pertinent information that is required in order to conduct a comprehensive review. the american people have a right to know. they expect this to get to the bottom of the solyndra issue. >> thank you.

the white house has agreed to cooperate on this investigation. they have been true to their word. executive privilege has been exerted. this president has done nothing more than that. i have to ask a question. what is different in the case of president obama? we have a responsibility to investigate. we should continue with what we have. this is not the priority. they need jobs. this is what we must turn our attention to. while we may be able to wait to get more information on solyndra, the people of this country are demonstrating they cannot wait. >> shields her time. -- she yields her time.

>> thank you. i am saddened by what we're doing today. it is premature. i support a full investigation of solyndra. the fact is they administration is cooperating with house investigators at this time. they provided more than 80,000 pages of documents. the ministrations turned over 15,000 pages of documents to the committee this week. at a time when the american people want to see us working together and to put country before party, it seems like this is nothing more than a political gimmick. the administration is working with this committee.

should it stop, i would support this. they are fully participating and cooperating. i think the investigation should continue and include anyone with any knowledge about any of this. let's get to the bottom of it. let's not have these votes just for what may or may not be political gain for someone. it is time for us to come together and work together and put country before party. >> thank you. this is a serious investigation of a loan program for renewable energy administered by the department of energy. this was modified by the stimulus bill in section 17 05. it allowed for non money down loans. that surely contributed to this fiasco. our colleagues on the other

side of the aisle when given an opportunity several months ago when a subpoena was issued to the omb for records. they voted against it. we received very valuable records. now they have another opportunity. they have an opportunity today to vote yes or no. they have been entirely necessary. this is an important investigation. let's be teammates. the american taxpayer deserves nothing less. i yield back. >> you're recognized for one minute. >> thank you. the $535 million, you would think that the white house would be willing to operate and give us the information that we have been requesting. from the very beginning, when

our committee started looking into the solyndra scandal, at the obama administration has failed to comply. they failed to live up to the very transparency that president obama tried to make a hallmark of his campaign. the taxpayer money got lost. we may have been able to protect the taxpayer money. here we are again after a partisan attempt to block us from getting the information we already got that is been so important. now they're trying to get more information that the white house will still not give us. we will have given you enough. they do not get to decide that. in the white house is not above the law. there's taxpayer money still atlas -- still at risk. the white house has played a heavy in this. i do not know why they're not complying today. what do you need?

they are still trying to do this. it is time for them to come clean and finally get to the bottom of this scandal with solyndra. >> you are recognized for one minute. >> thank you. this subcommittee has been investigating the solyndra affair for months. the investigation has been slow and delayed. you cannot lose half a billion dollars of taxpayer money and not provide answers. i hope everyone had shared in the sky. apparently not. and there's nothing to hide, then why hide? i am confused because there seems to be so many people who are unwilling to seek of those answers. i'm curious the spirit of cooperation muslims and there is still lecher. -- cooperation was when we sent the original letter.

they have the ability to do this within the resistance we have been met with. this is unacceptable. i hope the white house will begin to take this matter seriously and show some initiative to get to the bottom. i yelled back. >> the gentleman from massachusetts is recognized. >> thank you. the white house is saying they want to cooperate. they want to provide all of the relevant documents. you are saying no. the reason you're saying no is back from the minute you took over in january, you have had a concerted effort to destroy the renewable energy program in the budget. this was reduced by 70%. in april, when you brought the government to the brink of shut down, you successfully rescinded $18 billion for

renewable but let these 22 billion for nuclear loan guarantees. that is what this is about. this is just a continuing pattern where the nuclear industry once this competitive wind and solar industry to grow. we have not had any announcement of an investigation of a loan guarantee for this other company or for two nuclear power plants. the stock above this. let's examine whether the economics work at all. >> thank you. frankly, i am one of many who have worried that the actions of the administration in providing massive grants to solyndra and what appears to be

under political persuasion or favors or cronyism, or something, has endangered the renewables more than any ryan budget. it has created a public perception that this is an unstable, corrupt industry. i do not think there is a fair -- that is a fair label. that is why we have to make sure that our investigation is complete and that we have the

appropriate documents. >> cooperation, cooperation, but there is no cooperation. two months ago we passed the white house for cooperation, and still we wait. every step of the way, the minority has opposed to this investigation. i want all of this information to be public. $75 million subordinated, making the taxpayers second class creditors. the american people need to know who was involved in the decisionmaking process. it appears a subpoena is the only way to find out disinformation. -- this information. >> of the gentlemen at yields back. there are no further opening statements.

>> resolution offered by mr. sterns. be resolved by the subcommittee on oversight and investigation doubt upon the adoption of this resolution, the chairman of the committee on energy and commerce may authorize and issue subpoenas to both william daley, white house chief of staff, and bruce reed, the office of the vice-president relating to the committee's investigation of the following matter. a loan guarantee made to solyndra by the united states department of energy in september of 2009. >> mr. chairman, i have a motion at the desk.

pursuant to rule 16, i move that the subcommittee on oversight and investigation postpone consideration of the resolution until november 15, 2011. >> the gentlelady is recognized for five minutes. >> mr. chairman, this morning we have been haggling around about whether or not the white house has been responsive to the committee's request for documents. we all agreed that a subpoena to the white house is unprecedented in this committee. if there is any way to get the white house to cooperate with us and to provide the documents, that would be the very best results in terms of getting the evidence we want without getting involved in a prolonged court battle over

executive privilege and it would also help get the evidence that we need in this investigation. i would like to take a couple of minutes to clarify exactly what has happened. to be honest, on both sides of the aisle, there has been some confusion as to what requests were made to the white house and the rest of the executive branch. this committee's first document request to the white house related solyndra loan guarantee was sent on september 1 of this year. it asked for all communications between the white house and solyndra, as well as in the communications between the white house and "the investors in solyndra."

the white house, mr. chairman, responded to the request would document production on september 13, september 30, and october 7. there have been subsequent communications between this committee at the white house. the white house has asserted that many of the documents that had been produced by the department of energy and omb were also documents that were included in the september 1 request. there have been a number of back and forth communications about those documents. there was this meeting yesterday, which we have all talked about, where the majority was there, the minority was there, and the white house.

i heard the white house council clearly say that she believed that this was a legitimate investigation. she believed that documents relating to any thing about this loan guarantee board appropriate, including documents about communications with white house political donors and others. she volunteered to work with committee staff to further narrow the scope. later yesterday, after many conversations between our staff and the white house, as i said in my opening statement, the white house offered to produce more documents. it was delineated in the letter that i sent you last night. it seems to me that the white house is attempting to cooperate with this committee's investigation.

for my part, we would urge the white house to go overboard in cooperating with this committee's investigation. it is inaccurate that the white house documents were requested 8 months ago. they were requested two months ago. there have been good faith efforts to produce documents. secondly, i have reviewed the proposed subpoena. we got that from your staff fled last night. it is a very broad subpoena. it says all document to be produced relating to the $535 million loan guarantee to solyndra by the department of energy. including notes, analysis, memorandum, and all drafts of such documents.

since you are dealing with a very broad document request, there may be thousands of pages of documents that are irrelevant. it would slow us down and trying to figure out exactly what happened. the second concern i have is that if the white house asserts executive privilege and we end up in court, this is further delayed. what i have done is i have said, let's delayed this subpoena until the november 15. that is two days before the secretary is scheduled to come in and testify before this committee. let's try to work to get the documents that would be relevant to that we can question him on that. if the white house still refuses to produce documents, we can look at it at that point. that would be my suggestion. >> i recognize the gentleman from michigan.

>> i rise in strong opposition to this amendment. we have been trying to get information now for months. last week, i informed mr. waxman that we would ask for a business meeting this week. at the same time, i was going to call bill daley. and urged a course of action that to could have avoided today's session. i did not speak to bill daley on thursday, i left a very detailed message. i thought it would be prudent for the white house counsel's office to reach out to committee staff to see if we did get this resolved. we were not satisfied with the response sent from the letters that we send to the white house.

he chose to reach out to me on tuesday afternoon. of this week. i made this same request and we had the meeting with the white house counsel yesterday morning. with both mr. waxman and their staff. they knew that we were going to sit down with the republican members at 4:30 yesterday afternoon to make a final decision as to whether we would move ahead today. 5:00 came and went. the white house knew we were sitting down at 4:30. department of energy had dumped

documents to the press. i did not see that as a sign of good faith. it was about 6:45 when we received written response from the white house. that had no sense of timing when we would see any production. i would say that when we went through the exercise last july of seeking the subpoena on, it was only got the finally began to see some cooperation to provide documents. i am a former white house official. you have bad stories from time to time. when does happen, it is best to get them resolved and get them over with versus drip, drip, drip of bad news.

we do not want to see this delayed any more. it has plagued -- and it is time to get to the bottom of this whole mess. we need cooperation from the white house. we have not seen it so far and that is why we are moving ahead with the subpoena resolution. i would ask my colleagues on both sides to oppose this resolution. i yield back. i would move to table the motion that is before us. >> the motion to postpone is

tabled. a request for a table of vote. >> the clerk will call roll. [clerk calls roll]

>> anyone else wishes to vote? >> mr. chairman, on that vote, there were 13 ayes, 9 nays. >> i seek recognition to strike the last word. we have the unfortunate situation of solyndra's

bankruptcy. it is appropriate that this committee investigate how this happened. not only to find out what happened in the past, but to make sure it does not happen in the future. who is involved in such a loan? the department of energy. they are the ones that make the decisions. who else is involved? the office of management and budget. our committee asked doe for information and we got 65,000 pages from them. some people at omb had a different opinion about solyndra. before they had a chance to get it to the congress, this committee moved to subpoena them. i thought it was inappropriate. it is a far different thing to subpoena the omb than to subpoena the president of the united states.

we did not give an opportunity to work things out. we slammed them with a subpoena. not because i did not want to get the information. let us review at about where we are at the white house. the white house counsel outlined held want to proceed to get the information that was important for our committee's investigation. they acknowledged that it was a legitimate investigation. they said they would get as information on the core concerns of the committee. that statement has been made as if a were already established. we have not even gotten all the facts. there is no evidence to support

it. we have to get all the information to see if it is true. the white house says they will give us that information. the loan guarantee at closing and loan restructuring. those are the reasons we have an investigation. they did not to give him anything in writing before is 4:00 meeting. because they gave them something in writing at 6:30, we're going to go to a subpoena. give me a break. two hours? the white house is trying to cooperate. republican after republican said today that the white house has refused to give us anything. it is just not true. in congress, i have never seen a situation where on a

bipartisan basis, when somebody asks for more time, you did not give them more time. we could have given them a little bit more time. why is the white house still saying they do not want to comply with all the information? because it is so broad, it could be a violation of executive privilege. if someone is discussing whether the president should go to the solyndra factory, that is not information that is pertinent to our investigation. it is a fishing expedition. it intrudes on the prerogative of the presidency. not just this president. if he would look at this

question seriously, you do not need to have a subpoena vote today. after that information has been provided, we can see what else we need. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

i don't believe there is a mandate for principal forgiveness in that. >> the former mac program does have not as underwriting standards, but also sets out procedures for when a mortgage bows into defaults. have you looked at how that program has worked and whether that works? >> i have not looked at that particular program, no sir. >> part of what we would establish in terms of standards would be lost mitigation protocol. that would be part of the servicing standards developed so that market investors would have protocol of how servicer was expected to minimize investors lost in the event of a delinquency in a mortgage. >> thank you, mr. chairman. nice to see you here, mr.

demarco. does fannie mae and freddie mac and fha's dominance of the mortgage market allow for innovation in the private sector? we already heard about some of the businesses being shut down and jobs lost because they cannot compete with the taxpayer back in government programs like fha. should we continue to allow the government sponsored housing programs to compete and to edge out the private sector? >> to the first part, i don't believe a model of having fannie mae and freddie mac in conservatorship is conducive to innovating new products and we are not introducing new products. i think the market framework that would allow for innovation

and the introduction of new instruments and so forth would better have an outside the realm we are in today. >> in the white paper treasury's auction one, there is a privatized system of housing and finance role limited to the fha, usda, and department of veterans affairs. it looks a lot like the plan that the republicans have been promoting for a couple of years. what is your view of option one? >> i believe option 1, at is certainly a credible option. i believe chairman garrett's discussion draft is one of the next developments or refinements of the treasury's auction one in that it provides a basic framework for treasury's auction one to be implemented

legislatively. -- option 1 to be implemented legislatively. >> the you believefhfa creates mortgage buckets and defines the standards to fit into those buckets? the private sector will perceive that the mortgages in the buckets are implicitly guaranteed by the u.s. government? >> no, that is not how i understand it would work in this bill. i don't see anything in the bill that would give that sort of insurance to investors. >> that is something we are always working to make sure we don't fall into may be a trap like that again. those are my questions. i would yield back. >> thank you very much, mr. chairman.

mr. demarco, as you review the language of the private mortgage market investment act, how do you believe that this will impact to your organization's ability to effectively regulate and the conservator of fannie mae and freddie mac? >> i perceive this legislation as actually being in tandem with other legislation that has already been pending before the subcommittee and to the full committee. i don't believe this is intended to be undertaken with an ongoing indefinite conservatorship of fannie and freddie. i believe this is framed to be replaced it. how that transition works remains to be worked out. >> how does fhfa have the capacity, how to have the expertise to implement such a program that will go into effect no later than six months from the enactment?

>> there are a number of things we would be required to do in this legislation that in fact we are already doing. the servicing alignment initiative we have undertaken as conservator of fannie and freddie to establish more robust and consistent and effective mortgage servicing standards is something we are well along with and the implementation of it has begun. that would be a key component of what would go into the standard setting that the chairman's discussion draft would have. the second thing is i have already made clear that as conservator of fannie and freddie, i am working towards changing their securitization process so that mortgage market investors would have detailed low-level data on the loans underlying the pool. this is also a provision as part of the chairman's bill. this is something we are working towards already.

i believe there are certain things we are already under way and we have the expertise in house to be able to develop that. i think some of the work we are doing in our current rolle fits well with what is proposed in the new role. >> what does the secondary mortgage market looked like with no government guarantee on a long-term, fixed-rate debt? >> for long-term, fixed-rate mortgages, it looks like one that is pricing the risk according to what it actually is. we will get a true market price of the risk, not just the credit risk but the interest- rate risk associated with a long-term, fixed-rate assets. the concept behind a grouping of mortgages is to give greater homogeneity in the securitization process so that investors would understand this is a class m taiko pool, this is a class p type of pool, so

investors know what to keep credit characteristic differences are between those different pools and we would see that priced accordingly in the marketplace. >> in listening to the dialogue that you had with my colleague congressman miller regarding the principal modification, and your response was, principal forgiveness. there is a heck of a lot of difference. what we have been discussing here in our committee is that if we are going to be able to make it possible, scituate -- situations where person buys a house for $300,000 and then it drops in market value to $200,000, they still have an indebtedness for some part of $300,000. we are asking consideration of those modifications, and i need for you to give me some clarification, because i am not

clear on your response. >> i will apologize to congressman miller if i misunderstood the question and did not give an appropriate answer. to your question about principle forgiveness, here is how i have looked at this as the conservator of fannie mae and freddie mac. i believe we have an obligation to minimize taxpayer losses from the book of business that they have. i also believe we have an obligation to be maximizing our efforts to avoid foreclosures, recognizing the net present value to that taxpayer. that is a statutory mandate that we have. what we are doing in a loss mitigation space with fannie and freddie is that there is a whole protocol that is in place at each company that the mortgage servicers are supposed to execute on their behalf. what this protocol is about is when a borrower goes the link on the mortgage, there is

supposed to be immediate outrage to that borrower to find out what the reason for the missed payment is. -- immediate out reach to that bar or. if they are incapable of making the full mortgage payment they are obligated to, the first alternative would turn to is a loan modification appropriate for this maror. the borrower is committed to continue to make a payment they can afford and committed to staying in the house. that is the outcome we all want to see, and that is our first priority. the per se step is following the precepts of the treasury department's home affordable modification program. the hamp program is designed to fund what is an affordable payment, which is defined as a payment equal to 31% of the borrower's monthly income. there will be a series of modifications made to the mortgage to get the borrowed into a payment of that size. we are in fact doing that and fannie mae and freddie mac

together have completed just under 1 million completed loan modifications. if the borrower doesn't qualify, there is a proprietary model that will address the particular situations of the bar or. loan principal forgiveness in that context, we have found we can get the borrower to that payment without doing principle forgiveness and we better protect the taxpayer by preserving an upside potential if the borrower is successful in their modification. >> the gentleman from california is recognized for five minutes. >> as we discussed earlier, there is general agreement that the conservatorship was the right thing to do in 2008 and that the conservatorship in the current system is not the permanent solution and we need to replace it with something. the question before us today is whether or not this bill is the sole and sufficient replacement for fannie and freddie as

opposed to some of the other alternatives that are offered by other members of this committee, including myself. the first question for you would be if fannie and freddie were to disappear tomorrow and this bill were the sole replacement for that comic-con -- the sow replacement for that tomorrow, could this serve the entire marketplace? >> it could not do it tomorrow. this would take some time for standards to be developed and articulate it and in order to attract private capital and build up the infrastructure to do this secured session proposed in this bill, we need to know what the standards are, what the requirements a going to be, and then make the necessary inappropriate investments in infrastructure and risk management to be able to execute it.

over time can that develop and be implemented? if the market has certainty that these are the rules of the road and that these rules of the road are not going to be changing every three months, i believe the private market can step in and do a great portion of what is currently being done by fannie and freddie. >> let's talk about what would happen to fha and federal home loan banks to the volume through them if fannie and freddie were gone and this was the sole solution? >> fha really has an unprecedented volume today relative to any time in recent history. i believe for lawmakers to consider the housing finance system more broadly, i would expect consideration of fha pose a role here, whether it expands, contracts, gets redefined, that you all would figure out. a huge portion of the market

would probably go through fha if fannie and freddie disappeared. >> i would not necessarily draw that conclusion. >> they used to be the lender of last resort. now they have become the lender of first resort, particularly for anyone with less than 20% down. >> there are a lot of borrowers that would find market execution at an attractive price without having to go through fha. >> this bill actually has a lot of government restriction and control over the marketplace. one of the things that we required fhfha to do is promulgate underwriting standards. could this not be seen as a stamp of approval or leaving open to litigation or legal liability from investors, were those portfolios to go bad in

the future? >> i believe the discussion and careful review of the discussion draft on that point can and should continue. i would say at first blush it looks to me as though the bill is taking great pains to make clear that in fact that is not permissible and that is not intended. >> it is not permissible to -- under this bill as i see it, you are in essentially filling the role of the bond rating agencies. >> i believe what we are doing is setting definition than rules in terms of mortgages with this group of characteristics will be classified as this class. mortgage investors will know when an offering is made for this class, there is, to negative about the risk

characteristics and then for this river class, there is, an anti about the risk factors for that class. >> you are not just the director of fhfa, but your or a noted economist. there is no guarantee because the private market doesn't want to except the duration and interest-rate risk in addition to credit risk. what effect would that have on housing prices? we are talking about trying to keep -- if the housing market falls further, the economy will fall and a lot of jobs will disappear, and that is what we do not want to have happened creek >> that is a predicate to the question i would not really agree with it. the implication that this bill would cause that to happen. the question is, if you suddenly out what 30-year fixed- rate mortgages, would there be

an effect on house prices? there could be, but there could also be an effect on mortgage interest rates, which are also affecting house prices. in some ways, there are trade- offs there. a lot of girls don't used fixed-rate 30-year mortgages at reject a lot of borrowers and don't used fixed rate 30-year mortgages. >> i thank the gentleman from california for his questions.

title 3 of the discussion draft prevents federal departments or agencies from engaging in forced principal writedowns. i am not clear whether or not you're talking about a ban on principal writedowns as it applies to new loans or existing loans. this is with respect to any securitized mortgage loan. you have said that given the calculations of fhfa, fiscal writedowns on freddie mae and fannie mac loans are not possible at this time. do you think that a statutory prohibition or principal write- down is appropriate or should be director of fhfa have the flexibility to pursue future writedowns should data demonstrate it is appropriate? the reason i ask this question is that -- it has been stated that one of my colleagues, that many of us are very sympathetic to the homeowners who are under

water. we do believe principal writedowns make good sense. we believe principle writedowns will keep many of our homeowners in their homes. but for principle writedowns, they will end up foreclosed on. my question again is what i already stated -- should this be in law? should we ban or prohibit principal writedowns in what? would you like to have the flexibility in dealing with this issue? >> with respect to the first part of the question, i believe it is equally legitimate for the congress of the united states to legislate that the use of taxpayer funds to write down a principle of other mortgages is an appropriate public policy and to provide for that. it is equally legitimate for

the congress of the united states to pass a lot to say that is not an appropriate use of taxpayer money. at this point, it is a question for lawmakers. i have made clear, given my current responsibilities and source of funding, i have made clear my view of what i am not doing it. i believe it is up to lawmakers to make that determination grid we are talking about the use of taxpayer funds. that rightfully this as a determination of lawmakers. >> let me segue to another issue. i am interested in the timing. i and other members are very pleased about the request for ideas that you put out relative to disposal of the 300,000 reo's that you have on the books. could you tell us something about the timing about that? when can we see requests for proposals go out?

>> thank you for that. the subcommittee is aware that we made an important set of announcements regarding the finance program. the agency has been focused on that as the first priority. now that that work is just about complete, moving to this reo question and finalizing our review of these 4000 submissions is our next priority. i would hope to be at least making some movement forward over the next few months with that. i believe that we need to get going with it. >> thank you very much. i yield back. >> the gentleman from florida. >> mr. demarco, first i just want to set i applaud your written testimony on page 3 where you say that you're going

back and attempting to recover some capacity or damages. the question is, yes or no, are any federal law enforcement agencies working with you to recover punitive damages? >> i can only speak to the action that i have taken. what we have done is undertaken the public complaints. i am not in a position to speak for the law enforcement agencies of the government. >> so you are not aware if they are then? >> i cannot speak for what law enforcement is doing. >> i am not asking you to speak for what you are doing, i am asking if they're working with you, behind you, beside you, or and if you have an interest in it? >> from time to time, we are approached by law-enforcement about things we are doing and we always give our full cooperation. as a general matter, are there

issues out there that law enforcement is pursuing in the mortgage area? the answer is yes and we're providing our support to them when asked. >> do you notify law enforcement when you discover fraud as you attempt to uncover damages? >> we have a mortgage fraud reporting regime that fannie mae and freddie mac have. there is a great deal of reporting that is done. there will often come back to us and ask for additional information or guidance and we do provide that. >> last time, we heard the defense these for the freddie mac and fannie mae defense fees were about $162 million. do you have an updated number? >> i do not have an updated number but i suspect it has not changed much. >> a court has ordered at least one of the executives to pay some bonuses that were received. yet not deserved.

could that be viewed as any type of adjudication of guilt and may be a reason for the american taxpayers to stop paying for these crooks? >> i am not aware of the particular issue or circumstance that you just described. i would have to find out exactly what ruling was made that you are referring to and then i suggest that. i am not aware of the top of my head what you're talking about. >> i'm going to make a couple of statements and asked you to tell me what is wrong with them. for about 60 years, we have had fha loans, 3% down payment loans which require an extra 0.5% insurance premium. to a large extent, the extra 0.5% mortgage insurance premium has paid enough through its

accumulation for the losses that have been incurred for the loans. it has been a sound system. the aid, which has a down payment of about 2%, which is incredible because of the job they do working with their clients, that is one argument for not reinventing the wheel. the bubble was not caused by mortgage limits or low down payment. i would wager at least three people in this room bought their first home on a 3% down fha alone and did not the fault. most people did not. most of that was caused by fraud enacted between the bars and lenders. if we are sure to eliminate that fraud, the system should

work without additional regulation, red tape, and so forth. do you see anything wrong with those statements? >> i apologize. in mortgage fraud has been an important element of the debacle of the last several years. i would not say that borrowers generally -- let me set vha aside. they had a small business during these acquisitions. but the acquisition of houses with 0% down is a contributing factor to the housing bubble and the losses the taxpayers having absorbed. i would go further to your point about fha and say that these are credible, explicitly

government guarantee programs with targeted populations of eligible borrowers. i fully expect that wherever we end up in housing, we will continue to have a robust fha and va program. one of the decisions for lawmakers in a post-fannie mae freddie mac world is whether there is consideration to be given in altering any way the program or eligibility of fha or va. >> i do not want to cut you off but i am running out of time on my five minutes. >> actually, you are overtime. >> can i get one quick follow up? it has been my impression that congress pushed freddie mac and fannie mae to make many of the loans the we now regret. i hope that congress is accountable for that. do you think that is a fair assessment?

>> i think that congress, in establishing certain expectations that drove fannie mae and freddie mac -- i will not relieve the executives for making poor business decisions. >> thank you very much. >> the gentleman now yields back. the gentleman from california. >> we have seen some bonuses at fannie mae and freddie mac. do you have a comment about that? >> first is that the compensation programs that are being reported are the same compensation programs that have been in place since 2009 at the same levels that i have extensively testified before congress about. i will say that a number of executives have turned over to companies that we see in every instance to be bringing in new executives at lower compensation than their

predecessors. finally, i believe this compensation problem will be solved when congress gets on with coming to a final revolution of conservative ships. >> this bill we are talking about today is either a very small bill in its importance or a very large one. it is useful to have standards of weights and measures 4 ounces and pounds. it would be good to have federally published standards for mortgage-backed securities. this could be an enormous bill if it is somehow a step toward abolishing betty mae and freddie mac and not replacing it with anything similar. what does the secondary mortgage market look like to you if there is no government guarantee of a long-term fixed rate mortgage?

>> i have said earlier in the evening that i do not see the fha or va going away. i further believe that in the constant that is here, it would certainly be an opportunity for mortgage investors to price into being willing to accept 30- year fixed-rate mortgages without a government guarantee. >> what does it look like to the average home buyer right now, if they have a qualified loan, a conforming loan, they are paying a certain rate of interest. how much higher is that going to be without the government guarantee? i know what it was in my area five years ago. before mortgage-backed securities got an ugly name. but what kind of increase are we going to see for somebody who is borrowing and not borrowing from fha or va. >> that is a complicated

question. i can make a general observation for you. we continue to have a mortgage market that is outside the fannie mae and freddie mac realm. looking at past history, it suggests that we are somewhere in the order of 38621 half of a percentage point in difference. those borrowers also reflect a different credit profile, not just -- >> let's say we were talking about 75 basis points to. what does it do to be about to of homes in this country if, for the vast majority of buyers, the interest rate is in a 75% of a point higher.

>> there is a connection between mortgage interest rates and house prices. the incredible subsidize over a long period of time through fannie mae and freddie mac with affecting mortgage interest rates have been capitalized into the value of homes. >> you have any evidence or studies of would disagree with what i have seen, another 15- 20% decline in the value of palms? >> i do not have studies 2.2 with regard to that. >> what does it do to the national economy if the average home in this country declines by 15-20% over the next year's as a result of action taken in this room? >> a substantial decline in house prices would not be good

for the economy or taxpayer. we will see how this actually evolves, what kind of transition there is and so forth. >> the gentleman yield back. the gentleman from new mexico is recognized. >> thank you. mr. demarco, nice to see it. last time you were here, we had a little dust up. for the record, i came into the office and made it professional presentation on the status of the institution and i appreciate that. i am still working on those notes. i want to get that into the record here. if we pursued the line of questioning that mr. posey was on, what would be the definition of fraud here? a great% of the loans are fraudulent. what would be the definition of

a fraud? i will go ahead and give what i am thinking about. i have been in discussion with one of the bottom lenders from wall street. her performance bonuses were based on making loans out the door. you have got to get them in and kick them out. she would not compromise standards to the other people sitting on the desks making loans did. their bonuses were higher. her supervisor get bonuses if she gets bonuses so she is under pressure to make loans. would that be fraudulent or is that just -- it does not cross the ethical line, but it is up there. >> as yet described it, i would not perceive it to be fraud as long as those credit characteristics are being appropriately reported to the buyer or investor in the

mortgage. >> where i'm going with this is that any market is going to have that same pressure, whether it is this bill in front of us or the market that is operating right now. it is a pressure that is going to be there. is there any way to regulate that pressure? any way to deal with it? it is not technically fraud, but they're putting mortgages out there that maybe are not going to perform as well and are not categorized that way in order to get their bonuses, that is a problem in the system that i do not know how you get around. >> instead of some compensation programs, what can be looked at is creating a positive or adverse incentives for hultgren markets are functioning. incentive programs are critical here whether we are talking about executives or rank and file of employees.

it can run quite a wide gamut of participants. a cannonball appraisers, lenders, borrowers, companies that are actually equaling and secure sizing mortgages, fraud can occur in any number of places, including the house. >> the second continuing drumbeat of concern from the house is that if we go to some private market, they will never get the rates of return that they can in the large markets. they are suspicious of movement away from -- they do not like the expos and guarantees with the implicit guarantee. what reassurances could we give the people in new mexico, the lenders, that they will be ok, that a private mortgage market will actually provide liquidity to them? is that every assurance that is possible?

is it one that is advisable to give? >> that is a great issue. it is one that concerns me a lot. i would answer slightly differently. as we consider housing finance reform, whether it is the chairman's discussion draft or any other for a work that is put forward, one of the things i would suggest policy makers and lawmakers should be assessing is, what does this framework offer to small and mid-sized lenders? there are community banks, mortgage bankers, and so forth, to be able to be active for dissidents in the mortgage market so you have a more competitive marketplace and one in which it is not dominated either at the mortgage origination point or the mortgage servicing point. it is not dominated by a

handful of very large institutions. >> i yield back. thank you for your responses. >> the gentleman yields back. before we go, the gentleman from california raise good questions with regards to the compensation issues and what needs to be done about that. we do have legislation hr1221 that was sponsored by the full chairman of this committee which would try to address that and says thank current compensation packages. that is consistent with the executive schedule, which would be less than what was out there. it passed the committee 27-6. the gentleman from california voted no on that piece of legislation. just for the record, we are trying to address the situation. with that, i yield to the lady from new york. quarks welcome mr. demarco. we welcome your comments on what is the 15th proposal the subcommittee has reviewed in the area of subcommittee

mortgage markets this year. i know that this question is not exactly on point with what we are reviewing today, but since you are here, i wanted to follow up on something i have been involved with your with your office in the past several months. a recent story was in the october 19 issue of the new york times entitled "rush to drill for natural gas create conflicts with mortgages." it has raised important questions about how many of these new gas leases on private property is in many states that do not have a history of such leases and how this will impact mortgages. the article reports there are concerns that these leases do not ensure compliance with certain standards set by secondary lending institutions and earlier this year, i sent you and your staff questions on this area.

i appreciate your response. but your counsel's response raises questions in light of the recent story. there seems to be conflicts between these gas leases and mortgage rules which could become a problem with investors. now that the technical default that these leases could create on mortgages, it may force freddie mac and fannie mae to buy these mortgages backed writ if this happens, it could be incredibly expensive for the u.s. taxpayers. 90% of residential mortgages are owned by freddie mac and fannie mae. so many people have already signed these oil and gas leases. my question is, as the regulator, what is at h e a doing to audit to understand the scope of such a threat?

>> as you know, my staff has been working with you and your staff to better understand this emerging issue and its implications including its risks for fannie mae and freddie mac. we have provided one set of responses. with regard to the more recent developments that you reported, i will confess that i am not up to speed on that and if you would indulge me, i would be happy to get a more full response and get back to you at your office regarding the latest developments and to make sure we provide a real answer to your question. >> thank you. your agency's letter said you were waiting to see what the epa determines about whether tracking is environmentally dangerous. i believe that that determination is irrelevant. something does not have to be

environmentally dangerous for it to negatively impact property values or violate mortgage rules. take the example of a landfill. it is not considered dangerous, but it definitely lowers the value of property. most people would not like a landfill in their backyard. regardless of what epa fines, most research says that drilling negatively impacts property values. as time documents show, drilling leases violate fannie mae and freddie mac rules. the question remains -- is fhfa or fannie mae or freddie mac going to do an audit to see how many mortgages across the country have non-compliant leases on them? this is a serious issue. it costs billions going forward.

>> as i said, i would be happy to go back and take a serious look at whether an audit is in order, whether that is feasible and practical, what it is we would expect to get out of it. i am not prepared to give you -- >> are there any efforts in fhfa to see how many mortgages in the united states are overlaid with non-compliant leases? is there any effort to look at that? >> i am being advised that these leases that you're referring to may or may not be recorded. our ability to be able to effectively gather this information is uncertain at the moment. i am told that the staff is looking at this and will continue to. i would be happy to follow up promptly with your office to advise you of where we stand. >> thank you very much.

my time has expired. >> the gentleman from texas. >> think you for holding this hearing and thank you for putting forth a very interesting proposal for bringing the private market back to mortgage finance. it is a very important thing for the long-term housing that we have a robust market. mr. demarco, thank you for coming. you have one of the most difficult but most important jobs in our country right now. the taxpayers and you have some bad news this morning. it looks like freddie mac need another infusion of about $6 billion. what i found troubling about that is that they lost $6 billion in the previous quarter. if you go back one year ago, the only loss for $1 billion. with the amount of origination have got, you would never expected their earnings to start showing some improvement.

i find that troubling and i assume that you do as well. >> i certainly do. i would say that a portion of these, there are three key contributors to this. one is an additional income and credit loss continuing to reflect both the pre conservatorship and the difficulty of markets are having in stabilizing. it also reflects losses due to hedging in terms of the financing of hedging the financing risk of the retained portfolio. 10 $6 billion of that is the dividend owed to the treasury department. >> on september 30, the loan limits have temporary increases. it was expired so the new loan limits are in place a. has anybody done an analysis of how much that would affect overall origination for that to

move from the 729 down to the 605 number? >> i know we have how many mortgages freddie mae and freddie mac have originated in the particular markets that were affected by the change in the loan limit. i am afraid i do not have that with me. i could easily provide it. it is not a huge number. but we can get that for you. >> in texas, it is a relatively small number. >> relative to their book, it is a small number. >> the question is, and mr. scott has a great proposal of bringing some certainty to the market, but will be the incentive in the private market to have originated any thing in the current space that the gsc's are allowed to operate?

and what would be incentive for the private market to let the federal taxpayers guarantee that? >> is pretty hard to compete with the federal government and the degree of support that is being provided right now. >> if you're going to get the private sector back into markets, you're going to have to create some space for them to operate. there is no incentive below 625 for the private sector. >> is hard to compete with the government guarantee. as long as there is a wide put print or that, that is going to be a wide space in the market. it will be hard for private bridges as to compete in that in terms of financing. >> and you think the fact that we did create a little more space in the market by letting those limits expire gives us an

opportunity to see? and the private sector is operating in the jaumenow. isn't that a good opportunity to create additional space without giving up a lot of origination? as you just said, it is a very small amount of all origination. >> is an opportunity to provide a modest amount of additional running room, if you will. for the jumbo market to be able to reestablish itself. >> so you would support that? >> i have remained faithfully agnostic on the question of what the loan limit should be, viewing that as a decision of lawmakers. to your premise, that by having this well-announced, a gradual decline in loan limits in certain areas, would that create greater opportunity for the private sector to reestablish itself?

the answer i would say, is certainly yes. >> here is a final question. recently, we wrote you a and we were anxious to your response. freddie mac and fannie mae, insurgents bases, basically have a monopoly. what would be the reason to give certain originators different these than others? why would you have the spectrum? if your not competing for the business, you're getting all of the business. >> there is no question. i would say a couple of things -- those gaps have been declining since publicly in september, when i said what remains in the space i am looking to eliminate. >> thank you for your time. >> the gentleman yield back. the lady is recognized. >> i want to thank our guest for taking this time.

i want to mention that i'm really happy to see that you have filed losses against the 18 financial institutions to recover the losses suffered by freddie mac and fannie mae and to seek damages for the losses that the enterprises have suffered. there has been a lot of talk about the malfeasance of freddie mac and fannie mae. we too often forget that they were victims themselves of criminal activity. how much do you think you could recover from this? compared to the exposure that freddie mac and fannie mae have? >> i appreciate the question, but that is something, given that i'm in a litigation, it is impossible for me to answer. we are seeking to recover appropriate funds.

>> thank you. right now, the fhfa is funded through the fees that the gsc has received. you would need considerable staffing up to fill the space. under this bill, how would you fond the gsc's? >> i'm not sure there would be gsc's. it is not determined in this bill. that would be something that would have to be figured out. >> is it a gap or a tavern? a small gap or a significant thing? >> for me, it is a significant thing because i want to know where the funds are coming from. >> how much as a cause right now?

>> our budget today is on the order of $180 million. i am being told it is probably less than that. but we are funded to assessments on freddie mac and fannie mae but also on the 12 main banks. >> thank you. right now, the investors in fannie mae and freddie mac securities are basically rate investors. under this bill, they have to add credit risk as well as the rate. if there is any indication that we could attract the kind of the investors and privatize the market's without the gsc's. >> that is right.

we are in a rate market today. what the pricing of this credit risks would be is going to depend on market appetite for credit risk and the clarity and resiliency of the standard structures that have been put in place. >> what would a borrower, a mortgage borrower have to look like? in order to raise the appropriate amount of funds? we want our mortgage market to be able to come back. we have to be able to fund mortgage securities. what is your assessment of the tolerance for this credit risk in the private market only? >> i believe that there is

certainly tolerance for private capital to fund this risk. they're going to want to know what the rules of the road are and do they have cleared the in order to assess the amount of risk there would be undertaking. >> not mentioning loans, would be the standard, do you suspect? >> in terms of the underwriting standard? >> yes. >> and the discussion draft would require us to -- >> would it be 20% down? >> the bill does not require that kind of thing at all. the buckets of mortgages that are defined by the risk characteristics. >> my time is about to expire and a sense you are not going to answer the question. the largest insurance and guarantee your -- a character is located in my district. what impact would this have on the mortgage insurance industry? >> there are some investors to look into having various forms

of credit on mortgages or pools of mortgages. it creates a market opportunity for private guarantors' to replace what is currently a federal guarantor. >> thank you so much. my time has expired. i yield back. >> and the lady yields back. i appreciate the gentlemen's answer. that is one of the variables that may be considered by the fhfa as well. the gentlemen is recognized. >> i like to yield a few minutes to my colleague, the gentleman from new mexico. collapse to the gentlemen from the other side of the aisle who is talking about the negative impact of drilling off properties. if that was really the case, you would not have any property in my district. we have gas wells in backyards, schoolyards. if you're going to create a

freddie mae dead zone if you're going to limit loans to private residences in areas where they drill, be careful in new mexico. we do not mind out there. thank you. >> reclaiming my time. [laughter] i have a question on economics and a question about the past. the question is, one of our colleagues talked about how the subsidizing of federal government into housing has helped keep interest rates low. all of a sudden, if it went away, interest rates would climb through the roof. having a rudimentary understanding of the laws of supply and demand, would it not work that the government subsidize the housing market purchases, that would mean

there would be more available to more people and the more people that there are for the limited number of housing, the higher the prices would go for those houses, which would then reduce the availability. is that not how it would work? >> imposing a system in the short run, yes. in the long run, you see a change in the supply of housing. >> you would see prices come down, and which would offset the homeowners, but not the people purchasing them for it which could make the down payments smaller because the 3% asking price would be lower than it would be with government- inflated rates. i just want to make sure that i actually read the book college as some might have skipped through. a practical question about the past and would be, as you have stated, and everyone can conceive, there were mistakes made by this board and the people in charge of operating it. is that a fair statement?

>> yes, sir. >> thank you for much for try to go in here and fix it and working with us to do it. this is not directed at you in anyway. this is a matter of curiosity as well as public record. is there anywhere we can go and find a sink list of who was on the boards and what that decisions these boards may? these people made a whole lot of money to screw this thing up. i think that under giving credit where credit is due, i know a lot of people like to thank them personally for their efforts. >> since these are public companies, in your annual disclosures and reports, the leadership of the companies is a matter of public record. >> that is heartening. that is very heartening. i was also curious -- though -- that are public entities. is there anyway we could find

out how they managed to get these jobs? these are important jobs. not something you would want to see go to a political crony without the best of motivations and active and in terms of dealing with these things. so you could say, not only are these the people who should be credited with these decisions, this is also the compensation package. here is out there were chosen to be on this board. >> i believe that that is available information. >> can you send me the link and give me a concise sheet of that so i can share with that all the people in my district who are wondering why this thing got so badly so quickly and people were compensated so much for so little. >> we can provide to informational the public record. >> thank you. i yield back. >> the gentleman yield back. i appreciate the gentlemen's question. and also the book he read in college. college.