kids. i have gone into these institutions -- i have met a lot of these kids. i listened to their issues. and i meet them later when they come out, and their stories are moving. ashleyen's daughter works for the state. she escorted a partnership between

>> i really think this election is about the economy. it is about jobs, people on food stamps and changing the direction we have in the state. part of that is an honest assessment of where we are as a community and state. if you poll folks, it is all jobs and the economy. we are not providing enough opportunity. and what we did with $21 million for a plant that has no jobs, $19 million to bloom for a plant that doesn't exist down the street. if we had taken that and put it in delaware businesses and expanded growth we would be much

farther along. i think we need to change the focus and focus more on delaware businesses, good morning growth. we do that under a great administration we will have better results. i ask for your indull skwrepbls -- indull skwrepblgs. >> when they closed facilities we had a choice. we could fight to put people back to work and make things in delaware or give up on those workers. and if your approach was followed we would have an empty building decaying factory and rusting refinery. i will fight for those workers. when i was first running for governor i could not have imagined lehman brothers was about to collapse or major pillars of our economy were about to close down but that's what happened. and in delaware that changed everything. we have pulled together and i'm proud of it. we are a state of neighbors but

we have significantly more work to do. we are going to do it. that is why i ask the people for their confidence and vote. >> candidates, thank you. david wilson, thank you. and to our audience we appreciate your attention as we talk about the issues in the race for governor in the state of delaware. on behalf of wvde and the university we thank you for being with us and good night. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

>> as hurricane sandy continued along the east coast washington, d.c. and the presidential campaigns are adjusting schedules. the house and senate has a proceed form tpa session and the government is closed. the presidents have suspended campaign activities the rest of the day and the president is in washington, d.c. monitoring the situation with the fema. >> the stories are textbook left out. great stories about real people in american history.

very important moments in american history that we don't know about. the first pilgrims in america came 50 years before the mayflower sailed. they were french. they made wine. they landed in florida in june instead of december but were wiped out by the spanish but we left that out of the textbook. a woman was taken captive by indians in 1695, marched into new hampshire. in the middle of the night she killed her captors and realized she could get a bounty for cancelness and got them and made her way to boston. they erected a statue to her, the first statue to an american woman showed her with a hatchet in one hand and scalps in the other. kenneth davis is our guest sunday. he is a best selling author of the "don't know much" series.

watch live at noon eastern on book tv on c-span 2. >> we talk about running a large public financial institution just six months after it came under government control. he also looks at how president obama and mitt romney will deal with the housing industry after november's election. this is just under an hour. >> i'm bob glauber. i'm a member of the faculty here at kennedy school. it is a pleasure to welcome all of you to this year's lecture which is funded by nasd which is the private sector regulator of the u.s. brokerage industry. the focus of this series is on financial regulation. and each year we have had a leading public official

responsible in some way for u.s. financial regulation. this year our speaker is a tiny bit of a stretch. he was c.e.o. of freddie mac from mid 2009 to just a few months ago. while in that role he was not a public regulator, he was responsible for returning a very large public financial institution. freddie mac and fannie mae are what are called government sponsored entities, g.s.e.'s. for years they were described as private companies with a public of supporting housing, or, more simply, as mixed public-private enterprises. in september of 2008 both failed financially, were placed in government conservatorship. becoming quite unmixed, just

public corporations. the g.s.e.'s have had many problems prior to the could have beenor ship. ed was not part of that, arriving about a year after conservatorship. but he was part of the solution. the task of running freddie mac is a big challenge. it is a very large business. it is about 5,000 people and with the balance sheet at its peak before conservatorship of just under a trillion dollars. that included about $800 billion of mortgages financed directly by freddie and another $1.7 trillion of mortgages guaranteed but off balance sheet. together with fannie mae freddie was responsible for roughly half of the u.s. mortgages made to homeowners. since conservatorship the amount of mortgages directly on the balance sheets of freddie mac

and fannie mae have declined. but their role in financing u.s. home ownership has shot up. today roughly three-quarters of u.s. mortgages are made or guaranteed by freddie and fan nie. i was on the freddie mac board head of the governance and nominating committee. the first c.e.o. of freddie put in place by the treasury at the time of conservatorship quit after six months. we had to pitch to efrd to make the job. that was simple. a most challenging job but the opportunity to do meaningful public service. freddie mac and fannie mae

needed strong leadership and guidance as they rehabilitated themselves and waited for the government to decide just what to do with them. i should point out that we are still waiting for the government to decide just what to do with them. it is now four years since conservatorship, and beyond some partisan back and forth about banks' handling of foreclosures housing policy has been one of the elephants in the room during the campaign. ed had an outstanding career in public and private sector. degrees from dartmouth, h.b.s. and harvard law school starting with a philadelphia investment counseling firm. they were later bought by united asset management which ed eventually ran. from there he became chairman of delaware investments a large mutual furnished investment

company. next he was called in to run put man investments in boston which had experienced regulatory failing. he righted that ship and sold it at a good price for shareholders to a large canadian financial firm. it was at that time we approached ed to run freddie mac. freddie mac and fannie mae with the broader issues of u.s. government housing and finance is one of the major unfinished pieces of business in financial regulatory reform. it is clearly an important issue. we have c-span here tonight filming this. ed has a prbgts of an saerpbs -- perspective of an experienced manager and thoughtful public policy participant. this evening he will talk about where the g.s.e.'s have been and what to do with them.

my great pleasure to ed haldeman. >> thanks for that kind introduction, bob. i'm appreciative of so much of you come being out to visit with me and learn about freddie mac and g.s.e.'s. i'm particularly pleased to be giving the glauber lecture tonight. there are many, many people, perhaps hundreds, maybe it would number in the thousands, of people whose career was launched by bob glauber. i'm one of those. he taught me investment pplt in 1973 at hubbard business school and as he indicated i spent approximately 35 years in the money management industry. so, i don't distinguish myself based on my career being

launched by bob glauber, but what is a little bit special about me, perhaps unique, is that my career began and ended with bob glauber. and since particularly this week i ought to be careful about the preposition i used in that last clause, because bob was on the board, i was the c.e.o., and the preposition i used was my career ended with bob, not by bob. and i think this week particularly i'm sensitive to making sure everybody knows that we ended our time at freddie mac together. i'm pleased that the subject tonight is freddie mac and the g.s.e.'s so that i have an opportuni opportunity, now that i'm no longer the c.e.o. of freddie mac, to present a balanced view

of the g.s.e.'s. in is a subject -- this is a subject of which i have come to see others speak aggressively, emotionally. it gets very heated and it is very uncommon for people to present a balanced view. in fact, my goal tonight is to present a balanced view of the g.s.e.'s. and if i succeed i think it might be the first time there has ever been a balanced presentation about the g.s.e.'s. certainly the employees that worked with me were passionate about their role, the function they performed, almost a religious kind of mission is what they felt they were doing at freddie mac. and it was hard to imagine that there were other people in society that had the same kind

of visceral feeling in the opposite direction about the work that they did. and neither side was able to see the other point of view. hopefully in the course of the next 15 minutes or so you will come to a balanced opinion about freddie mac and the g.s.e.'s. i want to start with where they been and i'm going back quite a bit in time to 1938, when the first g.s.e. was created, fannie mae. to think of what the mortgage market was like at that point in time. because i think that by doing so, we will see some of the advantages and good things that have been accomplished by freddie mac, fannie mae and the g.s.e.'s. before fannie mae the mortgage market was very different than today. the only thing that was available were very short term mortgages, five or 10 years, variable rates. down payment 50% was the standard in those days.

there was a full payment at the end of the term. had to come up with the whole thing at the end of this short term. very large variations regional ly with respect to availability and rates. o standardization in terms of underwriting at all. all done very locally with different standards. around the mortgage market was not at all connected to the capital market and, as a result, rates were quite high in those days. subsequently the mortgage market has changed radically and i hink in large part because of freddie mac, fannie mae and the g.s.e.'s. most importantly, the mortgage market got highly connected to the capital market, the secondary mortgage function performed by the g.s.e.'s connected the mortgage market to large pools of assets, the capital markets, including not just in the u.s. but worldwide. there was standardization in underwriting that was required

by the g.s.e.'s. virtually an elimination of the variability in rates and liquidity by region. there was a broadening out in access to mortgage money in our count country. terms ofery limited in very high income people, very limited in terms of ethnic background. the g.s.e.'s broadened that out substantially and, most importantly, made sure there was widespread availability of fixed rates at 30-year mortgages. think of what is so special about mortgages in our country tod today. for about a 3.5% interest rate you can get 30-year money with no prepayment penalty. a pretty unusual economic opportunity. so, those are the early years. the advantages that g.s.e.'s brought to the mortgage market. let's think of the years just

before the financial crisis and think about where the g.s.e.'s have been in that period of time. the reason that it is worth while looking at it just before crisis is there are many people who have argued and written that the g.s.e.'s caused the financial crisis or great recession. as bob glauber indicated, i was not at freddie mac until way after the financial crisis so i don't really have a stake in this game. i would is a chart that look at to sort of determine to ought freddie thau mac and fannie mae caused the crisis. and i'm not saying -- perhaps we will find later some contribution. but do you think they caused it. and this chart looks at market shares. the market share of the g.s.e.'s is at the top.

and it is that blue line. at then the reddish line bottom and gets very high in 2005 and 2007 is the private market. the private secondary mortgage market. so, this is the investment banks and commercial banks issuing secondary m.b.s. securities, private label securities we call them. look at that radical market share change. freddie mac and fannie mae going from on the order of 75% down to 40%, fulling like a rock. the private label taking a tremendous share. what would be the cause of that? cause, in my view, is a change in underwriting standards. a change from requiring substantial documentation and high underwriting standards of

large down payments, many of the private capital competitors reduced some of those standards and were able to take substantial market share. now imagine you are the c.e.o. of freddie mac at the bottom market share number, 40%. you have seen your market share for the two g.s.e.'s go from 75% to 40%. do you react or not? do you change your underwriting standards? how much can you tolerate in terms of market share loss? as the c.e.o. of freddie mac i had 5,000 or 6,000 employees. it looks like the entire market is going away from me. do i change or not? i think that the c.e.o.'s, the people running the company, did make some changes. and we each can make our what we would have done in that position. but i would at least argue it is

a hard call. it would not be easy to be unchanged in terms of your requirements on down payment, underwriting standards and have that market share go completely away like that. this is another indication of, i believe, whether or not freddie mac was the cause of the financial crisis. we are looking at mortgage default rates over time. the did he ever nation of default is 90 days delinquent. you can see that at freddie mac and fannie mae at the worst our delinquency rate got up in the to 5% zone. for the overall mortgage market in our country it got to be 10%. for the subprime sector of the

market it got up to be 25%. so, again while i believe that freddie mac and fannie mae did lower their standards, look at the resulting delinquency rates. i think that you can see a big 2010 the way freddie mac and fannie mae behaved and the rest of the industry did. t mac and fannie mae behaved and the rest of the industry di the mac and fannie mae behaved and the rest of the industry did. tc and fannie mae behaved and the rest of the industry did. the w and fannie mae behaved and the rest of the industry did.b the c and fannie mae behaved and the e the way freddie ry did. mac and fannie mae behaved and the rest of the industry did.t mac and fannie mae behaved and the rest of the industry did.w mac and fannie mae behaved and the rest of the industry die the mac and fannie mae behaved and the rest of the industry did.e freddie mac and fannie mae behaved and the rest of the industry did.n the way freddie mac and fannie mae behaved and the rest of the industry did. so, i don't believe that the two g.s.e.'s were the cause of the crisis.al i do think they did reduce underwriting standards. i can understand as a c.e.o. why you might have done hat given what the competition was doing. i do think there were some mistakes and problems made that were connected to the g.s.e.'s, and certainly one that i found troubling was sum retailed in a

book -- summarized in a book called "reckless endangerment" which is a story of crony capital i capitalism exhibited by the two g.s.e.'s. i view that book almost as a playbook on how businesses can execute crony capitalism and get close to government for their benefi benefit, not just an incredible lobbying organization, not just massive campaign contributions, but things like hiring repeatedly people coming out of government, opening regional offices in all of the critical congressional offices and hiring relatives of congressmen in order to fill those regional offices. so, to be sure, some of the criticism that gretchen

morganson offers is accurate. a second problem was the implied government guarantee. this was not something that necessarily was generated by the g. but they took advantage of it. but what they were able to do because of the implied government question was borrow essentially as much money as they wanted to at the government rate. so, unlike most private companies, when you put on more and more debt the rate goes up. they were able to borrow almost unlimited amounts at the government rate and create a retained portfolio which some people had described as a hedge fund because one was able to arbitrage the difference 2010 the government rate and the rate they used to buy in some cases private label securities.010 the government rate and the rate they used to buy in some cases private label securitie10 the government rate and the rate

they used to buy in some cases private label securitie0 the government rate and the rate they used to buy in some cases private label securities. the government rate and the rate they used to buy in some cases private label securities.b the government rate and the rate they used to buy in some cases private label securities.e the government rate and the rate they used to buy in some cases private label securities.t the government rate and the rate they used to buy in some cases private label securities.w the government rate and the rate they used to buy in some cases private label securities.e the government rate and the rate they used to buy in some cases private label securitiee the government rate and the rate they used to buy in some cases private label securities.n the government rate and the rate they used to buy in some cases private label securities. so, i don't think the g.s.e.'s but it is a ault stretch to call them the cause financial crisis. let's talk about what the g.s.e.'s have tkodone subsequeno the crisis since they put into conservatorship. that is the point in time i'm more familiar with.wput into conservatorship. that is the point in time i'm more familiar with.eput into conservatorship. that is the point in time i'm more familiar with.rput into conservatorship. that is the point in time i'm more familiar witeput into conservatorship. that is the point in time i'm more familiar with. put into conservatorship. that is the point in time i'm more familiar with. one thing they have done and reason i took the job is they have been the only game in town for the mortgage market. here are the numbers accounting for 75% of the total mortgage market if you add in f.h.a. another government mortgage provider, you get to about 95%. so, the private market has been providing only about 5% of the mortgage money. where would we have been the past three or four years without the g.s.e.'s performing this

function? in addition, we worked with the administration and treasury department in order to execute some of the government programs. home affordable modification program and home affordable refinance program. you see the number of modifications done is 1.2 million homes since conservator ship. the only problem with the number is when the idea of modifications was first generated, the program was quickly taken over by political people in and close to the white house and they decided that they needed to make an announcement of what they were going to do and they said three or four million modifications.

i don't know what they got as far as the number but 1.2 is a pretty big number and the g.s.e.'s executed on not just the modification program but the refinance program. one thing we didn't do was we didn't do principal forgiveness. and that is a -- i'm not quite ready for this one -- on this list of things up here we didn't do principal forgiveness and some of you have read criticism about us not doing principal forgiveness. we believed pretty strongly as did our regulator, there was a real real risk of strategic defaults had away offered that program which is to say even though freddie mac has lots of underwater mortgages, over 80% of them are still current.

nobody has had any problem or has continued to make their obligation despite being under water. we worried about principal forgiveness having some impact on those 80% of the underweather mortgages -- underwater mortgages and we thought better to focus our attention on hamp and harp rather than add principal forgiveness. i wanted to spend a money on another part of our record of conservatorship which would be profitability. many of you read about freddie mac and fannie mae being a black hole. the record in front of you shows two bars. one is the amount of draw that we have taken from the federal government and the green bar is the amount of dividends paid. what a lot of people don't recognize is that the dividends we have to pay now are a number like $7.2 billion a year.

so, if you generated $7 billion in income, you would still have to draw something from the government. that is why people continue to talk about draws. if you look at that total record for the entire time of conservatorship, the round numbers are a draw from the government of $70 billion and dividends of $20 billion, meaning a net draw of $50 billion. you can see in 2008, when that year was done, the draw was $48 billion. so, almost everything subsequent to 2008 has been a draw required to pay a dividend. that is, a net neutral impact on the treasury. the reason we have been able to get to that level of profitability is all the mortgages put on in the last four years have been very high quality in terms of down pavement and fico score, much

higher than the case prior to conservatorship. and the new book, the subsequent conservatorship, accounts for over 60% of the total book of freddie mac. that was all past. we talked about the real old time period, 1938. we looked at the pre-crisis period and post-conservatorship. look forward and think of what to do with freddie mac going forward. it has been a great frustration to me that the treasury department and administration has come up with no program policy or recommendation as to what to do. it is now 50 months we have been in conservatorship and 6,000 people working at freddie mac don't know if the company will exist, have no job security at

all. the treasury was to put out a position participate in january of 2010 with a suggested solution. they didn't do that. it didn't come until january of 2011. then the whit paper listed just three optionless that would have been obvious to anyone on day one of conservatorship. so it is a g pregress in this area. particularly when there is strong consensus on what to do. there is a proposal before you put forward in august of 2009 by the mortgage bankers association which talks about forming private capital companies they called mortgage credit guarantee entities that would be three to five and compete with one another. that there would be no

government guarantee of the company. there would be a mortgage back guarantee but they would pay an insurance premium much like fdic insurance. the securitization would only be a plain vanilla kind of mortgage. anything exotic would have to be done in the private capital market and there would be no retained portfolio at all. so, we had this proposal, a sensible proposal in my view, in august of 2009. three years later a really smart guy named jim milstein who was at the treasury department and responsible for the restructuring of a.i.g. he is a lawyer and investment banking restructuring kind of person. and he put out a proposal which has many common ingredients that

we saw from the mortgage bankers association. here the emphasis is on a government agency, the federal mortgage insurance corporation, which authorizes, manages, regulates a series of security identifiesers and -- securitizers and the companies are not guaranteed, just the securities are. and the beauty of both proposals is that the technology and infrastructure and systems and human capital of the g.s.e.'s be wasted but compete with them. so i believe there's been some consensus around a proposal that is feasible and would work. one was issued by somebody who had an ax to ground, the

mortgage bankers association, but milstein, coming from the treasury department, presumably his view is what is best for the economy but it is a very similar kinds of proposal in my estimation. and i wish that we could move ahead with something like this. it would be a tremendous benefit, i think, for the taxpayers to get some usefulness out of this investment that they have made in the g.s.e.'s and keeping them together and functioning to use the skeleton and infrastructure in a way that allows the taxpayer to get a benefit, to get some-monthizati some-monthization -- some moneyization of the investment. so, where should we go? in summary, i think the most important thing is to go somewhere assign.

it is incredible to have this uncertainty and not know whether you have this future. it is debilitating over time. they are becoming less corporate-like and more government-like and from my that is view regrettable. so, i hope i have given you some insight into where we have been with the g.s. efpe.'s and where ought to go and i would be interesting in your questions. >> we ask you to identify yourself and we ask you to do something very simple. to ask a question rather than make a speech. and that the question be reasonably contained. i'm going to ask the first question.

you said where you would like to go. you said that you are concerned that nobody has gone there yet. any forecast of when you think congress is going to go somewhere and what the process will look like? >> yes. i think my decision to leave freddie mac because i thought it as going to take long time before we would get resolution, unfortunately. i joined the company the middle of 2009, and at that point everyone was essentially certain that the company would be relaunched in some form in a couple of years. and obviously we have been kiss pointed -- disappointed in that. as the calendar rolls through three or four years i concluded, looking a at my birth certificate, that i probably wasn't going to make it.

that was one indication of my pessimism about when we were going to get it resolved. it was clear to all of us as we got into the election year that nobody was going to spend any time on it and it has been remarkable how silent the two candidates have been on this subject given how much is at stake. and i think once we get the election over and get the new congress established, they have an agenda with more significant things, like tax policy and like policy on the deficits. so, i think there's going to be -- we are going to have a wait a good period longer before we get any action on this. then there is the implementation delay. i'm just talking about when somebody puts out an idea, which has to be challenged and fought and debated.

then you get something passed and you have implementation. after all, think of where we are in terms of implementation on dodd frank or obama care. i'm very pessimistic about when we get resolution. >> i'm ryan kennedy a student at harvard business school and harvard kennedy school. you started the remarks talking bout the euincredible political influence fannie mae and freddie mac had before their conservatorship. as we think of the entities that will follow, how do we think of creating the appropriate amount of political insulation against lobbying when it comes to capital requirements or appropriately pricing in the government guarantees? >> that is a real struggle. i can tell you that during my ti time, during the conservators p

conservatorship, we have had really strong restrictions on us. we were not able to make any political contributions, not just at the corporate level but i personally was not able to do it. i happened to go to law school with a couple of senators. i was not able to even visit them in a personal sense. so i was precluded from any action with any member of congress. if i was going to the hill i had to go with our regulator. before i got there when we were placed in a conservatorship initially all of the lobbying was stopped and the lobbying people were let go. so, during there period of time you should know that i can tell you that it has been totally insulated with a couple of exceptions, which were really annoying to me which were

congre congress, a member of congress who felt like they owned freddie mac, like they owned me, would call on my personal cell phone -- i don't know how they got it -- trying to make me intercede on some action that the company was about to take in her district, presumably some kind of foreclosure kind of activity that had gone through the process. i was asked to intercede. in that was an attempt direction. and all of that makes me a little bit pessimistic about your question. i think when we get to the resoluti resolution, one would hope we would have these private capital compani companies, which would be regulated very closely with restrictions on campaign

contributions, lobbying, that kind of thing. but we are also going to have to have strong leadership at those things who do buckle to the pressures that they receive. but it is a problem. and i guess the reason that i'm not too pessimistic is because we have gone through there period of time where the two g.s.e.'s have been incredibly disciplined by involvement in political activity. >> you also talked about the discipline of the g.s.e.'s during this period and quality of the mortgages that they have guaranteed. have you come under any pressure ease that stringent si during there period? >> very modest. ut it would obviously be statements made by members of

the treasury document, administration. suggesting that we were too tight or how aggressively we took the putbacks to financial institutions. but very modest and not particularly troubling. >> i like your charts and everything is helpful. looks like they focused around the single family side of things. i would like to hear what you think it looks for the multi- family side. >> thank you. this is the second time i have spoken since the vice presidential debate and every time i sip water i wonder if it is too much, too little or

appropriate or not. multifamily is a real great story at freddie mac. it turns out it is about 10% of our business. but it is a very successful and it is one where we have had -- i showed you the chart on the single-family delinquency and we are very low, over half as much. the multifamily business had an infinitesimal default rate, maintained high profitability such that many people, industry kinds of people, have been anxious for that business to be spun out individually as a stand-land kind of business. and that is -- stand alone kind of business and that is something that is feasible and another way taxpayers could

receive money. but i'm proud of the effort there. >> i'm asking this on behalf of a committee. in the current revision of the fannie mae and freddie mac bailout would you say they have lost the ability to recapitalize themselves? >> i think in the traditional way of using the word recapitalize themselves, yes, because of the 10% dividend requirement. so, when most tarp institutions got money to a use your word, a bailout, there was a 5% dividend with an ability to repay that.

at freddie mac and fannie mae the dividend was 10% with no ability to repay. as a result of that, the ability to recapitalize themselves, to use your phrase, really isn't there. the numbers for freddie mac are that the total draw in round numbers is like $72 billion, meaning that the dividend payment annually is 7.2. so, really, really hard to generate enough capital to meet that dividend and then accumulate on your balance sheet to have a chance of recapitalization. >> i'm a senior at the college. you began the talk by discussing some of the important advances in the mortgage market after the introduction of g.s.e.'s. and i wants to know in your

opinion in the modern society and looking forward to what extent you think a more purely private sector driven solution is able to or would be able to achieve the public goals of the g.s.e. g.s.e.'s? > let's haoeuypothesize no government involvement. you will remember that the suggestion that i made had what i think is limited government involveme involvement. say five private capital companies none of which are too big to fail and none have a government guarantee but the mortgage backed securities they issue would be government guaranteed and there would be an insurance premium paid for that guarantee. so, that is the extent of the government let's hypothesize, now to your question, that there is no ultimate reinsurance,

ultimate government backed stuff of the securities. the disadvantages to that, i think, are largely in the cost of mortgages. i believe that mortgage rates would be materially higher as compared to my suggestion. the reason is that i think there big sources of capital worldwide that will only invest in our housing mortgage market if there is some ultimate government backstop. i think there are big pools of assets in asia, for example, that will only invest if there's an you want government backstop. i visited during my tenure with some of the holders of freddie mac securities from foreign and they said they

would not buy any more and were their holdings because even under the current state of affairs they weren't exactly comfortable with the ultimate guarantee. and they made it clear how significant it was to have that guarantee if they were going to invest big pals of assets in our housing market. so, for that reason i am willing to tolerate that limited amount of government involvement. >> thank you. >> you just said that without government involvement it would be a higher price for mortgages. and i will bet that is right. i think everybody would agree the consequence of letting the private market do this would be higher mortgage costs. what would be the consequence of that and would those consequences be good, bad or not matter? >> the consequences of higher rates? >> yes.

>> uh, well, i think they would be significant. i think that that already we are going to narrow down the universe of possible home buy s buyers. because the down payments are so lar large. then if you compounds that with a higher interest rate we are going to narrow that potential universe of home buyer down to a level which i think is unacceptable in american society. we definitely went too far toward the goal of making everybody a homeowner. we had that single-minded objective of getting that percentage higher and higher and i think we pushed too hard. but i think if you compound a

20% down payment with significantly higher mortgage rat rates, i think that we would be narrowing the universe of home buyers into too small a group. >> i'm jacob riley, i'm a sophomore here. would you talk about the climate and culture you experienced when you assumed leadership in 2009 considering all that had transpired in the months before, kind of what were the expectations and pressures that you faced. >> i will try to describe it a little bit. there were 5,000 or 6,000 people that work at this company. many of them, like people employed anywhere in our society, had invested a lot of their money in the company, their 401-k, had stock holdings.

many were proud of the company and they bought stock in the company. and their holdings went to zero. i'm not saying everybody had 100% of the 401-k in freddie mac stock but there were big holdings that went to zero. were criticized e by politicians and the press as being the cause of the financial crisis. these are people who literally believed that they were doing great work helping people, and somebody accuses them of financial crisis. many of the employees told me that when they would wear a freddie mac t-shirt or sweatshirt to the super market or home depot they would be accosted by people for what they had done.

as bob indicated, they were put into conservatorship, and six after the c.e.o. arrived in conservatorship he left. two months after he left, the person who was the chief financial officer, age 42, took his own life. he didn't do anything -- there was no fraudulent activity, but because of the stress. so, the employees had that list of thoughts and pressures with no job security, no idea whether the company was going to exist. remember that there were senior politicians who repeatedly told the press that freddie mac should be abolish ed. in the white paper the treasury put out they said many, many, many times that the company should be wound down.

and those were friends of the g. alley efpl g.s.e.'s. imagine the morale of the people. because of that, i tried to spend as much time as i could being visible and talking to them and trying to come up with hope for the future, which was around this notion of us getting ready for relaunching the company in some form. the good news is the people hung in there and they continued to work hard and the company is functioning quite well. >> i'm josh. i'm a student here. i want to ask you for your reaction to the perspective of the book fault lines when he

talks about need for cycle-proof regulation when he observes we come up with great ideas like you articulated and outlined very well. we come up with them at this time but in better times they get dismembered and political pressure is applied to them under what he calls credit populism so he says we need to figure out ways to build regulation that somehow that won't happen, we are immune to those pressures. any thoughts on how we can do that? >> this is a great thought and i will be only partially facetious when i say one of the best ways i know to prevent the problem you are talking about is to make sure that there are people around who have lived through many, many cycles and have seen

the movie before. i know that is true in the investment business where i spent most of my time, that the enthusiasm builds and builds and builds and people become more more aggressive as things go up and up and up. and they inevitably reverse themselves and it seems like a new generation needs to go through that before they believe it. so, i think experience and peop people, having people on staff, regulatory authorities or companies, who have gone through few cycles is one great thing to have there. then i think that trying to insulate regulators from the

political process is really an important thing to do. and we certainly didn't get that right at the g.s.e.'s. if you haven't read reckless endangerment you really should because you can see how there was an attempt made to take the teeth out of the regulator because if three got too aggressive, you could just call people on the hill and they would intervene. those are two thoughts i have on how you might accomplish that goal. >> we've got to end at 7:00 so i will take one last question. >> scott leyland, staff member for the center for business and government here. thank you very much for your talk. the question on the campaign, you said there's a proposal from the treasury in terms of what to do next with the g.s.e.'s and an obama administration would follow something along those lines after dealing with the fiscal

question. tax reform and all the other issues. what about a romney administration? what sorts of promises, if any, have been articulated? >> scott, let me make it clear say there had ot been a proposal by the administration. they produced a long awaited white paper in january of 2011, which laid out three options. those options were a private solution, a government solution, or a hybrid solution. i'm not being very facetious here in saying that. so, we haven't will a proposal from either side. a proposal from either side. a proposal from either sidfrom either side. a proposal from either side.h a proposal from a a proposal from either side.d a proposal from either side. i would expect that a democratic would see some of the good things that the provided.ave

three go back to my opening charts about how the mortgage market has changed because of that, and would want to keep something like them around. and i think that the republican administrati administration, if it came in, would want to go more to a free market kind of solution without any g.s.e.'s. i would hope that the suggestion i made and the mortgage bankers association made and jim milstein made, would be seen as something that both sides could live with in that it is largely a private capital solution, there isn't a freddie mac or fannie mae or hybrid. in is a -- there are five private companies competing who have the ability to pay a premium in order to get a government guarantee of their und underlying securities. i would hope that would seem enough of a free market solution that the republicans would be ok with it and enough of a

protection of the housing market that the democratic folks might find it acceptable. thank you. [captioning performed by national captioning institute] [captioning performed by national captioning institute] >> through election day we will have come of candidates and key debat debates. up next "washington journal" live with your calls, tweets and e-mails. followed by a look at poverty and role of government in america. in 45 minutes well talk about are conducted and analyzed with scott keeter of the pew research center and we lo