this morning. -- effects of those talks the subject on those talks is expected to be on syria during the president touched down his e spoke with students, calling on the audience to take on responsibilities for the country's future. president obama also meeting today with british prime minister david cameron and russian leader vladimir putin. the summit wrapped up tomorrow with the president returning to the white house on wednesday. both house and senate are in session today. the house gavels in at noon eastern. legislation spotlight will be on two bills this week, one sponsored by republican senator trent franks, would ban abortions after 20 weeks. lawmakers also pick up the farm bill. the senate will gavel and at 2:00 eastern today. lawmakers will consider a pair of judicial nominations.

after that, senators return to work on the immigration bill. majority leader harry reid says he plans to finish the immigration bill by the july 4 recess. coming up in 10 minutes, we plan to take you live to the bipartisan policy center where forum lookingng a at ways to design a new system of housing finance. we will speak to the gym locker the federal finance agency. until then, a round table look at the week ahead in congress from this morning's "washington journal." host: this morning we will kickoff the reporter roundtable with a discussion of the week ahead on washington hill. we're joined by the federal fin. rebecca sinderbrand from "politico" ian swanson of "of the hill," over here on capitol hill.

we will be taking your comments for the next hour, but let's immigration reform. where is the senate after a full week of debate on this? guest of the immigration bill is going to go to a bunch of amendments and pass out of the senate before the july 4 recess. we are expecting a really busy week on capitol hill. republicans and democrats trying to come to different agreements on the bill. you cannot say that it will be a complete certainty, putting pressure on the house once it goes to a lower share. host: here is a story talking

about how big this bill is from "the washington times." not the biggest in recent years, but the immigration legislation can be challenging. dominating actions on capitol hill, one group, coming to about 24 pounds. you say that harry reid wants to get this done by july 4. is this still on track to happen by then? guest: probably it is right now. interesting an story in the news today. the congressional budget office could be telling us a lot about whether this bill will pass. that was a very important number.

the host: any estimates on what the number might be? guest: we will see the first estimates today, but there is a lot on this bill around border security. those things tend to be very expensive. there are also things the people want to add to the cost of the bill. that is something to watch in the house, it could get much more expensive. host: the deputy white house editor over there at "politico," what have you been discussing as this bill hits the floor? guest: for much of this process the president remained silent, coming out a couple of days ago, unusual and unexpected by several advocates. we have a story today about the move that the straight level for and now you are seeing and room of lincoln's

taking it as a political winner. wastor nunn and as it talking about this issue up in new jersey over the weekend. but we cannot support and of what i believe in terms of border security and the impediment to the pathway to legalization. host colburn ian swanson, -- host: ian swanson, talked-about the gang of eight.

guest: what was interesting about what they said yesterday was they were about to mention the politics of this, which are starting to heat up. some of the democrats were almost warning republicans that you have to get behind this or you will pay for it in 2014 and 2016. let's not forget that the immigration bill has momentum right now. barack obama 170% of the hispanic vote he pretty much worn his party did you have got to get behind this. host: here is a bit of lindsey gramm on "meet the press," yesterday -- [video clip] >> it positive note, a political breakthrough passing

reform with enough votes. i have never been more optimistic about it. host: we are doing our reporter roundtable this morning. alliance are open if you want to talk about immigration or any of the other issues we are talking about today. for republicans, 202-585-3881. for democrats, 202-585-3880. for independents, 202-585-3882. before we leave the issue on immigration, talk a little bit about lindsay grams relationship with the white house on this immigration issue? guest: you have seen the white house really take the lead on this, one of the reasons for that is of course a lot of democrats saying -- look, if immigration, talk a little bit the president is out in front it can only stall the issue.

one of the interesting things that is a political calculation is the effect in 2014, where the elections are likely to look very different. upcoming elections are looking to look more conservative, traditional, more white. it may not show the same affect being predicted. the question is -- how much of an impact will that have? blog the hill for action had at a senate reform citing, one of those amendments is a same-sex couples amendment being sponsored by hatcher leahy. can you talk a bit about this

amendment? guest of this is an amendment that he wanted to offer to the judiciary committee when they first considered the bill, in part because of pressure from republicans and democrats who said that if you add this bill -- at this amendment, you will kill the immigration bill and it will not get through congress. he offered to add it on the floor. on the floor it will be much tougher to get it into the bill, as you will need 60 votes. in committee it was just majority. it was a big deal for him to back off and not offer it in committee, and it is unlikely, you can pretty much guarantee that it will not. host: talk a bit about the gay marriage same-sex couple benefits going on as this

amendment is being offered on the immigration bill, could we hear from the supreme court on this issue? guest of that is right, the term is coming to a close and we have several days of decisions coming. -- guest: that is right, the term is coming to a close and we coming. we have the defense of marriage act and also prop 8. whereve a situation whether of not this -- whether or not this issue is included, it may possibly be somewhat moved by the end of the month. obama has a lot of the regulations in limbo, when it comes to federal workers and the department of defense. so, you have a situation right

now where same-sex marriage ban the immigration bill may not be as much of a factor. host: the cases on the docket, we do not know what they will be announcing? guest: we do not. "st: this is from today's baltimore -- "of the baltimore sun." -- "the baltimore sun." " baltimore -- "of the baltimore sun." host: the other big issue is about married gay couples and the defense of marriage act being unconstitutional. ian swanson, talk about how capitol hill is preparing for the possible rulings. host: -- guest: i think they are waiting on their hands.

same-sex marriage has been pretty dramatic, especially for the democratic party. there are only a couple of republicans in favor of gay marriage, but nearly all of the democratic senators have felt the tidal wave of change in public opinion. i do not think that we are going to see as many of the culture battles over same-sex marriage coming out to the degree we had seen before. it was not seen as much as a local winner, though it will be seen within the republican party, particularly with primary challenges among members. host: we are talking with ian swanson and rebecca sinderbrand. we are taking your calls and comments on these many discussions that we will be

discussing for the next 45 minutes or so. nancy is first, metal bridge, republican line. caller: good morning. host: your comment or question? caller: i just wanted to comment on the immigration bill. ofave heard a lot republicans saying that it is important to pass, but from my friends and relatives we feel like it is being rushed through and we do not like the idea of amnesty and are very suspicious of the bill. talk ian swanson, can you about who the key republicans are who are supporting this and who are opposed? guest: a lot of republicans feel the way the caller does and you have seen that reflected on capitol hill. certainly some senators have talked about the idea that this is being rushed through. jeff sessions and chuck

have been working hard to change it. >> you can see the rest of this discussion at c-span.org. we go to a forum to look at the future of housing finance as the associated press reports this morning that a builder sentiment is at the highest in seven years. coming up, officials from previous administrations. later this morning, and gym -- jim lockhart, who oversees fannie mae and freddie mac. cannot keep a job.

sarah is the president of the urban institute and has been for the last 18 months. prior to that she helped to found the center for american cannot keep a job. progress and has also been very involved in housing in washington for many years, having served in the clinton administration on the council for economic advisers and at hud, where i think she and nick may have worked together over the years. sarah is a lawyer by training by experience. thank you for joining us. we just heard a stimulating address and i suspect both of you have thoughts about it. we will go in alphabetical order. mark, would you like to comment? >> i think there is certainly a fair amount of agreement at the current system is not only unsustainable but unacceptable. we are admitting a lot of risks in the system and ultimately we

will pay a big price, particularly, when interest rates go up. important it is also of thegnize, my back envelope and that is about a fifth of the market is not there. we do not want to come back, but half of what is not there we do want to come back. do with the interest-rate environment, actually. i know this sounds counter fed focusesut the on demand and credit. under no circumstances with the current political risk and interest-rate environment would i put a dollar a my own money into the mortgage market. the returns are not there. so, again, we have to get through those issues. fed focuses

maybe i will be the only one to lou's point about the attorney general's. anytime there is something in the paper about eminent domain, there is one more reason for an investor not to put money in the market. so what are the reasons the government dominates the market? nobody else is willing to make those loans at that price with that amount of risk, which again, we do not by making things cheaper, but by what washington usually does, by hiding the cost, rather than eliminating. >> sarah? illuminating it. >> if you look at the amount of capital available for the parts of the market whose structure is well understood and where there is confidence it will be there in the future -- thinking of the private mortgage insurance market --applaud there is a tonf capital available. the real question is what are

the structures into which. i hate to use this because members of congress got into trouble over it, but [inaudible] >> how about this? make one other comment which i thought were fantastic, and the one place i would take issue is the that it is desired or would retain the budget of the gse's, the barrier to us getting to a policy solution.

my gut tells me that that is someps -- creates collective inertia, but that is not the primary factor. my sense is we have two necessary preconditions to get to clarity about the future. the first of which is the one that i think lou did talk about, that we need confidence that there is a private rmbs market that can take up this part of the market that the government is now serving, and unable to rely they can function effectively. i do think at a cafe is doing could to bring capital back in and offered instructions to create some models of what that plumbing might look like to give us a chance to see. when people get confidence in what those structures will be, my gut is capital will flow into the more readily and there will be more private capital ahead of

the taxpayer, and the second thing, that will help to show us the path over to the ultimate legislative solution. i do think that what needs to happen next -- there is a lot of activity on the hill, really for the first time. in the next few months you will see a lot more with people talking about bills and hearings and the like. and i'm not feeling that we are quite at the moment where we're ready to legislate the final bill in this congress. i want to be wrong about that, but my gut is not. i do think what we are starting to see is a direction being set rather than having three hugely theoretical and widely different options. it is mentioned as possible solutions, the conversation is emerging around a couple of consensus options. as that happens, the regulatory infrastructure begins to implement pieces of the plumbing towards that. as that plumbing is put in

place, it is a lot easier for is thes to make what act tori then -- de facto rather than to write on the board. i hope we can figure out a way in which the budget does not get in the way, for economic value does that get in the way. if we are smart about how we design it, maybe there is even a way to design the budget to accelerate that path forward. >> following up on the budget point, i do not think we will put up gse reform because they are giving us money. mike, about doing it at this time time, when you put them in receivership, line them down,

you can continue to sweep profit during that time. my point is it does not mean that you invoke receivership tomorrow. those two things are not inconsistent. billi worry about, from my experience, my worry about not seeing reform -- you do not have to. the current system is sustainable in a very bad way. you could go through the list of programs of the government that have been around for decades that we know we need to do something about. we need to do something about entitlements and i do not see that being fixed any time soon. the fact of congress does not have to do anything soon leads me to believe they will not. i think you need to get out there and move the ball, but ultimately, it will be a tough road. to me, the solution has to be fannie and take freddie into receivership for a five-year window.

you have to light a fire under congress to have something happen. >> it is a form of sequester, is that it? >> in some ways, there are steps, perhaps a shy of mark's drama, that will move was down this path. if you think about what fannie and performdo, three different functions of the mortgage market. the issue securities, they provide a platform effectively which the trade, and they are credit insurers. those three functions, i think, are gradually being the segregated. the hardest piece to disaggregate is the issue into the security -- and with the credit insurance. that may take some legislative doing. i think the regulatory process going through is moving us down that path. if we get to securitization platform, a single one, where

there is no obvious reason to have multiple entities. then on the other two functions, there probably are reasons to have both the diversity of issuers, so that a wide variety of institutions can get access, and i would argue, some competition in the credit that it? enhancement, perhaps more than two, if not a complete free-for- all. there are efficiencies of scale. i could see a path in which those functions are disaggregated. when you do that, the regulator can move us toward that before that legislative grand bargain moment. currentsuggests the .ituation is sustainable, badly do you agree? >> there is a form of the current situation that is sustainable. in my view, it is not the right solution. if you could imagine fannie and freddie, first, there platform being combined. they are in nationalize credit enhancer.

whether they are operated by two different staffs or not, that is what they are doing, and they are issuing securities. you could leave them in place doing that. you could even leave them in place where part of their risk is tied to the private sector. we will pay a higher cost of capital for it but we have not taken the taxpayer out of the equation without an explicit price paid for its risk. i do not think that is going tht way to go but it is possible to do it if this period is one in which we all get comfortable. if we use this period instead -- and i think this is where the treasury secretary, i am hopeful, will eventually deported a path on how we can move to disaggregate these functions and bring private capital and have the government. and if we can use the regulatory process to start to disaggregate those functions and put the plumbing in place, over time,

you do not end up with a single government insurer as the status quo. you have the building blocks of a new system. thearc, you talk about fhfa being the potential catalyst for a resolution. sarah mentions the treasury secretary. you spend a lot of time on the hill. what else needs to happen? the want to emphasize, treasury secretary, fhfa director are the only two who canssentially unilaterally push change on this. congress has both houses, you have both parties. soause the differences are broad in congress -- the house and senate are far apart. of course, you have to get to

congress -- conference and hopefully things are a lion out there. i have some optimism in that the conversation that you see are a necessary but not sufficient condition to get reform. the fact that they are going on is very important. i do think the treasury secretary needs to prioritize. the point that for the treasury secretary to say that the money market is a higher priority than fannie and freddie is baffling. couldot see how you prioritize it that way. i can understand how he wants to prioritize and thomas reform. i would under it stand budget issues, but they need to tackle this in a way that says we need something done now. but that does not happen, there is no pressure on congress. one of the reasons i am in favor of receivership is it allows you to do some of the things that demarco wanted to

do. you can combine the companies, you can do a bridge bank. fhfa has so much more flexibility and is not a liquidation scenario. that is my prediction for the next couple of years. around, hearket is moves us around the idea of a single platform, but there is also a 90% chance that the next president inherits fannie and freddie conservatorship. >> this question about it is it capitol hill or the executive branch that will solve this problem is, in some ways, a false dichotomy. there will be a conversation. i am with you in believing the legislative signing moment with 27 members of congress standing behind the president is not imminent. but i actually think the conversation between the two ends of pennsylvania avenue will move the conversation

forward and we will see a narrowing of options and more and more consensus. we will have deeply held views about what are relatively small design issues and there will be big fights about small design issues, but the big design framework is really starting to narrow. as you see both the executive branch and capitol hill started to talk about structures that have a lot in common. could drop a bill soon, and that could spur a competition with a number of other members dropping pieces of legislation that will have variants in it. the house will start from a different place but there will be some pieces in common, too. that sets a framework, if the executive branch can say, this is the direction we think the regulatory structure should go.

this is what we ought -- this is what we think he ought to be doing. this will help them put out a sense of direction. that starts to move the conversation forward and then people can start to work on the details of implementation within that structure, even if we do not have a bill signed. >> an amazing amount of agreement up here. >> if you worked at it, you could find some places we differ. >> let's open up to questions. yes, sir. good morning. i take the comments earlier about the regulatory regime, uncertainty contributing to a lack of interest in the private capital markets, coming back into the space, not with pending the move to the vmi

sector, there is a call for private position. has anyone given consideration to size available in the marketplace to fill the gap? and then one comment. taking your point about the private sector, moving into the receivership context, heightened uncertainty, would lead to greater uncertainty and appetite in the capital markets. youf you do not mind, could identify yourself? >> kevin shaffer. former ginnie mae president. not want to do the math, but i have partnered with others, and we will be putting out a paper on this broad topic, but we are

beginning to look at the size -- there is not a lot of detail -- but we have started to think about it. we are more confident that capital will be available. obviously, different situations in terms of what credit to investors will be, who will take that first credit risk. that is an important question. to us, if theible right regulatory structure was in place. >> to start from a broader picture -- and i will put myself out there as the controversial position saying -- i am pro home ownership, just not high leverage. the explicit objective of mine would be that we do not have an $11 trillion mortgage market, but may be closer to $7 trillion. that would imply lower home prices, which is a good thing. homes are a basic necessity of life and i would like to see

them be cheaper. starting from that number, to me, looking at who founded the gse's -- there is a tremendous amount of capital out there. the banks have a trillion and a half on their balance sheets. it is also important to keep in mind, the securitization market was often sold as connecting retail investors. to me, it never was. the vast majority were held by other parts of the financial system. whether it was pension funds, insurance companies, banks. all these other institutions, if you could put a dollar into fannie, freddie, rmbs, there is no reason you could not do so with private securities. the thing is, capital measures drive this disconnect. i have described the mortgage finance system as a house of cards. it would be nice to do reform

holistic plea. it would be nice to reform capital standards across the system at the same time. it would be nice to think about -- for instance, would mutual- fund as the result -- question in terms of credit risk in the sector. i want to say, the idea that couldount of capital shrink over time slot the terrifies me because we need to remember the point that lou made. the population will be growing to over 400 million over the next five years. when you add to that the changing composition of the population to being families that will have -- the number of people that are two unmarried adults living in a household with children is now down to 22%

of households with the aging baby boomers and the growing millennial. the market will have different needs for housing. perhaps some could be ownership, but it mummied -- it will need to be in location that are different. my colleagues have done studies to show where you have the people releasing their homes into the market and where you have people interested in consuming homes, in some parts of the country there is excess demand, but in other places you have a lot of supply that will be released from older americans without demand for that stock. in fact, it is not even that we have enough stock, we do not have enough stock in places of prayer the demand is, and population in those areas will grow. we will need capital to finance more housing over the years, but it may be for people who have less income than parts of the population in the past, and in

particular lower wealth. we will have to do a lot of work to figure out how to create rental and home ownership housing and works for those people, and we will need capital in that system. we cannot rely under the -- on the depositories under basel to do it. nameed keane. name is ed keane. i take it from your comments that you are not expecting the president's nomination of melvin watt to be confirmed? >> i do not think there are 60 votes there. i will leave it at that. maybe there are 55. >> next question?

>> robert england. mortgage banking magazine. what role will reducing the conforming loan limits play, and can that start now, is that something that ed demarco could do? given that congress has to reduce it, what would you like to see? the loand get rid of limit and have an income system. if you look and how rural housing works, it is targeted towards income, not house press. if the objective is to provide a subsidy to middle america, then we should define middle america. even middle not america d.c. in income system, like we do with other housing programs.

the firstd i agree on half of the answer. one of the first ways to get private capital in ought to be to attract them into the jumbo loan market. it is time for loan limits to come down now. in theory, i would agree with you on using income-based, but there are enormous practical difficulties because it is the hardest part of the mortgage package to verify and it is where we have seen from most likely, so we are inviting new problems into the system. and the fact is, home about you is a pretty good proxy for income. homes have auy 729 different situation than those who buy $150,000 homes. next question? canfield, consumer

markets coalition. transparency will have a huge impact on most major industry sectors in the united states and maybe across the world. do you have any observations on how big data and transparency will impact the funding of mortgages in the future? >> first of all, generally speaking, transparency is a good .hing, -- two things big data and analytics, and the capacity for people to understand much more about the dynamics in the mortgage market. that is the kind of analysis that has come in the past, been available to investors, to the extent they could pay for abrogation of data and information. i hope it is more available to policymakers and the broader public. that is one of the reasons that we hired a couple of people to

do analytics. having said that, there is a concern with transparency, because the also want to deepen liquid, tradable markets. to the extent we have too much transparency about the underlying loans and every security, it will be harder to make those fungible assets that will create and trade. i do not know how policy makers should resolve that. i think you want to get as much transparency as you can to protect liquidity and there may be different places for transparency in the process, but this is a really tough issue for us to think about, going forward. i let me say for starters, have long been surprised at the awareness of the american public of how much data is collected. i worry about the direction of dodd-frank.

one of the reason why i have generally been more sympathetic to going back to something of a more depository, are written in an old model, keeping in mind the problems that led to the s&l crisis, we lost a lot of soft information. lenders use to talk about character when they made a loan. a file anye that in more. having a local knowledge of, is this person's employer likely to shut down -- in my opinion, all that has been lost in the securitization process. you get your model parameters wrong last time, and now you have an update to -- you have a chance to update it, but a lot of that is lost. i would rather go back to a world where we do not rely 100% on hardeman merkel numbers -- i

say this as an economist -- because a lot is missing in that equation when you do that. provided one more question that it is an easy one. [laughter] >> ed pinto, aei. mark, i agree with you on home pro-ship, but not as leverage. i hear this push about 620 fico's, 3% down payment. freddie mac and fannie mae just released their data going back to 1999 that showed fully documented 30-year fixed-rate loans performed horribly when you have those attributes. what is your reaction to what you're hearing? >> unfortunately, we will be back in a crisis -- a process where the census of housing comes up and everyone needs to

get into the market again. when somebody comes into the door with a 620 or 580, the question should provided that it is an easy one. be how can we fix your credit, not how do we get you into a loan? credit repair should be the first question. that becomes very difficult to do when people think that housing prices will go up by double-digit rates and the need to get in now. i think it is important to tell home owners -- and it is interesting. you look at hud a couple of years ago, they did a report on housing counselors. the vast majority of housing counselors simply set up classes where realtors and mortgage brokers could speak to home owners. that is a system to create loans. that is not a system that says, let's look at your credit and get you in better shape. that is the system that we should be getting too, in my opinion. >> on the first part, i think we

agree, borrowers who are credit- impaired need to have viable high-quality options. i think there are some high- quality options for improving their credit. but i think we have lost the concept known as the compensating factor in the underwriting process. you talk about character not being a part of the underwriting process. --re is a rigidity -- a box and one multiple maps, of the consequences is there are three variables, they are fixed, down payment. ability to offset one of those with higher reserves, there is no ability to develop new products that might test alternative ways for borrowers to get there. we know parts of the population that are growing, will have families, who will be looking for homes in high-quality

neighborhoods with access for schools so they can create opportunities for their families, that part of the population may need other ways to get their credit in shape. we need to be able to do that, not in the way that we did wheree with layering risk, we allowed no documentation or fake documentation. none of that. all that has to be gone. considered, compensating factors could return to the underwriting process. when people talk about not wanting to see a 50 dti or 580 credit score, my question is, what else does the loan package have been it, and only then can we decide if we want to make that loan. >> please join me in thanking for coming today. thank you.

>> good morning, everyone. i am a member of the bipartisan policy commission. we are joined this morning by jim lockhart, the vice chairman of w. l. roth and company. we will follow a different format. rather than jim standing at the podium giving remarks, i will ask him a series of questions to better understand the context. thank you for joining us this morning. jim is on his way to europe in a couple of hours, so we are grateful for him being here. this is an event about moving forward, but i cannot sit here with you and not look back. it has been almost five years, september 2008, that you place the enterprises into conservatorship. what were you thinking at the time? [laughter] what was going through your mind when you did that? >> i was thinking we had a real

mess on our hands. we did not think five years later it would still be in conservatorship. but, then again, we did not think women would happen the next weekend, that europe was about ready to blow up. we did not know there was a housing bubble in europe. there was a lot of uncertainty out there. everybody woke up on a monday morning after we put them into conservatorship and thought that everything would be ok. the stock market went up. but, obviously, the problems of fannie and freddie and the housing market were deeper than we thought and may put them into conservatorship. certainly, some of their worldwide financial problems were deeper. notas something that we did really foresee. i have handed down a couple of charts here. if you look at them, everybody has talked about what happened in the market share of fannie and freddie.

not surprisingly, it spiked up in 2008 and 2009. they were the only game in town. surprisingly, five years later they are still 86% in single family. we do not talk much about multi family but it is an important market, especially for the lower income people. their market share is 72%. effectively, i never thought that would be there now. if you look at the next two pie charts, again, -- single-family market has shrunk since the crisis really started, started to see signs of the crisis in early 2007, yet, fannie and freddie have grown 40% in the period. their market share has gone from 41% to 59%. on healthy and unsustainable. the multifamily space has increased somewhat.

they have grown almost 90% over the period. fannie and freddie have grown 71% in the multifamily space, up from 30% to 43%. no, we did not expect that. certainly, we are all thankful and respect for public service, alongside secretary paulson and chairman bernanke making difficult times -- typical decisions in times of high stress. through this notion of conservatorship as a notion of being temporary. you did not know what temporary might be, but are you surprised that it has been five years temporary? >> very much surprised. as you know, we kept the boards in place. one of the reasons is we did think it was going to be temporary and they would come out of it in some form or another. certainly, the legislation with

treasury was to force congress to do something by continuing to shrink their portfolios and raising their dividend rates. we were really hopeful -- congress should act -- but that was pretty naive. in theon legislation bush administration to fix it. i do not know how many times the legislation passed, but none of it fixed it. naive toobably pretty think that something would happen. >> why is it taking so long? why is it stuck in the quagmire of conservatorship at the moment? >> part of it is the fragility of the housing market and economy. when the fed is by massive amounts of mortgage-backed security, it is probably not the

time to turn it over to the private-sector. we reached the point now where i think it is -- and i am pleased that congress and the senate is working on a bill. i think it is time to start the dialogue. it may take yourwhen the two, bs time to start thinking about what the future should be. >> what are the preconditions, what would need to be agreed to as a step out of the way to conservatorship? what is the context that would get us to the promised land of a future? there are a whole series of principles that have to be discussed. we are investors in banks outside of the u.s., so we're used to seeing banks owning mortgages. in this country, we need to get some of the banks back in. they are starting to buy the mortgages in this country but 30-yearl not be doing fixed rate mortgages. to 15 now.ing up when the private capital to come in. banks, investor that will take

credit risk. think a big decision -- probably the biggest decision will be some government support for some part of the residential mortgage market beyond at h.j.. in my view, there probably will least for thea be, at foreseeable future. -- beyond fha. i would like to see it go back to 30%, pre crisis. premiums go up when we see housing prices go up, and also, the government's market share falls when hausen prices go up. i am afraid we will create a system where we do not do that and we continued to have the pro-cyclicality of our present system. >> can you have that in circumstances where conservatorship may last for a long time? does it inevitably have least fe foreseeable future. to end? can you imagine a circumstance where, as far as the eye can

see, there will be conservatorship? >> it is possible. i certainly would not recommend it. slowly but surely we will build a consensus that we need to do something different. it is extremely unhealthy to government market share as high as it is. we are a capitalist country, but you look at the european countries, and none of them have a market share even close to that. hard decisions will have to be made. mortgage rates will have to go up. that will be tough. we have to make the kinds of decisions government market she lou was talking about. can lower income people, can we get back to the 69% market share? probably not.

there are a lot of tough decisions that have to be made. >> do you think we are right to have those conversations? >> i am pleased that they are starting in the senate. the house is a different environment. i think it is very pleasing that senator corker and senator warner and others are starting to write bills that make sense. >>there are a lot what counsel e them? would keep working on it. the other thing we need to figure out is how to get the house involved. i would encourage them to work with the house as well. knowing thesible, ideological differences in the house and senate on these issues, can you imagine a bridge being built? wishful thinking? >> having spent as much time as i have in washington, i should not be a victim of wishful thinking, but i am somewhat of an optimist. [laughter] how far can we get during by theatorship conservative -- not asking you to second-guess, because none of

us can do that. what kind of priorities might take and server give that would accelerate this notion of getting out of conservatorship? ed is doingithlou, a great job. tougher since i left, i can tell you that. long.e it has lasted so my view is you are taking the right steps. the single platform makes sense. that i would go with mark on the receivership. it is a decision that we looked at almost five years ago in august. secretary paulson was pushing for that i would go receivershi. was less than 40 days old, so nobody knew what receivership was. we knew that people were concerned about the mortgage market and the u.s. economy at that point. we were afraid receivership would kill the marketplace, so

conservatorship was the right decision in my mind. starte need to do is doing some of the experimentation. i talk about the multifamily market. there is a risk sharing in that market and it works well. they came through this crisis with hardly a hiccup. even withre examples, fannie and freddie, of what works. ed will be able to do things on the single family side as well. doing a case study as freddie has on multifamily, lower people taking the first risk. building up mortgage insurers is a good sign that things are coming back. i would even think, maybe freddie and fannie -- which they had in the past at one point -- issue rmbs without insurance and

see what that price is. why not? it might cost them a little money. they have some money to spare at this point. isjim, your current position at investment prospects, looking -- working with banks across the globe literally. if i could get some free counsel from you now, if i was a large mortgage lender in the u.s., how would you counsel me to read gauge our position myself best for housing finance in the future? at investment prospects, >> everybody has to continue to work with at h a and fannie and freddie. that is the mortgage market right now. -- fha and fannie and freddie. banks are starting to look at the floating rate mortgages, adjustable-rate mortgages, less than 15 years, they are starting to come in. they do not have many other places to put their assets. they certainly have a tighter

credit box, but i agree with the point, they also know their market better than the securitization do. facility.ide-type i think that is important. we have to think about the future of the 30-year fixed-rate mortgage. i think it is a viable option for many people but>> it is not priced properly, at this point. as regulator and then conservative of the aterprises, fha was in different room. i am curious about your sense of, can you truly reform the enterprises without taking on the issues of fha? issues oreparate should they be linked? >> i think you have to reform

the housing finance market in this country, therefore, you cannot totally separate them. congress is starting to look at fha and some of the issues there. some excesses' in that market as well, certainly, allowing down payments to be paid -- not by the people -- that was a big mistake. that has been corrected. i think we need to look at the interaction of what do we want fha to do in the future, and what we want the successors to fannie and freddie to do in the future, and the private sector? all three need to be looked at the same time. >> before we open up to questions, i want to ask you one last question, an unfair question. i do not know the only right answer but i'm hoping to trick you. what are the odds that five years from now we will be talking about the same issue? we will be talking about

housing and mortgages five years from now. i give the odds certainly over 50% at this point. >> let's open it for questions. back there, sir. jim, you mention you made the decision to put fannie and freddie into conservatorship -- >> and you do by yourself? >> fbr capital markets. you talk about putting it in conservatorship set up and dashed receivership. there has been a lot of attention given to the remaining nongovernment security holders and fannie and freddie, the preferred and the common. i was wondering if you could make comments as to what you tell those investors in terms of what economic value might ever be given to them. >> i can tell you, we are not buying their stocks and their preferred.

[laughter] there is this giant preferred that the government is sitting there on top of everything. that is not being paid back. and there is no way it is going to be paid back. it is hard for me to see much value. fannie and freddie's stock was listed on the new york stock exchange for good reason. delisted. and with all the government preferred not being paid off sitting above it, it seems there is not much economic value there, even if they don't did it in receivership. if they did there would be absolutely no value there. >> do you regret allowing those shareholders to fill exist? because one of the concerns right now is because of the run- up in some of those securities, you now have a new constituency with a very big economic incentive to influence this date that you would not have

necessarily had, especially with the changes to the pcpa which treasury tried to prevent having that economic value influencing the debate. >> no, i don't regret not to wiping them out. i am not sure that hedge funds will get a sympathetic audience on the hill. but maybe they will. >> keith bickle, bank of america. from your current seat, given the amount of money that is flowing into actual real estate assets, given the amount flowing into new corporate formation, especially server servers and the like, do you actually see the capital still there at higher capital holding ratio was for whatever emerges in the new system, both private and particularly government? over time capital

will come back. there's a lot of capital sloshing through the system looking for returns at this point. we looked at investing in each one of the mortgage insurers, and for a variety of reasons, we didn't. we certainly look better. part of the reason was without returns would not come quick enough because you have to have a long period before you were writing enough business. that would be the problem in some parts of the mortgage market, is how do you get the earnings early enough to make up the capital you have to raise to support a guaranteed system. >> what are the implications for transition? >> one of the implications is you will have to keep some government insurance in there for a while. and maybe long-term before the private sector can come back in a big, giant way. but over time i think there will be credit investors in mortgage-

backed securities. there already are in the jumbo market. that continues to grow as we see new issuers all the time in that market. we lowered conforming loan limit and raised the -- fees. more investors coming back into the rmbs market. asking the same question i asked lou. do you have a, securitization platform -- do you need to gse's and what is the phaseout if you do need only one? >> there are a variety of different models. you probably need more than two issuers, actually. and fannie and freddie just evolve into issuers instead of guarantors, that could be a future. my view is probably there should be an explicit catastrophic government guaranty agency, and that should only be one.

,ut there can be many issuers and the common platform makes some sense. but a lot of skill that fannie and freddie, a lot of knowledge base that i hope we don't just totally wiped out. that would make absolutely no sense. one of the comments i hear sometimes -- i am sorry, i didn't see your question. i am sorry. >> jenna hewitt from mortgage banking magazine. fhfa has brought several suits mbsnstciti and other issuers over sales of securities. and there has been a lot of repurchase, push back against lenders and even lou was saying and the border room, it is tightening the box beyond what fannie and freddie are saying is their underwriting criteria. would you be doing something

differently along those lines, or how do you evaluate that policy? >> first of all, i think one of the problems with the policy is it wasn't enforced when it should have been. in 2006 and in 2007, fannie in particular, but also freddy. i remember lots of conversations with fannie on the topic of putting bad mortgages to countrywide. although -- already they were showing up through bad mortgages, and it should've been enforced then and maybe we would not have as much problem as we have now. the policy makes sense. i can't get into the details. i am probably going to be suits, so ihe prefer not to state an opinion at this point. certainly put backs make sense for bad mortgages, no doubt. certainly the pendulum may have swung a little too much to one side versus the other. that often happens. certainlyw is that

in many cases there was bad underwriting and it wasn't disclosed way it should have been. >> weingartner from keith were bruyette and -- was. liquidity -- one of the gst's that allows in the shuffle are federal home loan mortgage. . you became regulator of federal home loan mortgage when fhfa was created. any idea what the roles should be going forward? would you like to see changes with the home loan banks? >> home loan banks did really great work in the crisis. to a trillionp dollars of that was critical and they played a important role. obviously they bought a lot of the aaa mortgage backed securities, and that was a big problem for some of them, and

they are sorting their way through that. whether there needs to be as many banks as there are, good question. we often hear as another source of capital for the mortgage market in the u.s., the covered bond market, which is something that works very well in europe where not only the owner of the security has a more just security but also the credit risk of the bank behind it. in many ways, the federal home loan mortgage provided the the u.s.ond market in very successfully. they have a role to play and i think they have a future role to play. the question is really keeping them focused on their mission and not allowing them to balloon their balance sheets like they did with the mortgage backed securities. >> other questions? right here. >> i want to follow up on that

question with a question about the home loan banks. much of the talk about whatever we do with fannie and freddie in the future implies that we shouldn't have an unpaid for implicit guarantee anymore. if that principle makes sense in the world of fannie and freddie, talk a little bit more about the federal home loan mortgage and what will be the logical consequences of that principle there been? >> that's a good question. [laughter] i haven't thought a lot about that. but again the mother should be paying for they guarantee one way or another and it should probably be risk-adjusted over time. they have an important role to play. they do support the banking system. the way they are protected, they never lost a penny on their advances. backing insurance companies now, and without the same kind of protection they have on the banking side. and that is an issue.

so, a lot of their advances are going to insurance companies. maybe they should pay more for those advances than they would for bank advances, an example. >> time for one last question, if there is one. let me ask you a question. there are some who suggest that housing recovery is still too fragile to do anything now. that we should sort of step aside and let the recovery go on. do you subscribe to that? >> if we do something that it was a 5-10 years to implement, so i have no problem starting now. [laughter] >> please join me in thanking jim lockhart for his participation. [applause] and please join me in thanking jim lockhart for his public service. >> thank you. [applause] panel to comeour forward -- our next panel.

let me introduce our panel. you have their brief bios in front of you. to the immediate left, kevin kelly, ceo of leon wiener and associates and vice chair or incoming chair of the national association for home builders. ceo fromens is the the mortgage bankers association of america and former federal housing commissioner. friend, fromar consumer federation of america and member of the bipartisan policy commission. i will lead a little bit of a follow-up discussion to jim's remark and get the panel involved and open it to all of you. kevin, if i may, let me start with you. beenwhole morning has about the unsustainability of the status quo and how terrible it is. what is not to like? the enterprises are paying lots of money to the treasury, the

housing recovery seems to be underway. what is wrong with the status quo? with a lot ofee the other speakers. it is unsustainable and undesirable. clearly it has had benefits for the housing market at the moment. certainly we would not want to see any radical decisions made at the moment that would inhibit or impact this nascent recovery of housing that is occurring in the housing market. we believe it is still very fragile. but again, as lou mentioned earlier and a number of the other speakers, the credit box is too tight. we survey our builders on a regular basis. one of the things that comes back to us can't really is the buyers are simply cannot be approved for a mortgage. and the credit box is too tight

for a number of reasons. but one of them, of course, is the concern lenders have with bback risk they take. we don't see it changing in the near term. we hear that it is lessening to a degree. but we see that as a significant impediment to a more robust housing recovery, and as a consequence, a more robust economic recovery for the country at large. we also think, quite frankly, there is some reforms taking place that is not necessarily subject to transparency. there has been a lot of discussion this morning about single-family side going to multifamily side. the of the things conservator has mandated for

2013 on a multifamily side, reduced that footprint by some 10%. and quite frankly, to my knowledge at least, that hasn't been a whole lot of explanation as to why that was necessary, how they decided on that, whether or not there was any coordination. as we know, fha is facing a challenge currently. it has indat that its mortgage credit authority will .e exhausted by early august as you know, the administration requested another $5 billion in authority from congress. these decisions, i think, lacks transparency. an undesirable thing, i think, in this environment. >> david, you are the ceo of one of the most potent housing trade

associations, mortgage bank you -- mortgage banking association. >> yes, i am. [laughter] >> but david, i step act and look at it -- hmm, mortgage spreads have widened. what is not to like? sounds good to me. making money. >> this is the core subject. i think all of us look around the room and we have sat on panels at various events like this talking about this future state. that is paint the picture. gse's have served a critical role in refinances america. the harp program would never have been able to work had it not been for freddie and fannie, because it created a streamlined crash -- process to do refinances. we are almost at the end and we are at the point as i look at the gse role going forward, something is to change. 75% of all freddie and fannie's

mortgage production was refinance. lte isverage non-harp 760and non-- harp fico is and fha is filling the void for all the demographics. 80% of african-american homebuyers, 78% of his panic on buyers are getting their product through a ginnie mae ruralm -- fha, va, or housing. where is that he and franny and where is their role in the purchase market? for me, we are entering into an environment as we exit the refinance market into a purchase system am entering an environment where ginnie mae is going to be an entry point and freddie and family, -- freddie and fannie, if we keep the concept today, becomes an alternative for those who do not have to pay the loan level price adjusters and big debt payments

and higher scores and greater net worth, and we will have kind of a separate housing finance system. that is -- that is one way why think we need to think about the future. a different business model that does not serve what the gse's have done so well the past couple of years. the second point i would make his freddie and fannie are two different companies today than where they were before conservatorship. the mortgage backed securities freddie produces today is far less liquid compared to fannie prior to going into conservatorship. some would say it can't survive in the future state without doing something to it. we no longer have two companies that really compete on an equal level. it was always an issue, but far more an issue today. , thee liquidity construct challenge is something that has to be fixed. so, for those two reasons, as we move into a contracting market, less liquid market, purchase dominated market, you got to ask yourself how do these two function in that kind of environment, or are we just going to have two institutions that only serve wealthier

borrowers and let ginnie mae service a win-win else. i do not know how we perpetuate that system. so we need -- >> it is hard to disagree with your analysis and prediction of the change a profile in mortgage lending. i think that is ready clear, especially in a rising interest- rate environment. . how does getting out of conservatorship of these enterprises or successors more able to participate in the market. that i don't quite understand. it is not so obvious to me. >> i see getting out of conservatorship as the ultimate and state of the steps that have to take place now. state.mate end we put out announcements the past several weeks of a series of steps that have to be -- that can be taken that do not require legislation. to having to make congress resolve a whiteboard -- dealing with security, you limit the

credit bought --box. they can show execution for small lenders and lenders of all size. these are steps we think can happen now. conservatorship being much easier to happen at the end. but if we keep them under the current construct where they stay under conservatorship we will perpetuate the current state and the current state in my view is very functional -- dysfunctional and does not serve the needs of the u.s. housing system in a purchase dominated marketplace going forward. so, we have to get there, and we have to start taking steps now to make it easier for policymakers to ultimately make that change. because if not, we will be here two years from now i'm in the same panel talk about what the future that the gst's will look like. >> do you share the perspective of what is possible and not inside and outside the server to ship? >> i do and i don't. there is no reason the companies in my view could not be broadening their credit box, being aggressive about pursuing purchase money opportunities.

and whole raft of things serving the public purposes for which they were originally chartered. i think the reason why we need to find resolution to the current situation is exactly because right now neither of the enterprises is fish nor fowl, they are crushed by the burden of the senior preferred debt, so they can't operate as private companies with any prospect of attracting new capital or paying return on capital that is already in the companies. the conservator is running the companies to conserve them and not with a mandate to advance homeownership in the united states, to create a safe and stable environment for housing. its mission is a little bit different. i think the key danger of more static situation here are several. one, we run the risk of losing sight of the whole point of the system. it is not an end to itself but a means to an end, and we have much less conversation and the public domain about the end to which these are the means to get to and more about the means of

themselves, which is a very limiting conversation i think. the more this goes on, before this conversation is simply going to be about structure and twiddling and not about why we do this in the first place and therefore what is the policy the government wants to pursue. i think the longer they stay in conservatorship, the more of a risk of lawsuits and challenges from investors becomes. whether you think they have merit or not does not really matter. the more they are hung up in lawsuits and court less effective in the scope of action they will have. and finally, it is important for the government to step back in congress and the administration and start from first principles. when the bipartisan policy center's commission start a work, we had to start by deciding the principle that guided our work and then find ways to make it actionable. and our recommendations on single and multifamily finance were designed to serve those purposes. it is not clear to me we have consensus within the conservator or within the

agencies or even congress and the administration about what the purposes should be. the longer we keep the status situation the more i think we will mine -- why but with a muddled policy, lack of initiative and clarity. finally, the lack of transparency is very troubling. --a are not as it raises questions simply about good governance and how many of the actions taken to molokai my support, but i'd might also not support, how we have access to a public conversation about how they develop developed the system going forward. the risk ofsay complacency, calcification of the current system, that i don't think will serve consumers well, i think is a high risk unless we are able to move forward. hypothetically a think your question is exactly the right question. things working fine, people getting mortgages, what's the problem? i think the underlying issues are what i just described. >> barry, on the commission,

thanks in large member to your participation and our colleague we didn't have a larger conversation the larger principles. but you think -- do you think we are really ready outside the doors of the commission to have a larger conversation? are you ready to face the difficult issues? >> i think of those conversations don't precede what i will call the architectural conversations, then i think we run the risk of creating a solution to the wrong side of problem's. chairmanhope that as handling those forward that we remain focused on what is the point of this whole exercise -- as chairman hensarling. the senate and the house have tried to hold hearings and the need for that has not diminished. i am heartened by what i think is a growing consensus that, a, the government does have a role to play in the mortgage system and to create the backstop and bring the interest rate invest third at creates a sense of certainty about the value of

these securities, but much beyond that i do not think we have too much consensus -- or what part of the population should be served and the relative role of a full faith and credit guarantee like we have through fha and ginnie mae and some pay for explicit guarantee that his back to private capital. you mentioned big growth and share of the agencies, and i have to say, on page 43 of the bipartisan policy center's report -- [laughter] not to be too specific because i did not put copies on everybody's table. 2006, absolutely lowest point in 40 years of share of mbs -- really the upper end of the historical range. the big difference is fha which ballooned from three percent, to 10%, to arty present. we have an odd thing going on. focusing on entity that does not have full faith and credit. we ballooned in size of the market that does. in this conversation about where the outlines go, what is the purpose of the different levels of guarantee is where we have to start the conversation and not

focus so much on the architecture of the agencies themselves. >> heaven, a hollow up to mary's remarks -- kevin, a follow-up youarry's remarks, represent national association of homebuilders. are you and your colleagues ready for the larger conversation that may or may not end up with a reduced government supported housing? is that a conversation you want to be part of? you think should be underway? >> we have been part of a conversation. we put out a white paper some time ago on this. and in that paper, articulated -- and i would agree with barry, you have to start with a list of principles. at the moment there has been some very positive steps taken certainly with the recent corker-warner, you have crapo and johnson

talking about it. tempering ofsome positions over on the house that although, you know, publicly i don't think has surfaced yet. but there may be. and we are encouraged by that. we certainly last week at our board meeting here in town -- the secretary called on congress to begin a bipartisan effort to begin the reform of our mortgage finance system. so, we were encouraged by that. where that goes from here and who is driving the bus, i am not sure it is the secretary of housing so much the more the treasury driving the bus at this point in time. we certainly are encouraged. but again, i think you've got to

start with the basis of a set of principles. one of those we are adamant about is a catastrophic backstop for the entire housing finance system. we think that is vertically important -- critically important. also one of the elements is to ensuree that there is -- the end result will be a menu of products that will serve a whole host of buyers as well as marketplaces, single and multifamily. know, secondary and tertiary markets are often left out of and underserved in many instances. and one of the principles we see as being critical is those reform willny

incorporate the ability to address and serve those marketplaces. and the people that reside there. >> david, i have been following with great interest the last six or seven weeks when nba's have suggested a number of mda's suggested a number of initiatives. -- mba's. can we read that there will be a final plan? let's go forward because we may not get to the final plan anyway? or is that unfair? >> we already heard a lot of people talk about the likelihood of a final plan, the timing of a final plan. there is but corker-warner initiative being talked about was seriously than it was a couple of months ago or even a month ago. it will still be on the senate side. there is still a question of what pathway when it is

introduced in committee. a question on the house side as to -- while i share your hope for low modernization, i happen to believe the burst bill introduce will probably be extreme and then they will moderate at some point. at the end of the day, you think about the timing of elections, the upcoming midterms or if it pushes too far past that, into presidential politics. we could be literally, depending on timing and motivation, we could be sparing ourselves back post residential elections on the next round -- [laughter] we both served in administrations and you recognize that the first year or first two years is when everything gets done and then things get a little bit crazy. has said this was not going to be his priority at the present time, or not in his present priority. andew this as a priority, our industry does because we've

got to get certainty on what housing finance will look like, both in single family residential side and multifamily side. i also am concerned that in the debate, that policy have less expertise in mortgage finance brawling will be drafting -- a broadly will be drafting and writing roles we will be responding to. the way we are approaching this today is let's be proactive, let's provide benchmark and rules that they can actually adopt theoretically written by industry experts that can, in the end, help design, back to the whiteboard scenario, help avoid sort of a lack of knowledge and bases we ultimately have to offend against and fight often legislative proposals. , we are laying out a series of steps. we have laid them out. we are going to package them all together in the next couple of weeks into one overall document. but there are steps that are very common for most of our

proposals. i will take, for example, homogenizing the security. the question that was asked earlier about the platform. a single common currency is ultimately the end state it -- and most of the proposals that is something we can work on today and the director can do today. the the, the director could expand on that -- extend credit today. i think the director of the conservatorship is tasked with conserving the assets of gse's and repayments to treasury. i do not see in his mission to need to expand credit. i am sure there is a mission driven role for ed given the context of what he is taking on, gse's whoese two avatar with their own failed institutions. until we can get our arms around the full steps to transition that do not require legislation

we are going to be continuing to debate this ultimate of the ultimate end state and how they get there over and over again, and they do worry fundamentally that the political timing of things could force our hand at not ultimately getting rid of the conservatorship status perhaps into the new residency. >> do you have a same sense of the calendar on these issues? that if we don't strike while the iron is hot today or tomorrow afternoon, we will wait four more years? >> as a very good friend of both of ours counseled us both, never bet against inertia and washington. i never lost money taking that. i don't know what the timetable is. congress is uniquely unsuited, to be frank, to this kind of conversation. big, complex, lots of conflicting interest in issues and it is exacerbated by the fact there is no obvious -- burning platform unless you have objection of the government

taking a large share of the credit risk in the current system. can letn't think you'd the perfect be the enemy to be good. there are some things that can be done, and whether you like it or not, they are beginning to move forward on. it is important to distinguish which of the, that form fhfa proposed and looking forward to execute, a jointly owned utility of the two companies. the meansmply be through which two different securities or in the future multiple kinds of securities get issue. it is very different to moving to a common security that might be something on their agenda but i am not sure it is as high. let's just get the infrastructure fixed because spending money for two new infrastructures -- because both of thegse's platforms are pretty all -- is more economical. the danger i think of a continuation is these kinds of advances along the path of some future state are being conducted by an agency that has one specific mission, is not as

subject to public comment, control, and influence as a fully developed a legislative solution would be, and overtime time is going to foreclose the options -- both congress and the administration. it will create an infrastructure that i think will have too much momentum to not become the default. that may or may not end up being a good thing. the concern i continue to have -- and as i said today -- it is not that ed can't do these things physically, that the gse 's camera on the box. i do not think it is the mission fhfa and they have. and still it is resolved we will have the continuing problem in the market and the use of a full government guarantee for purchases that i do not think there really consistent with how these companies were originally chartered. i will congress would like to see them do. am timeframe, i think -- i more optimistic than i was last year but five years ago i was asked about this and i said -- some of you will remember, i

said, for sure, by 2014 this will be over. and i was the most pessimistic at the time. so, i am not going to make any more bets on the timeframe. you represent -- one of the leading consumer agencies in the country. how do consumers find a way to participate in this so it is more than just the technical industry kind of restructuring? not that dave and kevin are not caring about consumers and all of that, but you have a special perch to look at that. how do consumers participate in this debate and discussion? >> that is a great question. we have been trying to refocus the attention on the larger principles. what is the purpose of the system? we joined with dave and others qrm. the there are regulatory actions we think are leading to the constraining of credit and we would like to see them removed or a meliorate it aired more broadly, what we are trying to say to anyone thinking about

architecting a new system is the system has to meet certain qualifications and outcomes. it has to provide access to consumers across a wide range of credit profiles. it can't allow secondary market institutions to cream the market, which i think was kind of the case before the 9092 legislation forced me csce -- gse's to broaden the aperture. and it has to be aggressive in helping spread responsible innovation in the system, which is currently not happening at the gse's. they are being constrained in what they do. a lot of innovative work that was quite safe and sustainable has been shut down by fhfa because they do not think it is consistent with the current mission. we are taking the approach regardless of what device you use to get to the end state, the end state has to guarantee these outcomes to consumers or it will not be successful. >> let me. it back. we spent this morning talking about the danger, challenges, unsustainability of the status quo.

we talked a little bit about the implications overall. and we all agreed to acquire -- we all agreed, the choir agreed, we need mortgage finance reform and address the larger principal barry and david talk about. if that is what we should do, why don't we address those issues? what are the barriers? um -- >> is a pure politics? >> it is politics. just the very nature of congress, the beast itself, if you would. >> the only congress we have -- >> it is the only congress we have. [laughter] we all have said, this is an enormously complex issue. the ability for people to get their arms around it. and quite frankly, it seems to me that in certain instances,

now that fannie mae and freddie mac are making fools of money -- oodles of money, the question is does it take the pressure off of those members of congress and people in the administration? m a what do you think? >> i think it has, to a degree. and i think it is unfortunate. i think it behooves us in this current environment to ensure that we don't take our eye off the ball. and number two, i think it also prevents a unique opportunity to move forward on this at this point in time. it has taken the conversation away from the drain they have been to the treasury and the cost to the taxpayer to now they are making money. .ow is the time to reform them so, i think you got some

crosscurrents here. but i think timing wise, particularly with the conversations occurring in the senate, that that ought to serve as a springboard for us to continue to push for comprehensive reform. it isid, do you share -- not overarching enthusiasm or optimism, but do you share that optimism that we are heading toward reform? i think all of us who work around the subject no caps for the first time the senate has come alive and is focused on housing policy, which is a good thing. so, i think we are moving willd reform, but i figure be way too slow. unless there is a groundswell of demand to take steps that can be done in the interim -- i think in interim steps are key. whether it is our list or a few items a broader group can gel around, we are not going to get

there for a long time. i go back to the common securitization program -- platform that ed is getting a lot of credit putting together and i think he is doing a great job in his role as well. they talked about a timeline for the platform several years out. we can't wait for a common platform to derail the need to get real transition going, because in the interim, there is too much tinkering that can take place. at the guarantee fees today. one could argue -- the question is when they produced the kind of profits they are producing today, to firms and conservatorship, is that a good thing or does that mean we are overpricing for credit risk? if we are pricing to this level to theoretical crowd and private capital, what steps are we doing to crowd in private capital? is there real risk sharing being deployed where we can get private capital up front to take the risk and really reduce the guarantee fees to offset that? it just seems to me that this in many ways are haphazard steps.

the acronym in record profits literally, is to work with -- they are creating record profit literally, historically record profit yet credit remains tight and builders are complaining about access to credit on the purchase side as well as the federal reserve chairman and others. i do not fit the coordination. i see no reason to pop the champagne bottles as we move forward. the role we have done up to this point refinancing america has been great. that was only done after they realize they have to deal with representation and warranties and streamline documentation. if we put that much effort in the purchase side, it would be a real different story. but today the representation and warranty structure on the purchase side remains overly on the wrist, making lenders are a mistake. -- overlyonerous. we are doing with with the fundamental aspects agreed transition. and although we can feel signs of optimism -- it is probably

going to be overall a pretty decent bill with good parts. we will pick apart on the margins. i really worry that the timeline for that, that one piece of legislation, created enough momentum to make it through two sides of congress is too long. i think we really need to be pushing on things right now to force transition. again, steps that can be done without dependency on legislation. it can be done with enough groundswell from a broad set of stakeholders in washington. >> i want to ask very one last question and then open it up. you heard david's approach to these transitional steps and the skepticism on the ability to come to consensus. is there a danger and that approach? if we take transitional that's, will it narrower options going forward? what is your take on that as a strategy? >> i wouldn't characterize it necessarily as a danger. i would characterize it as almost a near certainty. whether you think it is a danger or not i guess depends on which

direction they take and whether you think it is a good thing or bad thing for the market and consumers. this is one of the concerns about the current situation, chartera because of its operates understood financially less public input, transparency, public influence, then hud or even treasury would if they were carrying it out under different circumstances. it just raises questions about the ultimate public versus -- purpose of the agencies and the conservatorship. i do have to say we should all be realistic and acknowledge that when congress is pressed to do things quickly, and can often make all kinds of decisions that lead to unintended consequences that have one benefit, which is keeps people like me and dave in business because we get to argue over what they really meant and what the legislation should read like. but it also means you couldn't i -- wind up with an outcome that is worse than what you start with. i think part of what we have to get to hear his peel away some

of the ideologue -- ideology, some of the politics, some of the preconceptions about the system driving a lot of people attitudes toward it and get back to first principles. i think it is ironic that the companies today, without shareholders, who are supposed to be the drivers of the rapacious profit-making behavior are now making way more profits than they ever did when they had shareholders to be responsible to. i guess it turns out that profits don't really require your shareholders. they just require lock on the market and high fees, and to dave's point, a less generate credit docs and less public service that would have probably been the case in their own state. >> and quantitative easing and a harp for them that made it a lot easier. him a lot of support. the government's role in housing is not constrained to the gse's and the constraints on that are not just gse, but they include the federal homeland. i think it is important to focus andhat fhfa is doing today

try to influence that by bringing attention back to what will the result be in terms of credit for consumers, what will the result be to efficiency, what will the result be to the availability of long-term fixed- rate finance and the price of long-term fixed-rate finance? secondarily, i think we have to bring congress back -- remember what the point of his exercises, to make credit available available to american consumers so they can buy homes at a reasonable price so apartment homes and rental homes can be developed at a price that is affordable and serves the great middle part of the market. that is the whole herb is. if it does not serve the purposes,, we don't need it. >> let's open it up to questions and comments. yes, sir. and identify yourself. >> ethan from the national housing conference. like all the members to speak to how affordable housing providers to enter and look at this debate. it is really complex. these are for-profit, nonprofit,

state and local agencies, housing counselors, tenant advocates, those who try to create affordable housing on the ground and have had a mixed relationship with fannie and freddie over the years. where should they focus? they are not going to dive into the details of the plumbing of the system, but the outcome of these decisions is critical to the work they do. where is their point of entry? >> david? ethan, one thing of the guess if you look at any of the constructs of proposals or behavior -- take worker-warner, there is a fee collected that .oes somewhere -- corker-warner if you are focused solely on affordable housing that is where the best advice can come from, from people working on the bill, because he if you think about what the focus is, these gse reforms around -- they first try to fix the structure of the single-family

entity. then they say multifamily, let's make sure that works. and then i will what about affordable housing? i really believed it is a pecking order. my own experience, even when i was in the administration was, how do you make certain affordable housing just doesn't become, yes, we've got that covered, line item in the bill. that we will collect 10, 15, 25 basis points and put it in an affordable housing trust fund or give it to hud. that is where i think creating a mind trust of expertise to analyze the best way to meet affordable housing needs without saving the world -- word goals because you will lose the audience of capitol hill, too, with a way to make sure there is funding for affordable housing. the only thing i would just add is it is even listening -- interesting looking at being fha family -- multifamily program. a lot of restraint -- constraints came from the high

cost multifamily business that clog up the processes at fha. there has been de minimis focus on multifamily affordable apartment creation in this country, and with household formation reaching one million- plus annually, the question is, where will people live affordably on a go forward basis? i do not see a groundswell of work on that. i think there is an opportunity to create a groundswell of work on the subject. >> i think it is a great question and what we have been grappling with. it is hard to bring together a coalition of consumer organizations and get them all lit up over at the 30-year amortization of a g fee against that's right there i lost 90% of mike rob. -- 90% of my crowd. we made a specific effort to call out what i believe the key areas of consumer organizations and affordable housing advocates should focus on.

looking at housing access and affordability. unless there is a voice outside of the mortgage industry -- no offense to dave -- but outside the mortgage industry, that could easily be lost. we see a lot of those proposals who do take attacked they've said. we will have been off affordable housing, the way we define it, and let's not try to define it, and that is the job of "fill-in the blank." affordable housing needs to be the job of the entire system. it needs to provide the plumbing through which housing can be made available available -- mortgage finance be made available across wide responsible sustainable spectrum. i worked on a task or at the center for american progress and the council la rasa to bring together the thinking in a more comprehensive fashion and we just released every more last week and i commend that two people attention. i believe it is a sound laying out of that idea, that there is not just a money obligation on the part of the system but a functional obligation obligation on the part of the system.

the process,at in if we make a decision that the mortgage finance system by and large is for "fill in the blank" we not for "those people," will lose the greatest benefit the system can provide, which is a large-scale ongoing not discriminatory system of mortgage finance. so, i would say that is where i would really focus the energy of people who are not -- because you have a lot of us who will be in the weeds, so far in the weeds we cannot see the turf anymore. that will be our lot for the next however many years. but i do think without a strong voice continuing to remind congress of these obligations, we could end up with a system that fails to serve large, large portions of the population. as you know, currently fannie mae and freddie mac are very involved in that space at the moment. and i develop and own and

operate affordable housing and certainly utilize the program. just in terms of participating in the discussion, quite frankly i am not sure what the national council of state housing agencies have done at this point in time did i know we have all issued white papers. i am not sure where they are, to be honest with you, whether they have done something. they oreems to me that the national housing conference could certainly act as convener of organizations that truly focus on some -- on affordable housing, to become involved in the dialogue and set forth rentable's -- principles that address the need to provide whatever revisions of the system -- whatever revisions of the system are made have to provide for decent affordable housing for all americans. you go back to the housing act of 1949.

my, quite frankly, experience has been -- if you look at the track records of the fha's quite frankly under single-family and multifamily, they have had terrific track records over the last number of years, even with this horrendous downturn. so, in terms of looking for people to partner, i would say that will be a place i would start. they have standing in that space right now. obviously-- they have tremendous contacts through the governors associations and things. fha'sk they need to be -- could add significant weight to the debate and discussion. >> i want to second dave's

caution. in every one of these legislative debates i have been s&l of the since debate of get a fee and go home rather than getting the system to support the largest part of the population they can has been the tension. i thought one of the big victories of the 1992 legislation, of the same community of people, was to focus on the fact that are talking about a trillion dollar mortgage market, and getting $500 million through a fee? that is not enough of an answer. we need to be part of a larger system. it needs to have an obligation to serve those housing needs. i think that is the same opportunity we have here. i am all for the money. but it is not enough. it is necessary, but not sufficient. >> yes, kevin? >> i am struck by barry's, earlier -- i am kevin chambers at blackrock. struck i barry's comment about

attempting to refocus the purpose.-- mission and mission and purpose of being driven by the objectives of the ultimate stakeholders. whether one and, investors, or the other and, borrowers -- one end investors, on the other, borrowers. shape orus in some fashion as intermediaries in the weeds. i am curious, how do you do that? how do you elevate the conversation in a way that the broader interests drive the outcomes as opposed to the plumbing driving the endgame? am a great question, kevin. i think a lot will hinge on it. -- >> a great question, kevin. i think a lot will hinge on a bit of the commission tried to take a setting up in a separate box which we thought were the important access and affordability issues. what the task force has done is

an important contribution. and i think the organizations that care about the prospects for low and moderate income home ownership, sustainable, they need to be making the voice heard on the hill and not allow themselves to get distracted so much by the details. the startingthat point for some of the legislative drafts i have seen floating around book is exactly on those constituencies you describe and never mentioned the importance of the consumer, the importance of serving the broad market, the importance of serving throughout different economic cycles. it is really all about protecting taxpayer, detecting the investor. necessary -- protecting the investor. necessary but not sufficient. it is important for organizations across the spectrum to join that, but they will have other interests, too. consumer organizations, affordable housing developers have to get on this game simply to make his point over and over again. we did it in 1992. i think we can do it again.

>> the investors don't feel terribly protective. [laughter] >> david, kevin, any last comments before we wrap up? anyone have comments? please join me in thanking our panel. [applause] -- a couple of closing comments. i want to thank all of our panelists and speakers here this morning. a number of groups, including those represented at the podium, help plan this event. a special thank you or an national association for realtors in american bankers association also helped organize. i want to acknowledge the great affect the bipartisan policy center, particularly the housing stash under the able leadership of pam. and i want to acknowledge and thank my colleagues with a special mentor of the cochair -- mention of the culture. those of you know me know i am not a biblical goal are but how

often do you have a chance to misquoted the local -- biblical assets at the end of a session? i don't think he was, but hope king solomon was talking about mortgage finance reform when he once said, this, too, shall pass. [laughter] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013]

back as abigail

adams and martha washington, you find that first ladies played an active role in the white house and in the campaigns that it took to get there. abigail adams was basically a campaign strategist for her husband. she helped advise him on who to , who hewin elections needed to keep in his coalition. they would talk incessantly about the politics of the day and the legislation that needed to be passed, which senators and congressmen he could count on and which ones he couldn't and what he needed to do to win more support. >> as we continue our conversation on first later -- first ladies, john roberts takes a look at our nation's first ladies as political partners with their husbands rather than wives and mothers. tonight at 9:00 p.m. eastern on c-span. the u.s. house is about to dabble in for the day, beginning

with the morning hour. legislative business would've started at 5:00 p.m. eastern, with a look at a number of land and water bills. and now live to the floor the u.s. house here on c-span. the speaker pro tempore: the house will be in order. the chair lays before the house a communication from the speaker. the clerk: the speaker's room, washington, d.c., june 17, 2013. i hereby appoint the honorable kerry bentivolio to act as speaker pro tempore on this day. signed, john a. boehner, speaker of the house of representatives. the speaker pro tempore: pursuant to the orde t