this is what happened with fannie mae and freddie mac. they wiped out the competition and they formed the duopoly of the secondary primary mortgage market because they're perceived to be government-backed. mr. volcker, are we recreating the moral hazard problem by labeling these institutions "too big to fail?" how would you expect counterparties of these institutions to react to this label or even make -- even making the label official? >> with fannie and freddie in particular and the moral hazard, i think it is very real and it will be a real challenge to change that in the future. you're not going to do right now, but the market is wholly dependent -- mostly dependent on government participation, including support for fannie mae and freddie mac. so you're stuck with it. i don't think we need to get ourselves in that position in the future. i hope that is on your agenda next year when we reorganize the mortgage market. so far as other financial institutions are concerned, i hope your opening comment that the institutional station of "too

the overwhelming consensus -- fannie mae and freddie mac. verwhelming consensus is home builders, mortgage bankers, bankers, advocates for various groups, advocates for minority groups, all agree that simply abolishing fannie and freddie as well as we do that would not be enough. we also have to make decisions about what replaces it. many of those replacement entities will be purely private. notice there was a piece in the republican bill that said they have the state can do this. -- a heavy state can do this. those that can be doing the purely private aspect, what is the role of fannie mae and freddie mac? i stress that this is the beginning of this process, we will simtaneously be figuring out how best to wipe down fannie mae and freddie mac. -- wd down fannie mae and freddie mac. and we will be ready to replace the functions they are now performing in the economy without even [unintelligible] the old story says that you can't tear down the old jail until you build the new one. that is probably where we are in regard to this effort. we have

fannie mae has accrued a loss on the loan the treasury is making, and the treasury is assessing fannie at a rate of 11% every month, and they are loaning fannie mae the money to make the interest payment. at what point -- who exit's first? does fannie mae slow its lending down so mortgage-backed securities slows? does the treasury lower the interest rate to fannie mae so the losses are less? ford does the fed exit the mortgage-backed security, its holdings in mortgage-backed securities? which part will move first, >> first, the federal reserve was very concerned about fannie and freddie for many years. this is an issue we pointed out. my assumption is sometime soon that congress will be able to reform fannie and freddie or perhaps break them up. at the point, there will have to be decisions made. my assumption is the mortgage- backed securities, which are already outstanding, will be grandfathered and will retain u.s. government backing they currently have, so at some point, there will be a change in the structure, and there will be no more of the current one created. the existing will

and, now some republicans in congress say they want to phase out fannie mae and freddie mac.ness network's tracy burns joins us live, all right, so they were at the center of the mortgage melt down and now there is a plan from g.o.p. members in congress to phase them out within four years. is that even possible. >> it is a grade yes idea. look they -- grandiose idea and they want to redo the housing finance market overall and fannie mae and freddie mac were in the center of the collapse the last few years and they are part of the secondary mortgage market and you go, you get a mortgage from your bank, fannie mae and freddie mac buy that mortgage from them, and free up cash from your bank so your bank can continue to go out and make loans and that was part of the problem. threw money out there, simply and once fannie mae and freddie mac had these mortgages, they went out and sold them off, as securities, but, backed them pretty much said, we'll back anything we sell. so, they had a lot of money on the line, and we all know what happened, so they lost their shirts, and thankful

fannie mae and freddie mac played a significant role in this financial crisis.ver the past decade, they were allowed to take on excessive risk and leverage with inadequate capital and oversight. by the fall of 2008, their potential collapse posed a threat to the entire american financial system. fannie and freddie operated with a perception of government backing, which aloud them to take on significant leverage and build up and retain portfolio to the size the market would have never allowed. meanwhile, the government did not move quickly enough to put in restraints on their activity, restraints that would have protected the system from failure. this committee understands as well as anyone that these failures were not unique to fannie and freddie, which is why you moved late last year to pass a comprehensive set of financial reforms for the rest of the american financial system. the failures of fannie and freddie were symptomatic of fail gle iers in the financial system as a hole, failures by people over a long period of time. they took on tremendous amounts of

fannie mae and freddie mac -- hybrid organizations.given directions which came into conflict with their private mandates. there are the federal homeowner banks which should not be left out,. we will have to go hearings. we have a large number of private sector witnesses. many of them will be in agreement with what we heard from the gentleman from california. we of two jobs. we need to figure out the best way -- we have to good jobs. we need a bigger out the best way to wind down fannie mae and freddie mac. we need to decide what goes in their place. much of that will be purely private. it will not the government mandated. we need to figure out the interaction of these. who provides liquidity? is there a place for subsidy? i believe it is a mistake to heavily subsidize home ownership. we're better off trying to subsidize rental housing. you do not then confront the problems we have seen from people. there are claims to be made for helping some working people get into homes. that may be partly the fha or some other mode as well. yes, it

and freddie mac, because the underwriting requirements for fannie mae and freddie mac were not loose enough to allow those mortgages to be sold into the fannie and freddie secondary loan market. so this wonderful organization called acorn came to this congress in the early 1990's and lobbied the congress, they weren't the only ones but they were very, very active and forceful organization, they lobbied the congress to lower the underwriting and the collateral down payment standards for the borrowers so that fannie mae and freddie mac could buy up these loans in the secondary market and the loans that would be made by the lending institutions that were seeking to comply with the community reinvestment act, make those loans -- bad loans in bad neighborhoods, sell them off to fannie mae and freddie mac, shed themselves of it, take their profit and their margins out and let fannie and freddie worry about that as they rolled them forward. all of that was going on and it wasn't going fast enough, but once the underwriting requirements for fannie and freddie were approved here in this congr

fannie mae has accrued a loss on the loan the treasury is making, and the treasury is assessing fannie mae at a rate of 11% every month, and they are loaning fannie mae the money to make the interest payment. at what point -- who exit's first? does fannie mae slow its lending down so mortgage-backed securities slows? does the treasury lower the interest rate to fannie mae so the losses are less? ford does the fed exit the mortgage-backed security, its holdings in mortgage-backed securities? which part will move first, >> first, the federal reserve was very concerned about fannie and freddie for many years. this is an issue we pointed out. my assumption is sometime soon that congress will be able to reform fannie and freddie or perhaps break them up. at the point, there will have to be decisions made. my assumption is the mortgage- backed securities, which are already outstanding, will be grandfathered and will retain u.s. government backing they currently have, so at some point, there will be a change in the structure, and there will be no more of the current one created. the existing

guest: conforming loan appears to fannie mae and freddie mac guidelines. you have to meet certain requirements, loan to value ratio, how much your house is worth versus how much you are boring, what your credit score is, and it is only up to a certain dollar value which has been raised in certain areas to $729,000. host: little rock, arkansas, patricia, republican, good morning. caller: 3 or four years ago i lived in houston, texas, and at that time i was astounded because a couple had come over to the united states from some islands and as of late he had taken a fertility drug the -- this lady had taken a fertility drug and the taxpayers paid for months of bed rests because she had the babies and afterwards they had to all be on incubators and it was a huge hospital bill and they paid for that, and after that happened th, the top official from freddie mac came out and gave this couple a $250,000 home afraid. at the time i thought -- my word, freddie mac and fannie me sell stock and what kind of way to run a business is this? i am sure everybody in the uni

i want to ask about fannie mae and freddie mac. the congress put records on the liability of the taxpayers and treasury had the authority to do so and lifted, i think, the caps on the amount of the exposure. but we have not yet seen a reform proposal out of the administration and the scale of the losses, of course, at freddie mac and fannie mae are immense. this is a scary situation. as a fiscal conservative i don't like to see the taxpayers put on the hook for this, particularly in an unlimited way. if you could, would you tell us what the administration's time frame is, why we are still waiting to see reform for freddie mac and fannie mae and what will it entail to protect your kids and mine? >> what we have suggested, congressman, and we will put it in the public domain and i will testify on some broad objectives and principles to guide reform. we'll put out questions on strategy for public comment. this is a complicated issue. we want to take a look at the entire set of government agencies that act in the housing market and pol

in terms of the worst actors in the story the private issuers of mortgage backed securities, not fannie maeeddie mac. >> our notion of housing and owning a house and to own a house is a privilege but it is morphing into an entitlement. we speak of ownership in a general sense and don't take property seriously and that contributed to people not being willing to take those sub prime loans, 40 year mortgages assuming they would always be able to pay and throw the keys in the mailbox for the garbage and leave and start over. it is a different notion of property from what we grew up with and it was central to the whole story combining with the rating agencies and international capital and money flowing in. ownership and the concept of property when it became flawed contributed to the crisis. >> these loans are issued by countrywide and tapped into mortgage-backed securities. [talking over each other] >> it is about our decision as individuals. are we infants or are we adults? we signed thing that makes sense. they have to do with our financial future. we are not such fools that we can be duped a

freddie and fannie mae and some tremendous mistakes.erious delinquency rate in this country, and annie has about 5.3%, freddie is out 3.7%, but in the private sector, jumbo's art 9.6%. in my congressional district, they are performing better. in l.a. county, the jumbo market is at 10.1%. in orange county, fannie and freddie are 2.1% delinquent, jumbo is 8.9%, fha is 1.4%. in san benito county, 7.8% which is alarming, but the jumbo market is 20.4%. we need to allow the private sector to come lately control the secondary marketplace and get fannie and freddie out of it, but i am concerned that if there was a viable alternative to a gse, where was it in 2006 and 2007? it was not there. at the same time in the mortgage-backed security market, the booming part of the market was the group that sold terrible bundles to the private sector. many of fannie and freddie's losses were because when they sold the securities, when they take that nonperforming loans out, and replace it with a performing loan, nothing country wider anyone did matches tha

trying to get the health-care system to look more like the post office, fannie mae, or freddie mac is not going to work. it the way to get the cost of health care down is to apply the magic ingredient that applies to every other aspect of our economic life and that is to see if we can't get it to act more like the market. in the health-care you do not have the provisions of the market. the sick patient has virtually no stake in what the cost is of treatment. went to pay your deductible is free. but the hospital is going to charge $5,000 or $50,000 you could care less. as a result there is no pricing mechanism or cost-benefit that goes on to allow the patient to have an input and allows this to work like the market. i would change that and the incentives for doctors and providers such that instead of getting a fee-for-service that it would decapitated. -- that it would be capitated. we're going to get congressional staffers together and change one-fifth of the economy. run to put this on the entire country and see how it works. let's see what we can learn from other nations and from ou

was doing that got it into trouble was writing insurance on mortgage securities like those that fannie mae and freddie mac put together. but mortgage securities that were also put together by wall street. so, it did not necessarily include loans that fannie and freddie had purchased and securitized. so these were loans that wall street put together into these really mind numbing securities called collateralized debt obligations. a what aig was been sharing was the very highest level, the very aaa and above best possible loans in those pools of loans. and when the whole wheels came off the mortgage truck, then those declined in value, the insurance that aig had written -- they had to cough up money to make sure that the counterparties, the people on the other side were confident that they would receive their money on the insurance. that is what drove aig off the cliff. so, it is not a direct relationship between fannie and freddie, not a huge direct relationship but, yes, they are definitely linked because they were all part of this incredible mortgage boom that was designed to kind of prom

administration is taking steps to develop a system that could replace mortgage giants freddie mac and fannie mae. the movement follows criticism that officials are dragging their feet. the government seized control of them in 2008. these massive companies purchase home loans and package them in investments and guarantee them against default. the government has spent $126 billion in to these companies to keep them afloat. >>> a new survey says the summer job outlook for teens and college students is no better or worse than last year. snag a job.com says hiring conditions will be the same with 6% of businesses planning to take on more summer worker and nearly half of managers will prepared for a hiring freeze. for those lucky enough to land a summer job, average pay is expected to be flat, around $10 an hour. there are census jobs that kids can apply for and college towns are places where they need a lot of summer workers. >> you can get more information on those census jobs at our website on wusa9.com. >>> one hospital could be on the forefront on the way to treat a debilitating disease. >>> and

trying to get the health care system to look more like the post office or amtrak or fannie mae or freddiec is not agoing to work. you have to apply the magic ingredient that applies to every other aspect of our economic life -- to see if it can act more like a market. you do not have the provisions of the market because the consumer of health services -- the sick patient -- has virtually no state in what the cost is of their treatment. once you pay your deductible, it is free. if the hospital will charge $50,000 or $5,000, you could not care less because the insurance company will pay. there is no pricing mechanism or cost-benefit. i would change that and change the incentives for doctors and providers, such that instead of getting a fee-for-service reimbursement system, they get a different rate. you will see that in more detail in the book. i would think the president i would think the president would say, l we are going to get some congressional staffers together and decide how we can change it all. hwe are glenn to see how it works. let's work on these things. let's do we can learn fr

a $200 billion of fannie mae. in august of 2008, $85 billion by the federal reserve for a.i.g., which is up to $140 billion and november of 2008, tarp bailout and january of 2009 for a stimulus program, which was designed to keep us from getting to 8% unemployment and we are now pushing 10%. and that was followed by $410 billion omnibus spending bill and in december of 2009, $165 billion jobs program. and so we're spending a lot of money. and there's a lot of it out there. if we're looking for money, what we need to do is get out from the bailout business from general motors to the banks and we could find money on a bipartisan basis. i know the gentleman is one of the strongest critics of corporate welfare. i won't say it started with president obama. i do want to say this about the troops in the field and i do respect your support of troops. i just got back from afghanistan. i was there saturday and i was in pakistan on sunday meeting with general mcchrystal and our leadership on the ground over there. we do have

that we say are too big to fail and i think that we would have a consensus that institutions like fannie mae and freddie mac were in that category. but here the question is how many financial institutions do you think that the treasury has put capital into? on defining the bailout that the treasury is putting government capital into how many in the last 14 months to you think that we have had? can i have a show of hands? yes, how many? for? how many, sir. 600? the number turns out to be 690. 690, that is the number of institutions which the treasury has recapitalized. whatever your theory is of two big to fail, i doubt that it comes up to 600 or 690. so we clearly have a situation where we are basically allowing anyone to yell in a crowded room systemic risk and we give them money and it's my view that we need to develop an article that rationale, limited rationale and much more disciplined process by which we decide when and where we are going to be allowed institutions and also have some system of accountability. right now over the weekend something happens lots of people get bailed out so

if fannie mae would move forward and adopt that. maybe mr. quinn can talk about why that's a better score. in terms of accuracy, there's two standards in the american fair reporting act. one is reasonable procedural for maximum possible accuracy and the problem there is we still have the same sort of inaccuracy problems that we saw 20 years ago, and i think it goes to a fundamental issue, is that our three credit reporting agencies often like to think of themselves as libraries, simply passively take information from creditors and then just pass it on, when in fact, the law sets a standard for them that they have a grave responsibility to ensure accuracy and i don't think they live up to that, on very important occasions, especially with mixed files and identity theft are causes of serious inaccuracies, it would be harmful to consumers. possibly even bigger problem is the dispute process. naturally, companies want to automate, by the credit bureaus have automated to the extent that a consumer makes a dispute and there's a computerized exchang

fannie mae and freddie mac are going bust. we are spending way too much money. it looks like the future is very dim instead of bright. it looks -- we don't have a feeling of security toward the future right now. that is a major problem. host: the previous caller called the economy stable. what would you call it? caller: the problem is that the economy is flat. it is very poor. there is no, it's going on. around here in massachusetts, it takes weeks and weeks and i am talking a year-and-a-half to think about selling a house. people have had their properties for sale for two years. nobody is buying any realistic around here. nobody is selling anything. nobody is manufacturing. i think it is a stable economy but it is an extremely flat economy. host: how to help under water homeowners is our topic. secretary of state clinton talked about the recently announced arms deal between the united states and russia. there's a breakdown of what it means. it says that when it comes to currently deployed strategic warheads, the new arms control treaty would set a new limit of

no one is going to say fannie mae is now under fha. we are talking about a new set of institutions doing various functions. until we get those in place, we are not going to disturb existing arrangements. thank you all. the >> on the senate floor, christopher dodd talked about efforts to create a new federal consumer protection agency. his remarks are about 20 minutes. >> i'm going to take a few minutes to sort of lay out where we are on the efforts to reform the financial structures of our country. it has been a long undertaking. won't go into great detail, but i thought it might be helpful for our colleagues and others to get some sense and a feel for how things are progressing. so i'll share some thoughts on the major issues that we're grappling with. and i want to begin by thanking the 22 other members of the banking committee. one-quarter of the senate is seated at that table in our banking committee hearing room. and i want to thank every member for the work. we've been deeply involved now for well over a year -- more than a year,

the fed will complete a large-scale program of purchases of mortgage-backed securities issued by fannie maend freddie mac. lenders sell mortgages to these two agencies, which package them as securities sold to investors. last year, the fed began buying these securities as part of a series of extraordinary measures to promote recovery. at the time the program was announced, mortgage spreads over yields on treasury securities of comparable maturity were very high, reflecting in part the disruptions that had occurred in financial markets. i believe that our program worked to narrow those spreads, bringing mortgage rates down and contributing to the stabilization of the housing market. financial markets have improved considerably over the last year, and i am hopeful that mortgages will remain highly affordable even after our purchases cease. any significant run-up in mortgage rates would create risks for a housing recovery. business investment also presents a mixed picture. we've begun to see a rebound in business spending on equipment and software, and recent indicators point to solid growth.

no one is going to say fannie mae is now under fha.new set of institutions doing various functions. until we get those in place, we are not going to disturb existing arrangements. thank you all. [applause] on the senate floor, christopher dodd talked about efforts to create federal consumer protection agencies. his remarks remarks are about 20 minutes. >> i'm going to take a few minutes to sort of lay out where we are on the efforts to reform the financial structures of our country. it has been a long undertaking. won't go into great detail, but i thought it might be helpful for our colleagues and others to get some sense and a feel for how things are progressing. so i'll share some thoughts on the major issues that we're grappling with. and i want to begin by thanking the 22 other members of the banking committee. one-quarter of the senate is seated at that table in our banking committee hearing room. and i want to thank every member for the work. we've been deeply involved now for well over a year -- more than a year, a year and a ha

. >> by the way, geithner also testifies about the future of mortgage giants fannie mae and freddie mac and with the house financial services committee at 10:00 in the morning. the government took control of the companies in 2008, injecting $217 billion to keep them afloat. geithner is expected to defend the administration's actions as unfortunate, but necessary to offset a much bigger decline, christine, in housing prices, the first step in what is likely going to be a long, long discussion on capitol hill. >> right. and nicole, google has decided to end censorship at its chinese portal and will direct all search inquiries there to its uncensored site. >> hong kong. it's unlikely to discuss sino-google ties unless it's widely advertised. it was said google's other services in china, such as its smart phone software could be endangered by the decision. foremore of the developments of google in china, we're joined by cheng lei. lei, what can you tell us? >> google met with its 700 employees today, and get this, the employees now don't want to leave, unlike before where with we heard as m

no one is going to say fannie mae is now under fha.e talking about a new set of institutions doing various functions. until we get those in place, we are not going to disturb existing arrangements. thank you all. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> the next journalism must be open to blogs and e-mails, who are hammering on the door to be let into the conversation, to raise new questions, to suggest new context. >> winners of this year's national press foundation awards talk about journalism in a changing society. >> as "washington post" international correspondent, t.r. reid has traveled the world. his books are about contemporary issues, including "the united states of europe" a and "confucius lives next door." join us on c-span to. -- on c-span 2. >> the house is out until next week, when house members consider a resolution by dennis chris an edge on the afghanistan war. there will also take up the impeachment of a louisiana judge. the senate h

if fannie mae would move forward and adopt that. maybe mr. quinn can talk about why that's a better score. in terms of accuracy, there's two standards in the american fair reporting act. one is reasonable procedural for maximum possible accuracy and the problem there is we still have the same sort of inaccuracy problems that we saw 20 years ago, and i think it goes to a fundamental issue, is that our three credit reporting agencies often like to think of themselves as libraries, simply passively take information from creditors and then just pass it on, when in fact, the law sets a standard for them that they have a grave responsibility to ensure accuracy and i don't think they live up to that, on very important occasions, especially with mixed files and identity theft are causes of serious inaccuracies, it would be harmful to consumers. possibly even bigger problem is the dispute process. naturally, companies want to automate, by the credit bureaus have automated to the extent that a consumer makes a dispute and there's a computerized exchang

oversight committee and government reform, herb allison, assistant treasury secretary, formerly of fannie mae was asked about it and he said his big concerns were the cost and the moral hazards involved in principal write-downs. barely 12 hours later i asked him about it during a press briefing and he said, moral hazard aspects are mitigated by the structure of the program. i'm not sure what that means. but on the blogs today, realitycheck.com there is big outrage over the moral hazard. >> across the internet today. so lenders received 10 to 21 cents on the dollar as a federal subsidy. is there actually a violation of contract law? i see there is an incentive, but is the government actually forcing lenders -- >> no, absolutely not. this is fully voluntary and in the home modification program and the fha refinance program. they are incentives, but they are not forcing anyone to do it. that's why the question is investors hadn't done it before. will the incentive be enough? is the second lien incentive going to be enough? administration officials believe the second lien part of it will force in

government resolution authority, funded by $4 trillion in the house bill which sounds a lot like aig, fannie mae, freddie mac, government, taxpayers own it in perpetuity. some people think we should have a private bankruptcy court proceeding. how do you come out on this? too big to fail, who should run it and who should resolve it. >> i think fail is the only thing that works. if you want to get into intricacies. fannie and freddie had a lot more latitude on how to shut them down. that didn't work out well. i think it's a pre-log to how the epilog will turn out if we keep it in their hands. as far as other products go, i think the cost rises whether it's credit cards or different kinds of loans. >> right. >> we give the test to people to drive. maybe we should worry about education and make people take a class before we offer them adjustable-rate mortgages. why should it deprive me? i understand how it they work? >> isn't that one of the main problems. could ultimately mean that credit is less available. >> well, credit should be less available for people who can't afford credit. one of the prob

. >> fannie mae and freddie mac helped the bubble. $100 trillion of suspect paper. no private companies could have done that on such a scale. then the disaster, another subject, accounting. government regulation changed. a thing called market-to-market accounting. how do you handle bank's capital? traditionally if you bank bought a bond say for $1,000 for regulatory purposes it's kept on the book unless the bond went bad or the bank sold the bond. regulatory purposes or capital purposes kept it 1,000. middle part of the last dedicate, the rule was changed treating it like a day trading account. so when the markets hit turbulence, the capital was not just suffering a hit from bad paper, but also for perfectly good paper where there wasn't a decent market. if you look at the losses of banks and insurance companies, do you realize most of those losses came from book losses, not cash losses on their assets. if we had market-to-market accounting 20 years ago, remember the savings and loan disaster, commercial banks lowered with latin american loans, commercial loans, com

under, in this period under president bush,'s september 11 you would say are you concerned about fannie mae? they would say absolutely, here's the data and they are going out of control, fannie and freddie and we will be have legislation about it. did the right legislation come to pass? nolan they think a lot of that had to do with concern about international and concern about the war. one of the casualties of war is that it is hard to do domestic reform during the war but we all knew that fannie and freddie were a problem. that and the problem was uber only paying episodic attention to them instead of sustained attention and that is a matter of political will. >> guest: the worst loans or not fannie and freddie. the worst loans were coming from goldman sachs, citigroup. fannie and freddie were relatively late to the game in terms of worst loans. i was critical of them at the time, but in terms of the worst actors in this story they were the private issuers of mortgage-backed securities. >> host: ms. shlaes? >> guest: i would disagree with that. i think the notion of housing and to own a ho

that is the secretary's concern on capitol hill this morning as he was grilled on the future of fannie mae and freddie mac. >> we still have an economy that has only been growing now for three quarters. we have unemployment at around 10%, much higher in many parts of the country. housing market still overwhelmingly dependent on the government, because there is no private will to provide financing for financial real estate. >> he said fannie and freddie cannot continue to exist as they are now, but he stressed the need for some kind of mortgage guarantees. >> i think there's likely to be a good public policy case, good economic case, likely that both conservatives and liberals could agree on, where they design a carefully calibrated guarantee, appropriately priced that could continue in some form. >> when will this happen? not any time soon, that's for sure. remember, fannie and freddie and the fha, that is the mortgage market right now, about 90% of it. so there will be a lot of talking over the next several months. there will be a lot of proposals put forward. but nothing is going to happ

terrible because in this bill the federal government takes over the student loan program if you think fannie mae and freddie mac did a good job with housing, wait until the government runs student loans. $9 billion taken out of the student loan program to pay for health care. so the process that led to this bill was sleazy, the worst of washington. it wa not transparent. the substance of this bill is massive in terms of taxes and compromising medicare, and there's a bunch of tricks and gimmicks in the bill like you've heard about at&t is going to come up and bite the american people. so we're going to have a spirited civil contest on the size and shape of government and health care will be center stage. >> senator graham, despite what you say, is a campaign of repeal -- you're a pragmatic legislator -- realistic? >> yeah. only if you replace it. it is realistic to let the american people know the class act, which is a new entitlement where the government offers long-term health care insurance to the population, collects $78 billion in premiums to use to be paid for this bill. so when the money's

freddie and fannie, fannie mae and freddie mac to government can unshared out the bubble. $1.5 trillionis suspect eber, no private companies could amount on such a scale. and then when the disaster hits, another utterly boring subject, accounting. government regulation changed. anything called market to market accounting deals with how do devalued bank capital. traditionally, the bank but a bonsai $4000 for regulatory purposes it was kept on the books at $8000 a month the bond went bad for the banks of the bonn. otherwise for regulatory purposes or capital purposes, kept about 1000. but in all part of the last decade, especially 2007 the robust change creeping up like a day trading account. so when the market turbulence, suddenly banks capital was not just suffering -- is suffering a hit from that paper, but also for perfectly good paper where there wasn't a decent market. so if you look at the actual losses of banks and insurance companies, do you realize most of those losses came from book losses, artificial losses, not actual cash losses on their assets. if we market to market accoun

first probably 25% of the book on the mortgage markets and the securitization process on the gses, fannie maeand freddie mac and the role they played in the crisis because in many ways they are the ones who started the unraveling. we haven't gotten to much of that in that discussion so far. here at the center we have convened a mortgage finance working group and we're spending a lot of time talking about what comes next in the financial system as we try to disentangle the federal role which is 90% of the housing finance system. we could talk a lot about the diagnoses how that went. and you won't we won't have any more lending unless we figure out the securitization process. you talk about the mismatch between short term and long term. 30-rate fixed is a core concept. it's relatively unique. there's only a few other systems cover bonds, the danish model have produced longer-term finance. and the ability to know what your obligation is going to be over time makes housing more available to other people. do you think a more -- as you recommend the gses are somewhat unwound and much of that market

fannie mae and freddie mac, to government creations helped the bubble.by the end of 2007, one and a half trillion dollars of suspect paper. no private companies could have done that on such a scale. and then when the disaster hit, another boring subject, accounting. government regulation, changed. a thing called mark to market accounting deals with how do you value banks capital. traditionally, a bank bought a bond say, $40,000, for regulatory purposes it was kept on the books at $1000 less the bond went bad or the bank so the bond. middle part of the last decade, especially in 2007, the rule was changed treating it like a day trading account. so on the markets it turbans, suddenly banks capital was not just severing, something a hit from bad paper, but also from perfectly good paper where there wasn't a decent market. so if you look at the actual losses of banks and insurance companies, do you realize that most of those losses came from book losses, artificial losses, not actual cash losses on their assets? if we had mark to market accountable years ago

freddie and fannie mae and some tremendous mistakes.king at the serious delinquency rate in this country, and annie has about 5.3%, freddie is out 3.7%, but in the private sector, jumbo's art 9.6%. in my congressional district, they are performing better. in l.a. county, the jumbo market is at 10.1%. in orange county, fannie and freddie are 2.1% delinquent, jumbo is 8.9%, fha is 1.4%. in san benito county, 7.8% which is alarming, but the jumbo market is 20.4%. we need to allow the private sector to come lately control the secondary marketplace and get fannie and freddie out of it, but i am concerned that if there was a viable alternative to a gse, where was it in 2006 and 2007? it was not there. at the same time in the mortgage-backed security market, the booming part of the market was the group that sold terrible bundles to the private sector. many of fannie and freddie's losses were because when they sold the securities, when they take that nonperforming loans out, and replace it with a performing loan, nothing country wider anyone di

can you save fannie mae and freddie mac? those are no longer government funded enterprises. those are government enterprises. that's where the majority of these loans now said. come on the internet refinance millions of these loans. and if they don't they stand to lose somewhere between $40,600,000,000,000 over the course of the next several years if they don't refinance debt. but you have the capability, this congress, this government a mandate and if they determine and fix those loans and mandate these wall street and big banks were taking money from the american taxpayer and from this congress, and tell them they are going to participate in this program. it's not that the program design is bad. is the participation is bad. >> the gentlewoman's time has expired. i yield five minutes to the gentleman from utah. >> thank you, mr. chairman, and thank you all for being here. i do appreciate it. mr. dodaro, i'd like to go back to your july 20 recommendations that were made, specific to the personnel. one of the concerns in treasury is lack of leadership. i just want to make sur

there has been little talk of how bad freddie mac and fannie mae have been regulated.hey should concentrate on that. host: that is our focus this first 45 minutes, a look at new details coming out by chris dodd tomorrow. he announced he was looking for republican support, but republican leaders in a letter slowed down some changes -- they think that they're not good for the economy. the debate will continue. we're asking you whether there should be new financial regulations over wall street and the banks, what they should be. we began by talking about this and health care. the house will be in session late in the week with a vote expected later week or next weekend. peter baker has this piece and the weekend review. is failure forgivable? he writes that washington is already debating how critical the vote will be to presidency. again, the other issue this week is financial regulation over wall street. tom is joining us from buffalo on the democrats' line. caller: first of all, this barney frank thing -- i have heard this a lot on talk shows. bill riley would like to bl

the fed will complete a large-scale program of purchases of mortgage-backed securities issued by fannie mael mortgages to these two agencies, which package them as securities sold to investors. last year, the fed began buying these securities as part of a series of extraordinary measures to promote recovery. at the time the program was announced, mortgage spreads over yields on treasuries securities of comparable maturity were very high. that reflected in part the disruptions that had occurred in financial markets. i believe that our program worked to narrow those spreads, bringing mortgage rates down and contributing to the stablization of the housing market. financial markets have improved considerably over the last year. and i'm hopeful that mortgages will remain highly affordable even after our purchases cease. any significant run-up in mortgage rates would create risks for housing recovery. business investment also presents a mixed picture. we've begun to see a rebound in business spending on equipment and software. and recent indicators point to solid growth. at the same time, though,

think were instrumental in causing the first economic crisis in this country by looking away from fannie mae and freddie mac and now they're in charge of the financial regulations we're going to be under? >> absolutely. and i think they actually have a lot of credibility in this area, because obviously depending upon who you talk to, there are a lot of people who believe that democrats are actually the ones who were trying to keep this from happening and then it was republicans in the last 15 years that turned away from regulations that are badly needed, and that is what democrats are going to focus on now. and i agree with jason, it's going to be very tough for republicans to oppose this, because americans really feel that wall street was the one who caused this, and they have not felt any pain in the way that working class families and middle class families have, and that's what democrats are going to focus on. i hope republicans join us in this. if they don't, they don't at their peril. martha: you could feel it overnight, and i watched an interview that steny hoyer did, jason, and he sai

it's not a government-sponsored entity jane as it had been in the past much like fannie mae and freddie mac in housing. the private company, still has a private lending business, it will go forward there so it's not the end of the world for sallie mae but this is a pretty good chunk of the business going by the way side, costing 2500 people their jobs. jane: interesting the stock price has been moving higher lately. >> it's interesting. it's up a lot especially on friday when the details of this bill came out. one of the reasons is because now we don't have any uncertainty surrounding the company. there have been -- has been back and fot -- back and fot, what would happen or not happen. we know we can move forward with it. and a lot of times when you cut jobs it helps the stock because you're getting costs in line. i was talking to officials at sallie mae and they pointed me towards a wall street analyst report last week that essentially went back to what i said a moment ago, highlighted the fact that it has other parts of its business, it makes private loans, for example, supposedly we

mortgage defaults become primarily of fannie mae and freddie mac program, or is hud imposing alternative relief. while i expect to raise many fha issues in a budgeting hearing later this month, understanding the foundation of current fha requirements now would be useful. the last point i make is most important. that's transparency for taxpayers, as we have discussed briefly. i discussed at the hearing fort department of transportation on its budget for the coming year last week. i'm still waiting for real transparency in the current administration grant-making process. congress has a role and a responsibility, not only in authorizing and appropriating federal funds but also in insuring the funds are awarded according to objective and understandable criteria, including clear benchmarks to measure success. this was a particular problem for me and others when hud awarded some $2 billion in competitive neighborhood stabilization programs under the stimulus bill. i have yet to receive, and i look forward to getting an understanding, how hud cherry picked the winners. we saw a lot of -- found

in july of 2008 the democrat congress and president bush came in with a $200 billion bailout of fannie mae in order to shore up real estate. and not to be outdone the federal reserve a month later with the a.i.g. bailout, $85 billion that is now up to $140 billion that was supposed to avert financial collapse. and yet it did not. and then in october of 2008 we had a $700 billion tarp bill. then in january, $410 -- january, 2009, under president obama, $410 billion omnibus spending bill that was supposed to shore up the economy. and of course that brings it back to the other stimulus program. after a while we are going to figure out, everything we do is like cash for clunkers, it just doesn't work. if we want to help small businesses, we got to quick spending money. -- quit spending money. number one, number two -- the speaker pro tempore: the gentleman's time has expired. mr. kingston: 30 more seconds? mr. nunes: an additional 30 seconds. the speaker pro tempore: the gentleman is recognized. mr. kingston: number two, we need to let community banks be released from some of the overbearing a

the housing markets focused on three government-backed entities, fannie mae and freddie mac.e rain starts at 10:00 a.m. eastern, live coverage on c- span3. also on capitol hill today, israeli prime minister benjamin netanyahu. he meets with speaker nancy pelosi and later in the closed- door meeting with president obama. he has stated that jerusalem is not a settlement. it is our capital. the prime minister is responding to u.s. criticism of his government's plan for 1600 settlements in a part of jerusalem that palestinians claim as their own. and finally, secretary of state clinton and treasury secretary tim geithner will lead a u.s. delegation to china in late may. but twice yearly strategic economic dial the -- dialogue will include currency, human rights and the u.s.-based internet company google, which announced earlier today that it had pulled its search engine out of the mainland, shifting it to hong kong. >> a program update, president obama is citing the health care legislation today in the east room of the white house. -- is signing the health care legislation today

you start thinking about things like a fannie mae and a freddie mac where they had dual and sometimes. >> well, it may seem that way, but keep in mind, and i should mention that i serve on the board of the federal reserve in richmond, so somebody might say i'm not objective, but i think i'm certainly trying to be on behalf of our consumers, our clients. but consumer protection has already been for years and years a part of the prudential regulators, the fdic, federal reserve, sec. while it's not been perfect, they've made mistakes. i think we probably all have. it's worked pretty well. so they know how to balance safety and soundness. but here's the problem. when you separate safety and soundness in consumer protection, if you go off and push consumer protection to the natural extreme, you know, for example, you'll end up with a vehicle that will be so safe and so secure that it would cost $500,000 and nobody would be able to afford to get a car and drive to work. we have to be able to find some balance in life so that the whole system can operate. >> kelly, it's always great talking

fannie mae, freddie mac, they needed to be bailed out. if his, or as conservative as he were liberal, you would have a conservative commentator as well. as far as the media is concerned, are you kidding me? they did not vet john edwards, president obama. the media is ignoring the global warming hoax. how rich is al gore? how many millions does president clinton have? they are multimillionaires. look at the two senators in california. guest: i think you will find if you look at the u.s. senate, the reason there are so many millionaires is because they were millionaires before they got to the senate. the question on the table was whether they were using their office to enrich themselves. i think the answer to that question, by and large, is no, with a few exceptions. but that raises an additional question. why is it that so many wealthy people run for office and win? there is an answer. namely, it costs a lot of money to run in contemporary politics. the supreme court unfortunately is making it harder and harder to reign the costs of politi

because when we've seen institutions that have dual mandates before, you think of fannie mae and freddie the senator can comment on that. what i understand the bill is, it's an independent entity inside the fed. i have questions about that. but maybe the senator can caulk to that. >> it's an unusual hybrid we have here, which is what's the old saying? a camel is a horse that was designed by committee? this is a consumer protection bureau housed in the fed, but for all intents and purposes, they're just renting space there. they have their own budget, their own rule-making authority. but if one of their rules threatens the financial integrity of the system, that can be appealed by the prudential overseer to the systemic risk council that the fed is part of. so it's a pretty complicated system. >> it's like the sunglass hut at the mall. it sets up and leasings space in the lobby. >> can i just bring up one concern about that? i do not like the importing fed credibility on some -- bureau that we don't have any say over. >> they'll have all the responsibility but none of the authority. >> th

financial institutions, and purchases of mortgage-backed securities guaranteed by agencies such as fannie mae and freddie mac. these programs were vital in preventing a complete breakdown. but as conditions improved, the needs for such extraordinary support diminished. accordingly, the fed is already closed many of its emergency lending programs and will soon be closing the rest. i don't believe this is yet the time to be tightening monetary policy. but as recovery takes firm root and economic output moves toward its potential, a time will come when it is appropriate to boost short-term interest rates. the size of our balance sheet raises some technical issues as we begin this process, but these are manageable. when the time arrives to push up short-term interest rates, we will not have to sell off the assets we have acquired, thereby shrinking our balance sheet. we can instead boost short-term rates by raising the interest rate that we pay to banks on their reserves held at the fed. a hike in the rate we pay on these reserves will cause other short-term money market rates to rise in tandem,

system, failed cap and trade and numerous questionable interventions into general motors, a.i.g., fannie maeothers. this kind of track record gives the american public no reason to trust in administration with this health care. i urge my colleagues to listen to the will of the american people and vote no. i yield back. the speaker pro tempore: the gentleman's time has expired. for what purpose does the gentleman from texas rise? >> i ask unanimous consent to address the house for one minute. the speaker pro tempore: without objection, so ordered. the gentleman is recognized. mr. or tease: congress is waiting desperately to -- mr. hinojosa: as subcommittee chair of higher education, lifelong learning and competitiveness, i call on my colleagues in the house to put the ininsured and our students and families first. the student aid and fiscal responsibility act, known as safra, which we passed in the house in september, must be included as part of the final health care reconciliation legislation. safra makes the single largest investment in college financial aid in history. it's bigger than the