when fannie mae was one of the principal sources of capital in the mortgage market, fannie mae's influence was greater. when other sources of capital were more plentiful, as in the period prior to the crisis, fannie mae's influence was diminished. fannie mae and the other gse's were unique. we took our duties to our shareholders and our public missions very seriously. interest throughout most of my 27 years at fannie mae, the company was able to balance successfully its potentially conflicting objectives. however, this was more difficult when the markets experienced significant change and during periods of great stress in the system the growth in the last decade of the private label securities backed mortgage is one such change that had a significant impact on the mortgage markets and fannie mae. private label securities, or pls for short, are mortgage-backed securities issued by entities other than fannie mae, freddie mac and ginny mae. subprime mortgages, alt-a mortgages and jumbo loans were financed. in 2003, which was also a year of heavy refinance activity, the size of the pls market

any mortgage was a fannie mae mortgage and its stood for nothing more than an alternative to a fannie mae mortgage. so there were a number of studies, questions, process to look at the market and determine whether the feature is with -- features that went with these mortgages were things that we were asking for for 10 years that were no longer relevant to the market. or whether they were key data that was still needed. what were the variances between the markets? overriding that, a broad concern that under the continuation of these trends, fannie mae and freddie mac's cost role in the market would be less relevant. there was a strategic question of relevance that went to that, let us to use the data we had and develop a plan to understand it, by some securities, look at the day that , developed experts that understood how the market operated , do business with those we knew. we built it out from there. it was a reflection of the growth mr. levin described about that segment of the market. >> let me ask specifically, your market share in 2002 was about 29.4%. 2003, 36%. 2004, 24.8%. i

fannie and freddie. along with beginie mae. they account for 95% of all the lending in the united states is guaranteed by the federal government. so we have a nationalized market in terms of housing finance. and the challenge is going to be how to undue-- undo that. but right now that's the role that they are performing. they have been turned into public policy vehicles. >> before we get to where we are going, but so how would you define where we are now. there is still huge and still big players. >> they are. and in parts's because of the absolute disappearance of the private sector in lending and the conduit, the wall street conduit that exist, basically disappeared overnight. >> basically because of the economy. >> the housing market, these guys saw the writing on the wall and a lot went belly-up. guys were relying on the flow of these mortgages coming through the small independent lenders, the mortgage brokers, who really were basically originating for the purpose of securitizing them through wall street. and so those guys

sheet, and if you recognize that fannie mae and freddie mac are not consolidated into the government's balance sheet, our situation is actually worse than the numbers we showed, because they don't consider the federal reserve and fannie mae and freddie mac. [applause] >> the last speaker described the fiscal situation as an existential threat to the country. i think all of you would probably agree with that characterization. most of your solutions have focused on medicare and medicaid spending and social security spending as to be parts of the budget that i would say our human security spending, and this is very little about spending on military security. i am curious to know from each of you, do you think the military spending should be treated differently from any other part of the budget, and if so, why? >> no, i don't. i think that in looking for solutions, all parts of the

and fannie mae and its coert freddie mac were trapped and their private mission to make money for shareholders. as the crisis elevated they were pulled into refinancing, warehouse lending and other seemingly desperate attempts to stop the building. >> fannie and freddie were pushed to earn capital, rescue more borrowers and cut costs. i sought to balance the fine points of mission in business in so far as i could understand them with the support of regulators and policymakers. that was no longer possible by september 6, 2008, and i am sorry for that. >> now, mr. mudd was also asked about that day in september of 2008 when fannie and freddie were placed into governorship and it seemed like the letter was something out of the past noting issues that had already been addressed. he said the letter was simply to force conservatorship. >>> can fannie mae and freddie mac be fixed? joining us now is is sherry and

and another example of the dangers of political power of fannie mae had amassed. e all this political power satisfied even as of fannie and freddie executives, and totally serve one primary purpose, as the accumulation of personal wealth by any means that a court we also put the american dream of wealth accumulation as long as it is done within the rules. fannie mae begin the last decade with an admissions goal. double earnings in five years, to $6.46. a large part of the executive compensation was tied to meeting that goal. the internal auditor of fannie mae made a famous quote which was detailed in the ofheo specially report examines which advised chairman thomas mentioned our little i will not repeat but it just what part of how much 6.46 and these armies were so important to the personnel within the companies and the compensation that they would receive as a result of meeting those goals. and they did receive a great deal of compensation. in the case of ceo franklin raines he collected over $99 in total compensation from 1998 to 2003. of that about 52 month was

i worked to improve the relationship between fannie mae and its regulator and to return fannie mae to timely filing status with the sec. after the completion of that, one of the most complicated restatements in recent history, the company emerged to face the housing depression and the housing crisis. it did not survive. i want to be clear, i was the ceo of the company and i accept responsibility for everything that happened on my watch. over the past couple of days, i have heard mr. greenspan assigned himself a 70-30 ready and i believe the chairman gave himself a 49-31 rating. my experience was during the crisis of 2007 and 2008, it was virtually impossible to get on the positive side of that ratio because so many decisions were a choice between on savory alternatives. certainly, fannie mae endeavored to the best in class and to continuously improve business but we hired talented executives to build a world-class risk management modeling capabilities and maintain strong controls and comply with regulations. i did the best that i knew how to consider alternatives, to develop processes

. >> tom: the former head of fannie mae caps off a week of very public apologies, saying the collapse of the mortgage giant was on him. >> susie: but the panel investigating the financial crisis still wants to know why fannie and freddie mac dove headfirst into high-risk mortgages. you're watching "nightly business report" for friday, april 9. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> tom: good evening. the financial crisis inquiry commission today heard yet another refrain of the c.e.o, song-- "i'm sorry." this time it was former fannie mae c.e.o. daniel mudd doing the crooning, as the commission turned its attention to government-backed mortgage giants fannie mae and freddie mac. >> susie: tom, american taxpayers paid dearly for their poor decisions. fannie and freddie were taken over by the government in 2008 and so far they've cost taxpayers more than $125 billion. >> tom: the

nobody of the fannie mae folks we interviewed, recalled that they raised concerns.i guess there was an interim process but at the end of the day no one said this will compromise safety and soundness. did you comment on them? >> hudd would run the goals by fail and we would examine them and an apply whether or not they could be met. >> under your 10-year in 2005 did you voice an objection on safety and soundness ground? >> no. >> go ahead. >> but we also told the enterprises that if situations ever changed and they thought that they couldn't meet the goals without taking on excessive risk we made it clear they should not take it on. >> did they circle and say we have a problem here. >> mr. lock heart the same set of questions. >> the goals were set for a four or five year period. >> did they escalate. that's the first time i think they began to nudge above 50? >> they kept pushing them and pushing them. but that whole set of decisions was made in 2004, i think. we never got involved with the goal setting while i was there because they were about ready to be reset. >>

today's focus the gses and the people left holding that bag at fannie mae. diana olick joins us from washington with the very latest. hello, diana. >> hello, larry. blame it on private label securities and that is wall street getting heavy into the mortgage market. that is the message to explain the root cause of the mortgage crisis. >> it posed a financial threat because there was simply less business that was coming into our market. the business was going into another market. it posed a mission threat because many of the products that were financed by pls had affordability features and, so, it threatened our ability to meet our government mandated housing goals. it also threatened our relevance with our customers. >> now, according to fannie mae executi executives, they are through the critical run up on home crisis and fannie mae and its coert freddie mac were trapped and their private mission to make money for shareholders. as the crisis elevated they were pulled into refinancing, warehouse lending and other seemingly desperate attempts to stop the build

when fannie mae was a principal source of capital, the influence was greater. when other sources were more plentiful, as in the period prior to the crisis, our influence was diminished.

all their mistakes on fannie mae, freddie mac, f.h.a., all thele instrumentalities that govern the united states for decades to come they didn't take any losses on those themselves. they were enriched by the taxpayers of the united states who lifted them right up, and they're not dealing with the damage across this country where foreclosures continue to go up. i wanted to make sure that i placed on the record the names of the six companies that now hold 2/3 of the wealth of this nation, and they are goldman sachs, morgan stanley, j.p. morgan chase, citigroup, bank of america, and wells fargo. they have enriched themselves handsomely. they doubled their importance since the beginning of this crisis while quashing community banks across this country, seeing forced mergers and institutions like p.n.c. bought up as local community banks that didn't do anything wrong and were not permitted to do

and remarkably, after fannie mae and freddie mac literally facilitated and were at the very center of the financial crisis for housing, the president made absolutely no reference to gse reform. i'm not really surprised that bank stocks rose today after the president's speech, as was reported on cnbc, because what this is to the large financial institutions on wall street is taking the bailout ideas of t.a.r.p. and making them permanent. this is a permanent wall street bailout. house republicans and the american people oppose that approach, and sadly the president embraced it today when he visited new york city. >> it's interesting, by the way, congressman -- by the way, i love talking stocks with you. not all the banks went up. a lot of these big banks went down. citigroup, jp morgan chase, and u.s. bancorp actually fell. but you're right, the u.s. bank index was up. what would it take to gain your

they heard more apologies, including from former executives of mortgage giant fannie mae. >> i want to be clear, i was the ceo of the company and i accept responsibility for everything that happened on my watch. >> brown: we continue our look at what members of congress are hearing about the new health care law. betty ann bowser follows democrat tom periello home to his virginia district. >> health care is not my fight t was about economic relief to working it in middle-class families. seniors who are struggling. if we can save them a little money, that's a really big deal for people. >> lehrer: and we get the analysis of david brooks and ruth marcus, filling in for mark shields. that's all ahead on tonight's newshour. major funding for the pbs newshour is provided by:

i'm shocked. >> hold on, back to fannie mae and freddie mac, i think this reform bill has some decent protections, but there's no protection of taxpayers, nothing to deal with fannie or freddie in this bill or any bill and we bailed them out to the tune of $400 billion. >> your intentionses is great, we pretty much agree, unfortunately nobody is taking action on fannie and freddie, and we now own them in perpetuity, which means they will be directed by politically driven mandates. >> no question. wall street is the biggest. larry, wall street is the biggest contributor to congress. >> i got to go. >> there's no difference. >> robert reich, steve moore, thank you gentlemen. see you later. >>> once more, my theme about cowboy monetarism, i want wall street scared to death that the fed will shoot at them again and again, and they won't know when and when. that would keep wall street honest.

and on friday, commission members will hear from former fannie mae executives. you can watch it live both days starting at 9 a.m. eastern here on c-span2. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> the financial crisis inquiry hearing is in a brief break right now. the first witness of the day was former federal reserve chairman alan greenspan. we are awaiting h return. and while we wait, this when we talk to a journalist about fcc regulation. >> the headline reads court backs contest over at cc. the subhead, growing deals blo to propose to the author amy shots who joins us on the phone right now. if you could, kennedy was a little back story on this decision and for those who may not be falling on a day-to-day basis. >> guest: sure. so basically a couple of years ago comcast was accused of preventing some of its subscribers from downloading large video files on these file sharing. and essentially comcast didn't tell peopl

>> fannie mae and freddie mac? what percentage to fannie mae and freddie mac?> i don't know. >> can you give us a ballpark? >> i would have to follow a. >> can you provide that later? i would appreciate it very much. you said in your testimony you underwrote to originate standards not citi standards and this is interesting because mr. bowen's group wrote to citi standards. why was there this different business model? why would a customer want to loans underwritten to the originator standard instead of citi standards? >> we mostly bought from large low capitalized originators, who were known in the market, and so there was an acceptance of new century's guidelines or america west guidelines or wells fargo's guidelines to so when the offering document for the prospectus we would be technically the issuer but we would describe the originators guidelines. >> you mentioned three companies that were largely sub-prime lenders. >> they were large counterparties of hours a. >> you brought from them? they were the originators but they were largely some prime, at least th

got to be to a certain extent, isn't it, from the way in which you are funded versus a fail in fannie maeand freddie mac living or dying, based upon congress' willingness to offer appropriate funds. did you feel that when you had that temporary oversight work with fannie and freddie? or do you have any comment on that? because i would like a little preview if you have any. >> really, i don't have any. i did have any experience with that aspect of it. >> well, just let me ask if you had your druthers, would you rather have it come out of appropriate funds? >> what my son refers to it is an iq test. and i feel that i will pass. yes -- >> actually it's called a pain test. [laughter] >> there is a long history and the regulars were once partly appropriate more and somewhere. and the federal reserve never was. and it was historically a very important piece of our ability to have and hire, have the necessary resources and hire the people we need to have the budget its ability to maintain our independence with respect to this very highly regulated industry. and even in those days, it has always

bill: that takes us into a new area with regard to fannie mae and freddie mac.e mae and freddie mac not be included in the reform or regulation? take a stab at that. >> that is the $54 trillion question. that these they're firms two started this and reform of these firms is not part of the bill. but they want to go after wall street and after my community banks and the 8th district of ohio, and, yet, want to ignore them and i can't answer that. you have to ask the president. bill: okay, maybe we'll hear on that a bit later today, fannie mae and freddie mac, a lot of critics out there about what happened on their contribution and went down over the past, oh, let's say, 2-3 years. you have a challenge, the way i see it and your challenge is to convince voters that you are not sticking up forewall street and this is -- for wall street and is a populist message that the president will, all likelihood, say, sea what i'm doing and cracking down on the bankers on wall street and there is not a lot of sympathy for bankers in new york city. how do you make the case. >> t

>> leaving fannie mae and freddie mac out of it. they were two of the major catalysts in this whole melt down, this indiscriminate lending of money to buy hom hom s from homes for people who could never take it back. the community reinvestment act to give homes to people who would never make their mortgage payments. fannie mae and freddie mac being left completely out of it. we have to look at a number of other aspects of it which increased the role of unelected, unaccountable officials and a greater role of the congress of the united states. >> chris: you're upset about the fact that the fed would have a bigger role overseeing this? >> it concerns me because the fed didn't play a very good role the last time around. i think there needs to be a lot more government involvement, congressional involvement and oversight. and when we find out that feingogol goldman sachs was betting against its own investors and playing the double game, i'm sure we'll find out they weren't the only ones. things have to change in the way they do business.

it was in the house -- housing market, with the collapse of freddie mac and fannie mae. a loss of $1 trillion. one other thing that is missing on the senate side that gives me pause in terms of the way this is approached. let me make the point that the fdic has no experience with these types of institutions. as i have said before, i have opposed the bailouts. i, instead, wanted to see a system devised. we have companies, major firms go bankrupt in the united states, airlines, railroads. these are handled, these are handled by an expedited bankruptcy process through the courts. and that's what i wanted to see beefed up. but let's go to the senate bill. a major premise upon which the resolution authority was based is the notion that the fdic uses a similar tool to unwind small commercial banks. in fact, last week before the financial services committee, secretary geithner again reiterated this point. but this is like comparing apples and oranges and i will share with you why. the fdic is lick which dating very simple institutions made up of insured deposits and made up of

>> fannie mae and freddie mac? what percentage to fannie mae and freddie mac?i don't know. >> can you give us a ballpark? >> i would have to follow a. >> can you provide that later? i would appreciate it very much. you said in your testimony you underwrote to originate standards not citi standards and this is interesting because mr. bowen's group wrote to citi standards. why was there this different business model? why would a customer want to loans underwritten to the originator standard instead of citi standards? >> we mostly bought from large low capitalized originators, who were known in the market, and so there was an acceptance of new century's guidelines or america west guidelines or wells fargo's guidelines to so when the offering document for the prospectus we would be technically the issuer but we would describe the originators guidelines. >> you mentioned three companies that were largely sub-prime lenders. >> they were large counterparties of hours a. >> you brought from them? they were the originators but they were largely some prime, at least they

right now obama is doing the same to fannie mae and freddie mac. i see the loans every day that come through. the people do not qualify. the modifications are going into bankruptcy and foreclosure again. host: what do you do for a living? caller: yes, i worked in the insurance agency. i see these come through with no source of income, no qualifications. i received phone calls all the time to hurry the documents through because fannie mae wants to clear these loans. these loans are an abomination. who made good on all these bad loans? if you want to know when things began to go downhill, it was in 2006 when the democrats took over the purse strings. host: all right, marshall in arkansas. caller: yes, it is time that the gop except it -- and i think most do -- i think that mitch mcconnell has one of his welcome, frankly. i think god for senator bob corker who has stepped out and said a few things that may help get more of the gop some courage. the talking points will not get you everywhere, just to make the president fail in the upcoming elections. t

if the end up looking at the federal reserve's balance sheet, and if you recognize that fannie mae and freddie mac are not consolidated into the government's balance sheet, our situation is actually worse than the numbers we showed, because they don't consider the federal reserve and fannie mae and freddie mac. [applause]

indeed, other countries were trying to figure out how do we have our own fannie mae. they may was so busy that they started freddie mac, which does exactly what fannie mae does. when wall street jump in, i think that is when it started to go bad because they realize that they could make a lot of money. it did not really matter what the quality of the underlying mortgages were. that started, i guess, around maybe the early 1990's but really got going in the mid- 1990s. on the second question, the government did put a lot of money into financial companies before they knew the extent of the losses. the caller is correct. but then they did these stress tests. in the spring of 2009 -- they put a lot of money into this system as an emergency. they did not want the system to collapse. then they did a stress test. those tests, as a result, some of the banks still needed more capital. and instead of putting more federal money in, what the federal government said you have to go out and get private capital. and they did. and the banks are very successful in doing that. that is o

is that simply a coincidence or what was the business advantage to moving freddie mac from fannie mae >> i don't have the personal details of the pros and cons of doing business with each of them. those contracts were negotiated actually in the home loans group and i think steve might have been involved there so i can't recall why one over the other but we always try to have them in a good competitive position. >> i would like to enter into the record the washington mutual document, fannie mae allies business relationship proposal to may of 2005. here is what your executive summary says. the key is pretty proposes provides the mythic illiquidity for option arm originations with more advantage and credit for amateurs, and preferred access to the balance sheet relative to our current agreement with any. so it was economically, it was economically driven position. >> that sounds like a better deal. and not just option arms but i think i also heard that are guaranteed fees amount explanation. >> alright. i have one final question for you mr. killinger and that was, at one time towards the

>> fannie mae and freddie mac? what percentage to fannie mae and freddie mac?>> can you give us a ballpark? >> i would have to follow a. >> can you provide that later? i would appreciate it very much. you said in your testimony you underwrote to originate standards not citi standards and this is interesting because mr. bowen's group wrote to citi standards. why was there this different business model? why would a customer want to loans underwritten to the originator standard instead of citi standards? >> we mostly bought from large low capitalized originators, who were known in the market, and so there was an acceptance of new century's guidelines or america west guidelines or wells fargo's guidelines to so when the offering document for the prospectus we would be technically the issuer but we would describe the originators guidelines. >> you mentioned three companies that were largely sub-prime lenders. >> they were large counterparties of hours a. >> you brought from them? they were the originators but they were largely some prime, at least they were. >> the

they low therd standards for fannie mae and freddie mac for the secondary loan market so more lenders could make more bad loans in bad neighborhoods and peddle them into the secondary loan market of fannie mae and freddie mac. now we're into the 1990's and still it wasn't such a crisis until such time as the dot com bubble burst. the dot com bubble burst was initiated by lawsuits against microsoft joined by several state attorneys general, including my state attorney general, tom miller. i think that he and others wielded the lance that pierced the dot com bubble when they filed the lawsuits, the class action lawsuit against bill gates' operation and microsoft. even though i believe that bubble was swelling and would have burst at some point, i think the lance that was wielded was by those state attorneys general that brought about the dot com bubble bursting. in the area -- in the aftermath of the bursting of the dot com bubble, we had, i'll say, a mini recession. alan greenspan saw that mini recession and decided, this is my interpretation of his actions, certainly, mr. speaker, sub

>> fannie mae and freddie mac? what percentage to fannie mae and freddie mac?i don't know. >> can you give us a ballpark? >> i would have to follow a. >> can you provide that later? i would appreciate it very much. you said in your testimony you underwrote to originate standards not citi standards and this is interesting because mr. bowen's group wrote to citi standards. why was there this different business model? why would a customer want to loans underwritten to the originator standard instead of citi standards? >> we mostly bought from large low capitalized originators, who were known in the market, and so there was an acceptance of new century's guidelines or america west guidelines or wells fargo's guidelines to so when the offering document for the prospectus we would be technically the issuer but we would describe the originators guidelines. >> you mentioned three companies that were largely sub-prime lenders. >> they were large counterparties of hours a. >> you brought from them? they were the originators but they were largely some prime, at least they

and they don't consider fannie mae and freddie mac. [applause] >> a question i have -- >> nancy gallagher at the school of public policy. the last speaker described the fiscal situation as a threat to the country. and i think all of you would probably agree with that characterization. and i'm interested most of your solutions have focused on medicare, medicaid spending and social security spending. the two big parts of the budget that i would say really are human security spending. and said very little about spending on military security. and so i'm curious to know from each of you, do you think that the military spending should be treated differently from any other part of the budget? and if so, why? >> well, i'll go first on that. no, i don't. i think that in looking for solutions all parts of the budget must be on the table including revenues. i think that there's certainly opportunities for savings in the pentagon budget. the reason to focus on the larger program, social security, medicare, medicaid -- and they're all about the sam

you have freddie and fannie mae pouring money into the system. is it a surprise it caused this enormous bubble and shouldn't the fundamental reform be that we have to rethink all the of that? >> that's the arguments in some ways for doing reform in these stages t is a very complicated mix of decisions, it's not just fannie mae and freddie mac. that system, that housing finance system worked excepti exceptionally well for many d k decades it was the envy of the world many countries replicated the institutions we built to provide a fixed rate 30-year mortgage that expanded opportunities for homeownership over a long period of time it worked well across a whole series of recessions in this country over time. we made these two terrible mistakes in basic government policy over this period of time. one was to let fannie mae and freddie build up and hold a range of risky securities that are not centrally related to the basic function in housing markets, making housing more affordable without holding the capital necessary to support that. they did it bec

begin addressing fannie mae and freddie mac. again, the current dodd bill doesn't include the four words fannie mae, freddie mac. establish minimum lending standards for mortgages. we had subprimes with no underwriting standards, no lending standards. this present dodd bill does not change that. we must change that. increase competition for credit rating agencies. they were clearly part of the last crisis. and improve coordination and communication among all financial federal regulators. mr. president, these are the principles of strong regulatory reform. i hope these are the principles around which we can come together in a bipartisan way. i certainly support that effort by richard shelby and chairman dodd. i encourage that effort. but those negotiations will not be meaningful unless we demand here on the senate floor that they be meaningful and demand that a bill moving to the senate floor is true reform and a bipartisan approach. i urge that approach, mr. president. i enthusiastically support that approach. thank you, mr. pre

same was going on in the era of the community reinvestment act and fannie mae and freddie mac and the traunched mortgage-backed security and a.i.g. guaranteeing passing that up the rain, it became, yes there's foundational value under the mortgage the market sthreefl real estate but it was also a huge chain letter marketed up through and when the investors in the world lost confidence and they no longer knew the value of the bundles of mortgage backed securities, then we were threatened with an economic meltdown, madam speaker. that's kind of how we got here. and now, as the economy spirals downward, or more or less the threat of the economy spiraling downward we elected a president who is a keynesian economist on steroids. he believes, i've heard it directly from his lips, in short range, that franklin delano roosevelt back in the great depression of the 1930's lost his nerve on spending, dblet spend enough money. if he spent a lot of money, it's the opinion of the president, the depression would have been over in the 1930's instead of having to wait for the second world war that bro

. >> that particular home because it's fannie mae if you were to buy something right now you're actually able to ask for up to 3.5% concession. that can be for appliances. that can be for closing costs. that's also an incentive in addition to the $8,000 tax credit. >> joseph says the other plus of fannie mae and freddie mac which have taken over so many of these homes because they insured the mortgages is their record of upkeep. >> this particular one is owned by fedy mack. they want their pools blue. they want the power on. they want the utilities on. 85 to 90 percent of the other lenders, they just want to churn and burn and don't care about the green pool. if it's a government-owned property they would like to see new carpet in the house. they would like to see the house painted because we're targeting owner-occupants. >> reporter: craig and linda robinson hail from illinois. >> we're going to retire in to years. we're looking for something to come here part time. >> reporter: snow birds. >> snow birds. >> yes. >> are we hold enough to be snow birds? >> we are. >> okay. >> reporter: b

fannie mae, frede nationalized. and now -- freddie mac nationalized. and now you and i share the liability of $5.5 trillion in contingent liability of fannie and freddie. and before i go over the car companies' nationalization, i might remind you overhearing this dialogue that of all of the financial reform that has wall street under the focus and under the spotlight and under the magnifying glass, all of the tactics being used and the president going back up to wall street to give his speech today, of all of that, the president didn't mention fannie mae or freddie mac. there's nothing in the financial reform bill that reforms fran lee -- fannie mae or freddie mac. what's in the reform bill is a slush fund to let the administration decide which businesses are too big to be allowed to fail and go in and implement a takeover of the private sector. what are the criteria? the judgment of the executive branch. yes, there are guidelines but not many constraints. it gives them the power and authority to look over every credit transaction in america. every cred

we wrote two specific papers sounding the alarm about fannie mae and freddie mac. i was concerned back then that this explicit guarantee or backing of these institutions permitted them to operate without adequate capital and to super more risk than their competitors and borrow at below market rate of interest and that's exactly what happened. smaller companies got crushed, fannie mae and freddie mac engaged in increasingly risky lending with the backing of the federal government, and on a massive scale, they made mortgages available to people who could not afford them by buying those risky mortgages, and that easy credit fueled very rapidly rising home prices. as prices rose, obviously, the demand for even larger mortgages and fannie and freddie looked for even more ways to make mortgage credit available, notwithstanding a questionable ability to pay. it was a giant accident waiting to happen. by 2008, these two g.s.e.'s or government sponsored enterprises held nearly $5 trillion in mortgages and mortgage-backed securities. they were overleveraged. they were too bi

real reform would address the ongoing crisis that fannie mae and freddie mac. although the democrat bill is completely silent on this issue, i intend to see that we find a way to reduce their holdings and divorce them from government ownership. we cannot deny the fact that these two government entities were a major cause of the financial crisis, yet they are not even mentioned in this so-called financial reform. reform wouldn't be complete without also addressing the underwriting issues that led to the explosion of risky lending that fuel the housing bubble. this bill leaves the community reinvestment act in fannie mae and freddie mac's affordable housing goals untouched. each required significant increases in mortgage lending to lower income borrowers which led to a decrease in the underwriting standards to make more loans to folks who couldn't afford to pay them back, and these bad practices became contagious in the industry. if we don't deal with these housing policy problems that led to unsafe lending as well as fannie mae and freddie mac's sizable ability

the fha and fan fannie mae and freddie mac were given license to give mortgages they couldn't afford. there are a lot of people to blame. i don't see that the -- maybe it's politically advantageous. >> can you police risk? >> to some extent you can control risk. you can regulate it. you can't police all risk. people will make bad risks. home buyers did it. the mortgage market did it, the stock market did it. this is a process in the american financial world and in america. but it doesn't mean you have to turn this into a political vendetta. >> neil: interesting. mort, always a pleasure. >> mort zuckerman. the healthcare overhaul is underway and a new bureaucracy. the office of consumer information and insurance oversight. so obviously they're printing up the stationary. it has four offices underneath it. dr. griffith says this is a bureaucratic nightmare. you recall he switched from being a democrat to a republican in the height of this healthcare debate. congressman, what do you think of -- at least we're getting grids together, i guess. >> neil, i believe that anyone who had to deal

verdad que hay mucha situacion en este pais" y danilo no esta solo...segun una encuesta de fannie mael 76 por ciento de los hispanos encuestados, piensan que obtener un prestamo hipotecario se torna dificil en esta crisis... y la situacion se empeoraria aun mas para las futuras generaciones... "ellos piensan que es mas dificil comprar una vivienda y conseguir prestamos hipotecarios hoy dia de lo que era para sus padres y la futura generacion tambien tendra problemas comprando casa" a pesar que la mayoria de los hispanos prefieren comprar una casa... el 23- por ciento postergara sus planes de ser propietario... si ha bajado mucho el trabajo y ahorita no hemos pensado en comprar casa" el 36 por ciento de hispanos tienden a refinanciar las hipotecas de sus viviendas, comparado con el 23 por ciento de la poblacion en general...segun expertos, a pesar de la crisis hipotecaria, hay alternativas para obtener el sueÑo americano... "entendemos de que los bancos estan haciendo los prestamos, ellos mismos estan siendo mas cautelosos con los prestamo

the mortgage is passed on by fannie mae and freddie mac. fannie mae and freddie mac bundled them together, bundled a bunch of mortgages together and created an investment instrument through securitization. those securities were then kind of blessed by the credit agencies. the credit agencies, the mortgage to brokers, they make their fee. the bankers make their fee. they're out of it. fannie mae and freddie get some sort of fee for securitizing the loans. they're kind of out of it. credit agencies make their fee and they're out of it. we end up with folks owning these securities, in some cases all around the world. slice and dice these securities acquired by different investors. too many of the players in this business didn't have any skin in the game. and at the end of the day, when folks started defaulting on their mortgages, not making their payments and those investments, mortgage-backed securities were out there owned by a bunch of different investors, they turned into what i call swiss cheese, and they had a lot of holes in them. holes

we have seen the business end of it, goldman sachs, bank of america, fannie mae and freddie mac, businessesk lestly run and horribly mismanaged. so we took money from good businesses and moved it to the ones that weren't being managed so well. we spread the wealth around in the business world. now i got to thinking about what if we apply it in other arenas as well? not just in business, but say college. all the kids who stayed up all night long studying and preparing for the tests and got a's? well, what about the kids who stayed up all night martying and they got -- night partying and got "f"s. let's spread the grade around. take the points from the kids who worked hard and studied and take their points and give it to kids who partied all night so everybody can have a "c." that is spreading the wealth around as it relates to college and grades. think about this if we did it in sports. take the losing teams, those that didn't train as well. maybe just didn't have the talent. when they play, we take some points from the team who won, and we pass it over to the team who lost. that way, we hav

obama today did not mention fannie mae and freddie mac. and that's a fair criticism. they're part of the problem. i know the banks made big mistakes. i know there was some insane risky trading coming off of wall street, but he didn't mention fannie and freddie, which is ongoing. in perpetuity, government seems to own those two enterprises. he didn't mention the federal reserve had negative real interest rates for years and gave us massive doses of easy money and a cheap dollar. he didn't mention the hud housing secretary, the housing department pushing unaffordable mortgages on people. in other words, nicole, this is a big irnarrative than just looking at the role of wall street. why do we want to keep this a narrow narrative? why not understand all the things going on? maybe step back before we have a 2,000-page bill that a lot of people object to. >> right. that's absolutely true. wall street learned a long time ago that, as long as it learns to make all of these innovations in the housing market, that the government would never dare treat the housing market as the

short if peter is here, but in his absence, i wanted to bring of your suggestions to resuscitate fannie mae and freddie mac. if indeed mortgage securitization business is an economically viable one, why can we engage with that with appropriate regulations? >> i think they would. what i was arguing for was whatever system we can come up with, it should relate to the positive externalities' of home ownership, which are not reflected in the price of home ownership. when i buy a house, the value of reduced crime rate is not fully reflected in the price of the house. i would not -- i would try to get the politicians out of it. they have an incentive to make houses available. i would prefer the market, but i would prefer the markets with some form of subsidization that does not go as crazy as fannie and freddie. >> isn't the mortgage interest deduction arguably something in the the nature of what you are talking about? >> they might be, and i do not know the magnitude. they could be, although i would be inclined not to relate it so much to the advantage of it to the income level of at the recipie