so what will happen here is that fannie and freddie, or any combined with freddie and a single entity that would be this public utility, will be required to take very significant risks and what it buys. and it will not be able to charge a rate that compensate it for the risks that it is taking. it's just the way things work when you're under the control of congress. we see this now with the fha, which is also probably insolvent, and probably will have to be bailed out. and the reason that occurred is because over time, congress insisted that the fha take more and more risk without changing any of its charges for taking that risk. so unfortunately, i don't think the public utility model is going to work very effectively, and i think we ought to try to stay away from it. well, what about returning them to a gse state is, what they had before? i averagely oppose gse's when i started out at at the american enterprise institute about 10 years ago, because it seemed to me there was an inconsistency between a public mission of some kind and a private profit-making entity. and what would norm

then in may and freddie mac essentially doubled in size every five years. -- fannie mae and freddie mactially doubled in size every five years because of that the nominee. only when you make capital standards equivalent across institutions can reduce that dynamic. the second problem with a gst is that they live or die according to their charter providing get congress to tell me that i could get lower capital and higher leverage and my competitors, that is worth more than knowing anything about the marketplace. if you read the g s e annual report, they talk about political risk. they hire their ceo's to manage political risk, people who are well-wired on capitol hill and will do whatever the administration is currently in power will do. they are not more capable to manage a multi-trillion dollar institution. that is what we saw when they went down, they made systematic bad decisions. they doubled down on their best as everybody else was backing out of the market. these people simply did not know how to manage an institution of this size. everybody talks about government agencies being in

so, what will happen here is that fannie and freddie, or fannie combined with freddie in a single entityhat would be this to public utility will be required to take a very significant risks in what it buys a double not be able to charge a rate that compensates its for the risks that it is taking. this is just the way things work when you are under the control of congress. we see this now with the fha, which is also probably insolvent and probably will have to be bailed out, and the reason that occurred is that over time, congress insisted that the fha take more and more risk without changing any of its charges for taking that risk. so, unfortunately, i don't think the public utility model is going to work very effectively and they think we ought to try to stay away from it. well, what about returning them to layed gse status, what they had before? ire brauchli oppose gse's one i started out of the american enterprise institute because it seemed to me there was an inconsistency between a public mission of some kind in the private profit-making entity, and what would normally happen in tha

so what will happen here, is that fannie and freddie, fannie, combined with freddie,Ñi in a single entity public utility, will be required to take significant risks and it will not be able to charge a rate that compensates it for the risks it was taking. it is just the way things work when you're turned control of congress. we see this now with the f.h.a., which is also probably insolvant and probably will have to be bailed out and the reason that occurred is that over time, congre f.h.a. take more and more risks without changing any of its charges for taking that risk. so unfortunately, i don't think the public utility model is going to work very effectively and i think we ought to try to stay away from it. what aboutñr returning that -- returning them to a g.s.e. status, what they had before? i originally opposed g.s.e.'s when i started out at the american enterprises 10 years ago because it seems to me there was an inconsistency between a public mission of some kind and private profit-making entity and what would normally happen in that situation, where there is a public mission and pu

the fannie and freddie should not be there.i'm disappointed in my friends on the other side of the aisle when they were in control of the congress they did not do more to regulate fannie and freddie. we missed a golden opportunity that would have avoided a lot of the problems we are facing now if we had not had such a firm of ideological position at the white house and the treasury and the fed. i hope we can come together, republicans and democrats, to explore good policies this year. i've always felt the financial firms receiving taxpayer assistance should receive the most scrutiny with respect to their executive compensation practices. one example involves a large celery for a lot -- a large salaries for fannie and freddie executives. i joined chairman frank and others to vote to stop the unfair tarp pay practices unfair recipients. -- unfair pay practices of tarp recipients. finally, for firms to have repaid tarp, i do not think the government should go in and set levels. the government does have a role in looking at the st

the fannie and freddie should not be there.i'm disappointed in my friends on the other side of the aisle when they were in control of the congress they did not do more to regulate fannie and freddie. we missed a golden opportunity that would have avoided a lot of the problems we are facing now if we had not had such a firm of ideological position at the white house and the treasury and the fed. i hope we can come together, republicans and democrats, to explore good policies this year. i've always felt the financial firms receiving taxpayer assistance should receive the most scrutiny with respect to their executive compensation practices. one example involves a large celery for a lot -- a large salaries for fannie and freddie executives. i joined chairman frank and others to vote to stop the unfair tarp pay practices unfair recipients. -- unfair pay practices of tarp recipients. finally, for firms to have repaid tarp, i do not think the government should go in and set levels. the government does have a role in looking at the st

, that we have not tried to deal with fannie and freddie.i want to try to clear it up. as a supporter told me, it does not matter. people hear over and over again that president obama started the bailouts. where i want to go now is that too big to fail is a problem. they understand that they have what it takes to take what we have. if that is the attitude that they have, we are going to lose. my questions are, and i do not bill -- and i do not know the answer, did the firms with better compensation performed better? those with better compensation structures, did they end up performing better? do any of you know that answer? >> this is a subject that needs to be investigated. it is not a straightforward question to answer. what does it mean to be compensated better? if you believe that better compensation is one that provides less incentive to focus on short-term, then, you have to measure those dimensions and define how they have looked at the performance. that has not been fully done. >> did you not think that would be a worthy project? >>

let me now turn to freddie mac.role of freddie mac, let me turn to the broad priorities as identified by our regular -- regulator and conservator. the federal financing housing agency has described the three main duties of the government sponsored entities as follows -- we are to provide ongoing support to the housing market. the mediates identified weaknesses in our company -- we mediates -- remediatwe identified weaknesses in our company. we are to prevent avoidable foreclosures. these are useful categories of their duties and i will focus on the first and third. i will describe our stable ongoing support to the housing market, which includes a large part of our every day mission. with the market still seized up, we have continued to provide an ongoing stream of funding for mortgages every day in all geographic markets. in fact, the gse's funded almost three-quarters. that is 72% of all mortgages last year. we have done this at a time when most other sources of liquidity have dried up. even when private label inve

either in my life for at freddie mac. because i am an investment person, i do pay attention to a bloomberg. that is a news lifeline for those in the investment business. there was a headline that came across about 11:00 that congressman frank was having a a hearing and said that he would like the company that i was ceo of to be abolished. i felt that the votes were there, the house financial services committee would be voting for the abolishment of freddie mac and fannie. not a great headline. it was picked up and there were many articles that used that word "abolish." i have not had a chance to visit with the congressman. i look forward to doing so. i know i will have the opportunity to do so. we will talk about it. i get that he is the decision maker. but in this interim period, it wasn't a great day for me or our 6000 employees that saw that headline. it is something i met with employees with on monday. not our and tort workforce -- and not our entire work force, but it was a concern. it was not a great weekend for our

let me now turn into freddie mac.gulator and conservator. the federal housing finance agency has described the three main duties of the government sponsored entities as follows. we are to provide ongoing support to the housing market. the mediates witnesses in our company. -- we mediaremediate witnesses r company. we are to prevent avoidable foreclosures. first, i will describe our stable, ongoing support to the housing market which includes a large part of our every day mission. with the market's still see step, we continue to provide funding for mortgages every day in all geographic markets. we funded almost three- quarters, 72% of all mortgage loans originated last year. gst, 72% last year. we have done this at a time when most other sources of liquidity have dried up. even when private label investors abandoned the market, freddie mac continued to serve our mission on behalf of homeowners and renters across the nation. in this kind of an environment, our cost of c and stability is very valuable. as the head secret

may or freddie f- fannie mae or freddie mac. this is a private sector phenomenon. 90% of the mortgages were sold on wall street. so it was a private sector phenomenon more than anything else. my theory, as i say, is a said, this is basically an enormous market failure, and a failure of ideas and misapplication of market ideas. the way i frame it in the book, i start off with alan greenspan, who -- appearing before congress this time last year, and admitting he did have an ideology and it was free market ideology, anybody who has read any of my stuff would know that i make links to ayn rand. he said, this was my ideology, and in this instance it failed. i relied on the bankers and other people in the financial community to not get us in this mess. and the financial market is self-regulating because it's in the interests of bankers to avoid this blowup we have had. it ultimately failed. so, my book is an attempt to explain why it failed, and i -- the way i do this, seeing it as ultimate lay failure of ideas, i trace the free marke

fannie and freddie were too big to fail. does as a whole other area that goes along with inappropriate government distortion. thanks, ray. >> janet norman. how do you see citibank's future? >> i thank. >> i used to work at citibank. citibank's future -- they cannot succeed without market discipline. and right now they operate without market discipline. and just as importantly, they are distorting what other firms do, because they have got to compete against it actively a government-subsidized bank. so again, this is a place just like aig where you've got great business lines, great people at some places, but you've got to unlock these people and put them in the hands of managers who know how to manage the company. and you've got to do that at the expense of bondholders, who freely lend money to the company, and should take a loss when their prospects turn out to be not with the lenders have thought. there's no justification for not having bondholders to the financial system take losses. then you're just back to the problem o

>> oh, we are going to have to bring very substantial reforms to fannie and freddie, absolutely, and we are completely committed to that and we are committed to propose a detailed set of forms beginning this year. i don't think we're going to be able to legislate that-- that process can start until next year. it's a complicated thing to get right. we are completely supportive and agree completely with the need to make sure we take a cold, hard look at what the future of those institutions should be in our country. >> woodruff: treasury secretariry tim, thank you very much. >> nice to see you. >> woodruff: for another view we turn to scat garrett from new jersey, a leading republican on the house financial services committee. he's helped draft membership of his party's alternative recommendations for reform. thank you for being with us. tell us, overall, your take on the president's proposals today. >> i wanted to say that was a fascinating interview. i appreciated some of the questions that you posited and the lack of answers on the other side of it. and one other comment-- i was thi

>> oh, we are going to have bring very sstantial reforms to fannie and freddie, absolutely, and were completely comtted to that and we are cmitted to propose a detailed set of formbeginning thisear. i don't thinwe're going to be le to legislate that-- that process can art until next ye. it's a complicat thing to get rit. we are cometely supportive and agree completely witthe need to make sure we ke a cold, hardook at what the future of those institutionshould be in our untry. >> wdruff: treasury secretariry tim, thankou very much. >> nicto see you. >> woodruff: for anotheriew we turn to scat garrt from new jersey, a leading reblican on the house fincial serves committee. he's helped draft membship of his party's alternativ recommendations r reform. thanyou for being with us. tell u overall, your take on the presidt's proposals today. >> i wanted to sayhat was a fainating interview. i appreciated so of the questions thatou posited and the lack of answers onhe other side oit. and one other coent-- i was thinking, your lead-in to e story talked about theact that thstock market tanked to

there was the rescue of fannie mae and freddie mac and bernanke was participating in all of these things, and then there was lehman which was in some ways a lot like bear stearns, it was also an investment bank. but they let it fail. why did they do that? >> guest: the first thing important is i think they wasted the time before march and september before bear and lehman to read the did the freddie and fannie and that was preoccupying and people disagree and argue whether they did that the right way that they actually did something. >> host: they had to do it. >> guest: the question is whether they could've done some -- the had a problem, so it planned and executed it. they didn't get ready for another bear stearns. they didn't go to congress and say we don't have enough power, don't have enough money, give the equipment we need to cope with a fire like this again. they say paulson and bernanke had we asked we would have been turned down. it was an election year and that would have been worse shape than not asking at all. but they don't. internally. what do we do if this happens again. t

they did do that fannie mae freddie mac thing and people disagree with arguably whether they did that the right way but they actually did something. >> host: they had to do it. >> guest: the question is whether they could have -- the had a problem, is all a planned and executed it. they didn't get ready for another bear stearns. they didn't go to congress and say we don't have enough power or money. the of the equipment we need to cope with a fire like this again. it is a paulson and bernanke have we asked we would have been turned down it was an election year and that would have been worse than not asking but neither did a prepared internally they don't do what we do if this happens again. there's a little discussion about options but not a lot, so i feel they are not well prepared for lehman. lehman gets into trouble. paulson to some extent bernanke are very reluctant to do another bear stearns. they've both been pummeled by their colleagues for bailing out there stearns -- >> host: and by the public. >> guest: and by the public and they say there are three issues here. one, wall st

faneuil and fanie and freddie is perfectly solvent. >> i think fannie mae and freddie is fundamentallye prospects going forward are very solid. >> please! >> to your favorite married couple? >> tiger woods. if that is not a marriage made in heaven, you know. swedish supermodel and ahh, hookers and stuff on the side, too. then we have congresswoman chikowsky and robert creamer. married. i don't think he took her name. hard to pronounce. and then that is good. tough corruption of congress. they can lay in bed at night and say hey, i stole a bunch of money. the other one can say i did too, in a completely different way. anita dun and her husband, whatever -- he's the attorney now for the white house. by the way, i thought that wasn't happening. i thought when we broke that story we were called crazy, that that wasn't going to happen. hmm. >> your favorite couple of the year, i think, has to be clara pittman. >> i don't think they were technically married. >> yes, they were married. >> were they? >> yes, they were married. >> two names they will never say, cloward and piven. if you don't k

what we need to do is get rid of anime and freddie mac.if they are going to subsidize housing, which they most certainly will, it should be on the budget. that is way democratic government is supposed to run. fannie mae and freddie mac running around the democratic process and open to corruption, and has been corruption. host: of this article notes the hostility that has increased for the federal reserve and the chairman ben bernanke. but before this hostility turned on the federal reserve, when alan greenspan was heading up the federal reserve, there seemed to be admiration or reverence for what mr. greenspan would say. how can this institution be both revered by some people and have distain for mothers? guest: that is easy. when times are good and things are going well, they were great and people like them. when times are bad, as i have been, people say, look, why is the public angry about the puppet of reserve is doing -- they don't like the bailout. they don't like the fact that they are advancing number, the example, ford general moto

but to make matters worse, fannie mae and freddie mac bundled these subprime mortgages up into packages we call securities and sold them, sold them to banks as assets, sold them all over the world. these are the toxic assets that brought down our financial institutions once the housing bubble burst. so, folks, for the president, for ben bernanke, for secretary geithner to come in and indict the free market system and the greed of corporations and banks misses the whole point of what caused this problem. certainly these two causes created perverse incentives for the markets, the banks to practice irresponsible behavior. there's no question that went on. but to say that that was the cause of where we are today misses the whole point. my problem with ben bernanke and the president and geithner -- or secretary geithner, excuse me, is not that they made mistakes because congress made mistakes in not overseeing fannie mae and freddie mac and asking the right questions to the federal reserve, but the fact that despite that the evidence is so clear of what really caused our problem, mr. bernank

you to understand with health care, automakers, fan any and freddie almost a third of our country haseen socialized. i disagree americans aren't smart enough to run their own business that the government has to do it. i don't care if it lawyers stand up and stop them. >> john, it is true but it is not going to happen. christian, you are wrong it is not under the general welfare read madison this is under the interstate commerce clause. the court is not going to turn it over. it is not going to work. it is fortunate because -- the constitution has been eviscerated, it is whatever the court says it is. >> the founding fathers there's a million things we've done that the founding fathers would freak out about. if you think the courts are gonna let this be a constitutional challenge on 10th amendment it is not going to happen. you can't grow marijuana and though states allow that medically. they make you pay social security tax -- [ talking over each other ] >> you call these frivolous lawsuits is garbage. if my taxes go up because of the cornhusker bill going through right now because th

reiterated in the report we released is that fannie mae(kd freddie mac are financed and controlled by the federal government in a direct enough way that we believe they should be viewed as parts of the government for budget purposes. we do not in the end dictate the way administrationt( records th budget for yearsq that are passed. we are continuing including based on discussions with the committees to to project finances going forward. >> so you concluded that for the reasons you laid out that was a reasonable conclusion to place them on budget is basically what you are saying? >> absolutely. and the relationship changesç over time and we will revisit that. >> right now reasonable interpretation would place them on budget and it is contrary? >> that's correct. >> thank you. and this is not an inconsequential decision as to whether it is on budget, is it? >> well, it matteredw3 most for the budget numbers last year because by our assessment taking on board -- absorbing the companies/+ the federal governt was on the hook for the risk the companies bore. the biggest difference was for

and the bush administration joined the clinton administration both put pressure on fannie mae and freddie mac and the other agencies to buy sub-prime mortgage securities of the argument is ultimately was the government distorting the housing market that was the problem. they are the three main theories they think of what happened. i don't think any of those is particularly persuasive. i think there's an element of each of them and none of them is completely untrue but we have seen the worst of criminality. we have been seeing people sent to jail for criminality and more of them should be sent to jail. and clearly there was some sort of overconfidence in what economists call disaster my ops so psychological factors did play a role. i think the government's role has been exaggerated. i think it is sort of way out for the right and people who defend the free market it gives them an excuse. if you go and actually look at the studies they show that only 10% of the sub-prime mortgages had anything to do with fannie mae and freddie mac. they did not buy any more or guarantee them. this was overw

it just expanded the amount of fannie mae and freddie mac.ecause what we need to do is get rid of fannie mae and freddie mac. if they are going to subsidize housing as they almost certainly will it should be on the budget. that is the white democrat governments are supposed to run. fannie mae and freddie mac are open to corruption and there has been corruption. >> host: this article notes the hostility that this increase towards the federal reserve and the chairman, ben bernanke, and so but before this hostility turned on the federal reserve when alan greenspan was heading up the federal reserve, there seemed to be admiration or reverence for what mr. greenspan would say. how can this institution be both re-aired by some people and have disdain from others? >> guest: that is easy. when times are good and things are going well, people like them. when times are bad, as they have been, people say look why is the public angry about what the federal reserve is doing? they don't like the bailouts. they don't like the fact that they are dancing mone

it was carried by freddie mac. i did not even know that. there was nothing in the paperwork to state that it was carried by freddie mac. host: thank you for calling in this morning. more this morning about mortgage help from the u.s. government -- from "the baltimore sun" it says "murky message stymies obama. with congressional support eroding, his popularity falling and his renomination of federal reserve chairman ben bernanke potentially in trouble, president obama faces an even more daunting task in saving his entire domestic agenda and persuading millions of angry americans that his economic policies will bring them a brighter future. even as the economy has begun calling its way out of the great recession and job losses have slowed dramatically, critics on the left and right, even party loyalists, say that the president has failed to articulate a clear economic vision." one more thing on jobs in "usa today" this morning, "a survey of 58 economists think that 61 percent sign -- think that 61% more could be done." valerie jarrett spoke o

mismanagement of money and why did we get into the subprime cries because we pushed fannie mae and freddie mac to get into the subprime loan area at monstrously low rates and of course the housing market exploded. and here we are again, 870,000 and i'm shocked the american public is not up in arms and they should be after the segment. >> i'd like a house, $870,000, eric! >> you know why it isn't work -- >> you live in jersey! >> nothing wrong with jersey, tobin, here's the problem and what it is. they'll pay the mortgage mitigator, the mortgage servicer a thousand dollars and give them a thousand dollars every year for three years and they make a lot more money charging late fees and legal fees and throwing everything into the mortgage and certainly, they'll lose a lot of money, a lot of money if they drop the mortgage rate and there is no incentive for the banks to do it. but the point here is, isn't what they are doing or not doing, the point is why did they spend $27 billion so far, where is all the money and there's a lot of fraud and corruption there somewhere. we should find out. >>

i personally never covered fannie and freddie and those enterprises.se were a separate set of families that cover those companies but i think what we should've seen is the massive amount of capital that was allocated to the housing sector, government incurred for the government guarantee, and that encouraged a whole industry of these government sponsored entities, and that was a mistake, easy to say in hindsight. many of us in the industry sought for a while, and that goes back to the loan growth. some of the fastest growing areas as i showed the my loansharked, every slice of real estate, first mortgages, second mortgages, these activities, but do you know what, wall street also met the demand so it was kind of together, the government with wall street with the banks that facilitated it, and i made the general comment, i would prefer markets over allocating capital with very strong oversight and regulation. >> mr. chairman i would yield the gentleman to additional minutes. >> i wanted to get mr. solomon's reaction to the observation. i think it was mr

fannie mae and freddie mac are particular problems, had to be addressed. but under the current situation, the t.a.r.p. was used about companies and make all creditors whole, except for the shareholders, under a well-designed resolution regime, you know, many creditors could, would, should lose money which would create market discipline going forward which is what is desperately need to of what the moral hazard problem you're referring to. >> the recent sigtarp quarterly report states that there is $317.3 billion of on obligated t.a.r.p. funds available right now. do you support allowing the t.a.r.p. of three to expire on december 31, 2009? >> i think it's very appropriate to begin winding it down. you know, i think we should begin clarifying what additional need, if any, are still remaining to make sure the financial system is still stable and will not, you know, run into any new problems. but i certainly think the t.a.r.p. has mostly served its purpose, and that it's time to start thinking about how we're going to unwind, unwind that program. and in addit

secretary paulson, fired the bazooka and the federal housing finance agency placed fannie mae and freddieac into a government conservatorship and then, beginning of last year, 2009, cbo concluded fannie mae and freddie mac should now be included -- this is the important point, they should now be included in the federal budget. and accord to a report, you arrive at the conclusion after considering the following questions, who owns the agency and who supplies the capital, and, who selects the managers, and, who has control over the agency's programs and budget. and, ultimately, cbo, concluded this answer to those question, was... well, the federal government and each one of those. and since then, the treasury continued to purchase preferred shares in the gses, the means to provide them with enough capital to cover their losses. initially, congress put up $200 billion, as one -- 100 billion for each entity and last year the treasury raised the potential commitment to 400 billion and of course, on christmas eve lifted the cap altogether and now it is basically, unlimited. in the latest report

what we need to do is get rid of anime and freddie mac.f they are going to subsidize housing, which they most certainly will, it should be on the budget. that is way democratic government is supposed to run. fannie mae and freddie mac running around the democratic process and open to corruption, and has been corruption. host: of this article notes the hostility that has increased for the federal reserve and the chairman ben bernanke. but before this hostility turned on the federal reserve, when alan greenspan was heading up the federal reserve, there seemed to be admiration or reverence for what mr. greenspan would say. how can this institution be both revered by some people and have distain for mothers? guest: that is easy. when times are good and things are going well, they were great and people like them. when times are bad, as i have been, people say, look, why is the public angry about the puppet of reserve is doing -- they don't like the bailout. they don't like the fact that they are advancing number, the example, ford general motor

one other thing about the fannie/freddie bailout going on. they had that christmas eve extension on the fannie/freddie -- how much money they could buy from the banks and they just raised the capital over $400 billion on christmas eve. we have to let house's job, let the market settled, then everyone will come in to buy and will correct themselves and the banks will go out of business. host: baltimore, on the line for democrats. caller: hello? yes, the article you read some like it was specifically geared toward americans who can afford to pay their mortgage even if. their home is under if now not their fault, the individual american if their house is under water. it is the way the system is run. all lot of people want to blame minorities and people they feel like could not afford these houses as the reason we got into this mess. no, the reason is there were praising those homes of false values. i have been in bet the mortgage and the car business. when they are pushing those loans they don't care what you can afford. it was not my preference

secretary paulson, fired the bazooka and the federal housing finance agency placed fannie mae and freddiemac into a government conservatorship and then, beginning of last year, 2009, cbo concluded fannie mae and freddie mac should now be included -- this is the important point, they should now be included in the federal budget. and accord to a report, you arrive at the conclusion after considering the following questions, who owns the agency and who supplies the capital, and, who selects the managers, and, who has control over the agency's programs and budget. and, ultimately, cbo, concluded this answer to those question, was... well, the federal government and each one of those. and since then, the treasury continued to purchase preferred shares in the gses, the means to provide them with enough capital to cover their losses. initially, congress put up $200 billion, as one -- 100 billion for each entity and last year the treasury raised the potential commitment to 400 billion and of course, on christmas eve lifted the cap altogether and now it is basically, unlimited. in the latest repor

he still insists on a bill of gm, chrysler, fannie and freddie, so there is that cost. until the president commits msf do something, i am afraid a little bit of tax credit here for small business -- although i will probably embraces, is probably too little too late. it is kind of like a guy who goes in and orders five cheeseburgers, two malts and then says he cares about his weight and orders diet coke. if you look at his budget, his trillion-dollar deficit as far as the eye can see, you cannot use enough draconian or apocalyptic language to describe the future. the immediate response today is the fact we do not have the. job the we are mired in double-digit unemployment. host: here is a question by twitter. guest: i personally do not believe that we are under-taxed. we have a spending problem in the washington. you , get the you taxes still going up substantially over the last decade. so, taxes have consistently run -- if you look in the post-war era about 18.5% of the economy. spending has been about 20%. with the spending programs we have now in the next generation i

"the washington post" this morning talks about the role of fannie mae and freddie mac. open-" the obama administration has promised -- "the obama administration has promised to rollout new ideas for fannie and freddie this year. a liberal think tank with ties to the administration has proposed new entities called charter mortgage-backed securities, a privately owned firms that would package mortgages into securities and sell them with an explicit federal guaranteed. securitization fees would go into an insurance fund to protect taxpayers against defaults." this is a editorial this morning from "the washington post." open-" this proposal grapples with the fundamental problem -- "this proposal grapples with the fundamental problem of the old fannie and freddie -- an immediate an implicit government guarantee permitted, then cheap access to bar of funds, which they gambled in pursuit of maximum returns to shareholders. it also wisely emphasizes that the new organization's was held rebalance federal support between rental housing and single-family homes. this seems not only

not sure exactly what the right way to use the money -- my thought was give it to fannie mae and freddiemac and get them to start buying up some of this bad paper. i don't know. but the point, is it's an option that was never considered, so we'll never know whether things could have been done differently. but the within thing we do know is that the rebate didn't work at all. host: we next go to e ri e. greg, missed you earlier. caller: thanks. mr. bartlett, you just mentioned the bad paper. it really strikes me as sort of disingenuous of the right and the conservatives to complain about our deficit and the problems that the government's going through right now with financing all of these things, when you compare the deficit that the federal government has with the obligations that business has due to all of that bad paper, all the debt that they created, the trillions of dollars. i mean, credit default swaups are like $43 trillion. i mean, it's unbelievable the insurance that the business took out on itself against its bad decisions. and now all of that's coming due. but when you compare

of lender freddie mac at the economic club, and secretary tim geithner testifies on capitol hill aboutresident's decision. at 7:45, art guzetti. at 8:30, kevin carey talking

so why not tax the car companies, fannie and freddie?because the government largely owned it. host: next phone call from ohio. guy on the republican line. caller: one thing that could help people who do not have the money to be able to afford health care insurance would be to bring their wages up. maybe make them are around $15 an hour. that would help all lot of people before the insurance we need. it would also -- thank you. host: we will leave it there. we are going to go to josh in rome, georgia. caller: is it generally recognized in the government, and the federal reserve, treasury, that it was a mistake to let lehman brothers go into bankruptcy? the second part is, if lehman bros had not gone into bankruptcy, when the economy have been better now than it is? guest: the joy of hypothetical. i think most will say that it was a mistake, but they did not have a choice. the mechanism did not exist to rescue them. that is one reason the administration is pushing for the power they are asking for. it would allow them to wind down a compan

and fannie mae and freddie mac and all of this and it's government that is the problem. it might be a -- it's not -- i'm not suggesting that government is the answer, but a bankruptcy court system that has evolved from our constitution has proven to be a very effective instrument of helping people and at the same time being fair and equitable. that's my concern. i want your program to work. i really do. i think you need a little bit of a hammer hanging out there. go ahead. >> two things. i just want to be very clear. hope now doesn't really go on or off for what legislation should pass. with all the rules and the tools that are in the arsenal, to today hamp is a dominant part of what we do. if it fails hample, we do other mods etc. my personal background is a capital market background for the first 15 to 18 years of my career. i would share today we have a broken market still in a mortgage security market and the trading market and the government is unfortunately for all of us investing in those. what i do now is i don't know what a bankruptcy on a first lien mortgage wo

i've always looked at fannie mae and freddie mac as being part of the issue and how it grew over timem for the bad behavior of our underwriter banks but i think they were part of those problems. >> let me ask you about my limited time available -- in my limited time available, what is in your view proprietary trading? >> the rules of the federal bank, the national bank, are such that -- but that around. we conduct our securities companies much like our colleagues. >> that is not the bank. >> is part of the holding company. you can talk about it and try to define it, but i think when you all set a position, if you're doing it for the firm, it is managing the risk. the challenges of about regulating proprietary trading in some of the bank holding companies -- what is proprietary and what is customer-driven? if we delay interest to help a metal customer, we have to offset that, because we cannot carry one side of the trade. we have to offset that. on the other side of the trade, it is proprietary. at the end of the day, is to manage risk so that we can provide that middle-market customer

they're going to be made whole -- >> this does not include fannie and freddie, right? there has been an awful lot of teeth gnashing and there has been an awful lot of hand wringing about the way these banks have acted. we will see if the people that have their comments be known about the irresponsibility of their actions, we will see if that is backed up by ensuring that the american taxpayers are made whole for what they have lent these bankers. >> the president pushed these bankers very hard to lend more money when they were here. isn't this $117 billion that they won't be able to lend? >> if you believe that, then you should get an interview with one of these bankers and ask one bank why their bonus pool is $28 billion. it strains any common sense to assume that their share of $9 billion in a year would somehow preclude them from loaning money to a small business when they have set aside $20 billion for bonuses. i do not know how math works on wall street, that is not the way it worked in alabama. >> i have a quick one on haiti but i want to follow up on chips and q

financial institutions, including especially the government sponsored housing finance, fanny mae and freddy mac were too big to entail. i don't expect to discuss these at length. but i mention them as a warning against mono causal explanations for what we've been through. the recession just ended ranks as one of the deepest on record. it was led, as i suggested, by the plunge in housing construction that followed the boom. during the boom, housing prices almost tripled. but by 2005, evidence was emerging that the run up had gone too far. they can see rates began to rise in late 2005 and hit record highs. measures of home construction and sales activity began to fall. home prices also began to decline. that reduced equity values and household wealth. it led to rising defaults and foreclosures. the layoffs in residential construction dampened growth and thus dampened growth in overall household consumption spending. that caused the rest of the economy to slow and then the expansion officially ended in december 2007. we turned into contraction mode. the recession that followed was longer and d

interested in about risk-management practices at lehman brothers and bear stearns and fannie mae and freddieac, those as opposed to others that failed and went under. but i think the american people, we do not care about the risk- management practices at home depot or caterpillar, or even the biggest firms, like wal-mart and chevron, because if those firms bail and go under, and they go away, their competitors swoop in, but i think a lot of the problem and a lot of the political blowback -- we could not allow the largest financial firms to fail because of the broaderçó consequences for the economy, so what i want to do is first focus on the perception of the too big to fail question, and a question for each of you, on both investors and managers and your board members, and that is in the fall of 2008, do you believe that investors that were investing in your firm where pricing in the possibility that the government might come in and provide assistance? that the government might decide that your firm was too big and too interconnected to fail? and then, the related question, that you talked w

"the washington post" this morning talks about the role of fannie mae and freddie mac. open-" the obama administration has promised -- "the obama administration has promised to rollout new ideas for fannie and freddie this year. a liberal think tank with ties to the administration has proposed new entities called charter mortgage-backed securities, a privately owned firms that would package mortgages into securities and sell them with an explicit federal guaranteed. securitization fees would go into an insurance fund to protect taxpayers against defaults." this is a editorial this morning from "the washington post." open-" this proposal grapples with the fundamental problem -- "this proposal grapples with the fundamental problem of the old fannie and freddie -- an immediate an implicit government guarantee permitted, then cheap access to bar of funds, which they gambled in pursuit of maximum returns to shareholders. it also wisely emphasizes that the new organization's was held rebalance federal support between rental housing and single-family homes. this seems not only

we watched fannie mae and freddie mac be taken over by the federal government and then by an executive order right before christmas have them open up the debt ceiling on fannie and freddie where every american is a guarantee-or of the debt which can be as many as $-- 5.5 trillion. we watched negotiations take place behind the scenes which told the bankruptcy court how to push our automakers through there and both of them nationalized, taken over by the federal government. then we watched the $787 billion economic stimulus plan be passed in an urgency that hasn't produced a product and a result except the debt that's going to drag down this economy for the american people. and then behind that out of this house came hurry up and rush cap and trade, cap and tax, pass it, and it passed out of the house and went over there on the docket of the senate. and the american people began to realize what was happening. they couldn't first believe it. they didn't think at first the $700 billion tarp was really real. somehow they trusted that we knew what we were doing here as a majority. the majori

of the community reinvestment act that introduced affirmative action in lending or fannie mae and freddie mac whose irresponsible decisions were a fairly significant factor in all this but all the same there is the elephant in the living room. the factor that more than any other contributed to the crisis but never gets mentioned, is never mentioned in a negative light, certainly in political circles where to the contrary we are encouraged to not even think about it and that is the federal reserve system. most americans here that and don't even know what it is. i am never going to know. this is too complicated. i had better just what the experts take care of this. the experts are a bunch of quacks so it is important for us to learn this material. to know what is going on so that we can have an informed opinion so that we won't inadvertant we enlist in the army of drones who say the solution of the crisis is to give more power to our wives overlords. the federal reserve system is in charge of the country's money supply as i am sure i don't need to tell people in this room. it has the abilit

so for example, fannie, freddie, lehman, all had big events with deeds numbers as of offsetting, butclearly people are taking risks. they settled and cleared. in the benefit of hindsight those that means people were able to hedge their risk, lay

fannie and freddie or two-thirds of all -- are effectively the nation's mortgage lender.portant that we address that issue. we can talk about how to do it. i am more optimistic about this than most people, because i think there are some logical, sound, economic responses to the fiscal crisis. in my mind, is about getting the political will to do its. if history is any guide, we always figure out a way. i think we will get the will to address the fiscal situation. having said that, a necessary condition for addressing the long-term fiscal situation is to get the nation's economy growing again in a clear and definitive way. the economy needs a little bit more help to do that. >> your last point was the most optimistic i have heard in a long time. with that, let's turn over your rudy. >> mae west once said that too much of a good thing can be wonderful. i don't think she was talking about stimulus at the time, or at least not fiscal stimulus. we start with a situation here, obviously the unemployment rate is too high, the national debt is too high, so what do we do? because

mac and freddie mac. american people were getting nervous of the government takeover of private business. when they got to the takeover of the car company, that for sure wasn't george bush. that was all president obama. and when that happened, the american people's light bulb came on because they know cars. when the car czar turned out to be a 31-year-old fellow that never sold or made a car. we don't know if he actually fixed one or what he drove, but he was note qualified to be the car czar and that was the universal opinion. but the american people saw with that example that they didn't know what they were doing inside the white house echo chamber and got ever closer to the civil type of a revolt that took place and we saw it happen in virginia and then we saw it happen again in new jersey and then in massachusetts, a little over a week ago when scott brown was elected to the united states senate, the most improbable place. and when the exit polling was tabulated and they asked people why did you vote

you are for getting chris dodd and barney frank and the great work at freddie and fannie. then you act as though americans are against the average person when the democrats do all they can to drive up energy costs from drilling for oil to creating new nuclear facilities. they have always been against that and it is causing middle- class people to pay more for every good that they buy. how can you make the statement and have the republican ignore it? republicans were single-handedly the cause for the financial breakdown? when you had democrats urging no-money down home loans. they were responsible for things you neglect to mention. it amazes me you could think that the democratic party had no cause in a financial meltdown. guest: well, in the interest of full disclosure of have clients and the financial services industry, however, i disagree and that i laid all of the feet of the gop. i did say was republican policies like the bush wealthy tax cut that were harmful to the middle class. the financial meltdown has a lot of dirty hands. members of congress quite frankly are us