most dangerously and fannie and freddie.re allowed to grow to enormous size, take on enormous risk without capital to support those limits because of the expectation that government would come in and protect them. i completely agree with you. >> i wonder if i can get one answer. my bill -- would that be a proper thing to do now to make sure that line of credit and its inevitable purchase of this kind of debt from the fed, we should restrict that or remove it? would you agree with that? >> as i sat in my statement, when we think about what system should replace our current system, a critical part is to make sure you do not have institutions tied to shareholders taking advantage of a subsidy from the government that leads to taxpayer exposure to these risks. a centerpiece of the reform will be dealing with the moral hazard in the current framework. >> doesn't the monetary system bring this in? but that is designed to be the lender of last resort. they are there to be there to pick up the pieces. >> you said it was different. b

there are freddie -- fannie mae and freddie mac. hybrids, as they were.ic shareholders corporations giving a variety of presidential candidates. it came in the conflict in some ways with the private mandate. there are the federal home loan banks that should not be left out. they play an important role in housing finance. many of them will be in agreement with what we just heard from the gentleman from california. what is to figure out the best way to wind down fannie mae and freddie mac. one important job is to decide what goes in their place. when i say this side, much of that will not the government mandated. there will be some role for government agencies figuring out the interaction. who provides liquidity for the secondary mortgage market? is their role for subsidy. -- is there a role for subsidy? because when you put people in deceen conont the problems we have seen of people going inappropriately into homeownership. there are claims to be made for helping some working people get into homes after careful scrutiny. that they be part of the fha. yes,

most dangerously and fannie and freddie.d to grow to enormous size, take on enormous risk without capital to support those limits because of the expectation that government would come in and protect them. i completely agree with you. >> i wonder if i can get one answer. my bill -- would that be a proper thing to do now to make sure that line of credit and its inevitable purchase of this kind of debt from the fed, we should restrict that or remove it? would you agree with that? >> as i sat in my statement, when we think about what system should replace our current system, a critical part is to make sure you do not have institutions tied to shareholders taking advantage of a subsidy from the government that leads to taxpayer exposure to these risks. a centerpiece of the reform will be dealing with the moral hazard in the current framework. >> doesn't the monetary system bring this in? but that is designed to be the lender of last resort. they are there to be there to pick up the pieces. >> you said it was different. because th

most dangerously and fannie and freddie.stitutions were allowed to grow to enormous size, take on enormous risk without capital to support those limits because of the expectation that government would come in and protect them. i completely agree with you. >> i wonder if i can get one answer. my bill -- would that be a proper thing to do now to make sure that line of credit and its inevitable purchase of this kind of debt from the fed, we should restrict that or remove it? would you agree with that? >> as i sat in my statement, when we think about what system should replace our current system, a critical part is to make sure you do not have institutions tied to shareholders taking advantage of a subsidy from the government that leads to taxpayer exposure to these risks. a centerpiece of the reform will be dealing with the moral hazard in the current framework. >> doesn't the monetary system bring this in? but that is designed to be the lender of last resort. they are there to be there to pick up the pieces. >> you said it was

and barney frank in the center of the fannie and freddie storm.ears and years ago, it was barney frank in allegiance with republicans, including president george bush, who strengthened fannie and freddie. i know someone who was at the fed at that time, said they opened up the champagne when they had home ownership in america pass, what was it, 70%? >> i don't know. >> they had a big champagne event because fannie and freddie had, due to pressure from democrats and congress and republicans in the white house, changed the lending standards and so that more people could own homes. >> all right, well, once these opening statements are done, and the treasury secretary begins to speak, we will take you there. >>> wednesday on "squawk on the street," small may be too high, big may be too low, but midcap may be just right for your portfolio. we're naming the names you should be on the watch for. watch the opening bell live on "squawk on the street" with erin burnett, mark haines and david faber week days at 9:00 a.m. eastern. >>> and right now the dow jon

so, when they tried to blame fnma and freddie mac as a result of -- blame fannie mae and freddie mac, they should blame racism. guest: it is certainly a very charged issue. i don't know about the shorthand for subprime loans -- fannie mae and freddie mac guaranteed what are called conforming loans, which traditionally had not been the subprime loans. in recent years they did get into the subprime market to try to compete with the private lenders. but fannie mae and freddie mac were not big subprime lenders throughout most of their history. host: define what a conforming loan is. guest: conforming loan appears to fannie mae and freddie mac guidelines. you have to meet certain requirements, loan to value ratio, how much your house is worth versus how much you are boring, what your credit score is, and it is only up to a certain dollar value which has been raised in certain areas to $729,000. host: little rock, arkansas, patricia, republican, good morning. caller: 3 or four years ago i lived in houston, texas, and at that time i was astounded because a couple had come over to the united

we've got fannie, we've got freddie, we've got too big to fail. do we have cap and trade, do we have car check unionization? we're going to cover it all with republican judd gregg when we return in the show. when we revisit, a potential collapse of the euro and what is going on with falling home sales? that's something to think about. you're watching cnbc. we're first in business, worldwide. >>> after a century of striving, after a year of debate, after a historic vote, health care reform is no longer an unmet promise. it is the law of the land. it is the law of the land. now, as long as a road that this has been, we all know our journey is far from over. there is still work to do to rebuild this economy. there's still work to do to spur on hiring. there's work to do to improve our schools and make sure every child has a decent education. there is still work to do to reduce our dependence on foreign oil. there is more work to do to provide greater economic security to a middle class that has been struggling for a decade. >> all right. that, of cou

fannie and freddie were relatively late to the game in terms of worst loans. i was critical of them at the time, but in terms of the worst actors in this story they were the private issuers of mortgage-backed securities. >> host: ms. shlaes? >> guest: i would disagree with that. i think the notion of housing and to own a house as a privilege but it is morphed into an entitlement in the u.s.. we speak of ownership and the general sense. we don't really take property seriously and that contributed mightily first to people being willing to take the sub-prime loans, a 40 year mortgage is assuming they would always be able to pay, assuming they could throw the keys in the mailbox and start over. it is a different notion in which we corrupt and it was central to the whole story, combining with the ratings agencies, combining with international capital with a pool of money flowing in but the ownership and the prospect of economy when it became flog that contributed to the crisis. >> guest: these loans are being backed by countrywide. >> guest: this is also about our

and fannie and freddie were a problem. than sustained attention, that is a matter of political will. >> the worst loans were not fannie and freddie. they were coming through citigroup and merrill lynch and the private issuers. they were relatively late to the game. i have been very critical of them but in terms of the worst actors in the story the private issuers of mortgage backed securities, not fannie mae and freddie mac. >> our notion of housing and owning a house and to own a house is a privilege but it is morphing into an entitlement. we speak of ownership in a general sense and don't take property seriously and that contributed to people not being willing to take those sub prime loans, 40 year mortgages assuming they would always be able to pay and throw the keys in the mailbox for the garbage and leave and start over. it is a different notion of property from what we grew up with and it was central to the whole story combining with the rating agencies and international capital and money flowing in. ownership and th

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

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

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

and you're looking at losses with fannie and freddie for years out. and really, with the only way through this is through growth and growth in the economy. so we better hope that we don't go into a double dip recession, which we think is actually a very, very low probability here. we're in the camp that we are in a below average, muted recovery and expansion. but if we're wrong with that, we think the odds favor at least average growth as opposed to a double dip recession. >> and tom, i want to bring you back in, as well. tom vossa is with us, as well. you were talking about a www as hank was just mentioned, a double dip potentially in the last segment. we get housing data today, as well. what are you expecting there? >> i think in terms of the level of sales, we think they'll be quite weak. there are clearly weather effects which have distorted the weather in the whole of the northern hemmis near. what we see is a slight hangover coming through from the tax credit. in terms of the u.s. economy, i absolutely agree that where the numbers look solid. ho

but to get back to the fannie mae and freddie mac -- not much said about ginnie mae. it seems like 90% of the mortgages are underwritten by these three agencies, which my understanding they are owned by the federal government primarily. and since they are the ones that basically took these mortgages and bonds of the securities and sold them to the open market, and once they began to default, they had no choice, the u.s. government if had no choice but to bailout aig because they were the ones who were behind it. i would like your comments as to what i just said. thank you. guest: ok. aig and fannie mae and freddie mac are somewhat related but it is not a direct relationship. what aig was doing that got it into trouble was writing insurance on mortgage securities like those that fannie mae and freddie mac put together. but mortgage securities that were also put together by wall street. so, it did not necessarily include loans that fannie and freddie had purchased and securitized. so these were loans that wall street put together into these really mind numbing securitie

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

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

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

does lead me to the view that to me there are lots of people and lots of critiques of fannie and freddie to me the most difficult problem is that there is a implicit subsidy of the housing market in fannie and freddie. and it's very hard to calculate and very hard to find. people have lots of debates. but some of that subsidy -- a lot of that subsidy is going to the middle class and perhaps in some jurisdictions up to $700,000 mortgages. well, my view is as a government we need to be subsidizing the low-incomed housing and that's most efficiently done by subsidizing them directly. and then as the middle class and higher housing -- i'm okay with letting the private market operate. and if the result of that is that in the middle class and upper class markets you can only have 15-year mortgages and not 30, my view is, well, that's what the market tolerates. that's okay. because we shouldn't be using government resources to subsidize $500,000 mortgages and $700,000 mortgages. and that's -- that's just the strong view. and then in terms of people who really do need the government subsidy, i'd

i think fannie and freddie will stay in limbo for quite a while.don't think there'll be any legislation dealing with them for quite a while. i think that what sounded the alarm here on cnbc on friday. and i think it is a serious issue down the road. but i think for now, they're just going to kick that can down the anything on that this year. >> my job is to forecast the economy and stock prices and more stock prices in the economy. and as you know, the stock market's pretty strong, most economists are being more bullish. what impact, do you think, would happen if the economy and the stock market continued to do better? do you think that your opinions that you get from your recipients when you take these? do you think they could change dramatically if that would take place? >> i don't think there is much relationship at all between how the stock market's going and votes. there's just -- i mean, just sort of look at how, you know, the market has come back over the last year. and look at how the anger has gone up. i'm not saying there's an inverse rel

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

. >> fannie and freddie, there is a little theater: on right now there.y took all the ceilings off on the potential extra funds going to them and end an unnamed treasury official said he does not think it is going to be used. republicans have been attacking this generally and the bailout and had put through a bill which will probably not be passed to put fannie and freddie on the balance sheet. there bormann up for the election on this issue. it looks like barney frank counter -- countered last week and attacked and said both fannie and freddie creditors are not guaranteed. we are reworking totally new housing solutions and maybe they are not part of it. my question is who is going to win this? is it relevant to anything actually done potentially or not guaranteeing freddie and fannie and creditors and insurance? >> when i talk to people about freddie in fannie, they threw up their hands. if i think it will stay in limbo for quite a while. i did not think there be any legislation dealing with them for quite a while. barney frank sounded the alarm on cnbc

fannie and freddie had a lot more latitude on how to shut them down. that didn't work out well. i think it's a pre-log to how the epilog will turn out if we keep it in their hands. as far as other products go, i think the cost rises whether it's credit cards or different kinds of loans. >> right. >> we give the test to people to drive. maybe we should worry about education and make people take a class before we offer them adjustable-rate mortgages. why should it deprive me? i understand how it they work? >> isn't that one of the main problems. could ultimately mean that credit is less available. >> well, credit should be less available for people who can't afford credit. one of the problems we have in this country is people who cannot afford the debt took too much on. >> whose fault is that? >> well, there is a lot of blame to go around, but i have to tell you, here in illinois, people were preyed upon. >> oh, man, we're all victims? wait a second. >> larry, i'm telling you -- >> how do you force someone to borrow money? don't borrow it. >> what i mean -- >> did they put a gun t

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

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

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

. >> let me ask about freddie and fannie. have to go speak against the war, save some money. >> that is always good. to save money. >> i wanted to ask about freddie and fannie in particular. the congress put limits on the liability of the taxpayers and treasury had the authority to do so. those caps on the amount of exposure, we have not seen a reform proposal out of the administration and the scale of losses are both immense. this is a very scary situation and as a fiscal conservative i certainly don't like to see the taxpayers put on the hook for this particularly in a limited way. tell us what the administration's time frame is, why we are waiting to see reform and what will it and failed to provide protection for your kids and my kids? >> what we have suggested is we are going to put in public domain some broad objectives and principles to guide reform. we put out a sense of questions for public comment. this is a complicated issue that doesn't involve just freddie and fannie. we are going to look at the entire set of gov

rallied almost 50% in the past two sessions, first catching a bid after it got the green light from freddie mac to insure mortgages, then today's b. of a. news. radian group hit a new high on the rally. m.b.i.a and m.g.i.c. are at their highest price since last fall. staying with real estate for a moment, some builders saw some action after lennar reported earnings. lennar's loss was not as bad predicted thanks to orders and margins jumping. orders were up 18%. that optimism led to some builder buying; lennar stock is at a new post-recession high. hovnanian and brookfield also got into the act. also running after some new highs were a couple of restaurants. the latest spark today came from the company behind red lobster and olive garden, darden restaurants. on an earnings call, darden said consumer demand is on the mend and industry sales should continue to improve, but with some choppiness. darden raised its earnings forecast after beating the street. steak house ruth's chris also hit a new high. while we're looking at menus, a new item for starbucks shareholders: a dividend. starbucks wil

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

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

getting out of the home loan miss and everybody is going to the federal government, fha, fannie, freddie, because they're the only companies that loan it. megyn: like you and me, looking for mortgages. >> you and me, we want to loan -- want a loan, where do you go, can't go to citi, morgan stanley, the local neighborhood bank, you got to go to the open arms of the federal government that says don't worry, we'll give you this loan, we'll give you this loan at a low rate and if you get your loan through someone else and need to dwawl, it's okay, we're going to take care of it, we're going to mitigate that mortgage, we're going to drop the rate, in some cases, we're even going to drop the amount you owe to that bank. megyn: it's the federal government doing that, is it taxpayer dollars helping, in other words, if you're under water on your mortgage or help getting a mortgage you shouldn't be given and go to fannie or freddie and get it, am i as a responsible taxpayer helping you? >> not only are you doing that, the indication you're giving to everyone is it's okay to default on your mortgag

has freddie mac met its responsible is in that role? and what about within treasury, have sufficient resources been out here to effectively administer and monitor the program? >> one of the recommendations we made back in july last year was that treasury look at making a determination whether it has the accurate enough resources on board to implement the program. we still think they need to be able to do that. in fact, they went from reduce the number of people that they've had on place from 36 to 29. the only have 27 of the 29 position still. so we still think they need to look at whether or not they have enough people in order to deal to do. we do think there needs to be an overall compliance program put in place that's really not fair that as mr. barofsky pointed out, we're going to continue to follow that up. but really, the oversight is really coming from our office and mr. barofsky's office, needs to come from treasury over the services. and that's why we've encouraged them to put their system in place to ensure compliance. >> mr.

and as for fannie and freddie, you're right, that's what got us into trouble in the first place, butexcluded from all of this financial reform. not part of it. not at all. megyn: so you're telling me when i go into citibank or wachovia, now, to apply for a mortgage or a car loan that the government could be involved in that transaction too? >> in the future, question. megyn: really? >> they're trying to set up something called the consumer financial protection agency, a stand-alone agency like the environmental protection agency, for example, appointed by the president, politically controlled, and that would look at your transaction, your mortgage. was it fair? did you understand the mortgage that you just have taken out? megyn: how are you going to do all this? now the government's going to be running a large portion of the health care system, they're already running a large portion of the auto system, now they're going to be running a large portion of wall street and our banking business, who's going to do all this? do we need to hire more federal mows? >> yes. [laughter] haven't y

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

it is not just any mae and freddie mac. it is the fha. we have a number of institutions involved in housing finance. we have a number of functions, the deep subsidy. i want to do that for rental housing. we have a shallow subsidy for home ownership. that specifically works through the fha. we have the function of replying -- the function of applying liquidity. a mixed function turns out not to work. with fannie mae and freddie mac, a privately owned corporation with a public commission did not work well. warren buffett has a great quote. when the tide goes out, you see who has been swimming naked. that is what we found out. we are going to close them, moving forward. let me throw this open to any questions and comments. i would be glad to respond. >> [inaudible] right now, the disaster policy [inaudible] the time. is just too long. it is keeping us from getting people houses while credit deteriorates. >> this is a taxation issue. >> this is the fha rules. we need a disaster policy. it eliminated the flip rule. it allows us to get the hous

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

look at fannie and freddie in the housing industry.f they don't put some regulation on, where do you end up? they have to do something to put some type putfork in the road to say with a minute, you cannot go to battle because look at the coffers, they are all empty. host: here, the president calling for a remake of lead no child behind. it was his predecessors hallmark education initiative. >> and on monday my administration will send to congress our blueprint for an updated the elementary and secondary education act to overhaul our left behind. this plan recognizes that while the federal government can play a leading role encouraging reforms and high standards we need, the impetus for change will come from states and local schools and districts. yes, we set a high bar, but we also provide educators the flexibility to reject. under these guidelines schools that show real progress will be rewarded. local districts will be encouraged to commit to change, and schools that are clearly letting their students down. for the majority of school

freddie and fannie should have been shuttered. they should have been placed into receivership, but uncle sam, ever the chump, couldn't resist and now uncle sam owns 50% of america's home mortgages. eager for more, the obama administration consumes the student loan industry and they completed that transaction today with the signature of a pen. a breathtaking 33% of the private economy was either outright purchased or controlled by the federal government in a span of 10 months' time. but the brass ring of government control health care still taunted this administration. 18% of the private economy, the finest health care the world has ever known, was a long sought-after prize of the political left. today they've realized their dream at the 11th oth hour this morning, president obama was a signage -- with the signage of his name completed the federal government takeover of health care. 33% plus 18% equals 51% of the private economy today controlled or owned by the federal government. it is fitting on this momentous day that we pause f

it is not just any mae and freddie mac. it is the fha.ve a number of institutions involved in housing finance. we have a number of functions, the deep subsidy. i want to do that for rental housing. we have a shallow subsidy for home ownership. that specifically works through the fha. we have the function of replying -- the function of applying liquidity. a mixed function turns out not to work. with fannie mae and freddie mac, a privately owned corporation with a public commission did not work well. warren buffett has a great quote. when the tide goes out, you see who has been swimming naked. that is what we found out. we are going to close them, moving forward. let me throw this open to any questions and comments. i would be glad to respond. >> [inaudible] right now, the disaster policy [inaudible] the time. is just too long. it is keeping us from getting people houses while credit deteriorates. >> this is a taxation issue. >> this is the fha rules. we need a disaster policy. it eliminated the flip rule. it allows us to get the housing st

time to end the ambiguity over the government's involvement fannie and freddie. a car & driver 10best for the third year in a row. ♪ with a direct injection v6 engine. see your cadillac dealer soon, because while there is no expiration date on achievement, on rewarding it, there is. for qualified current lessees, the cts luxury collection. ♪ to finish what you started today. for the aches and sleeplessness in between, there's new motrin pm. no other medicine, not even advil pm, is more effective for pain and sleeplessness. new motrin pm. a man can only try... and try...and try. [ male announcer ] honey nut cheerios tastes great and can help lower cholesterol. bee happy. bee healthy. ♪ >>> the president signed health reform into law today capping one of the wildest congressional battles in recent memory. with us now, former senate majority leader, tom daschle. thank you so much. it's great to see you. you were one of the leaders who made this a prime part of barack obama's campaign. now you've seen it come to fruition. i have to ask you how you feel. >> this is su

trillion in mortgage backed bonds they purchased along with $500 billion in treasuries, fannies and freddies. close to $2 trillion of new money. all ends today. no more new money. peter, what's that mean, no more new money? what's that mean? >> we are going to see a little steeper yield curve. not alarmingly so. the corporate rapt bond mark set coming back. yesterday citigroup, obligation for $525 million. the fact is that people have money to loan other people and they are willing to re-enter the market the fed is vacating. i'm optimistic. as long as it keeps the federal funds rate low, through the summer, we will have adequate credit and will move forward from here. >> okay. peter likes and it i would say that the fact stock create the new money, probably a good thing. one reason the dollar is on the firm side is that -- a good thing. lot of people out there worried that the world is going to come to an end because the fed is not pumping money in. what's your quick take. >> they thought the world would end and never thought the fed's programs would be successful. i agree with peter and agr

your fans as the fannie and freddie. here's what they're going to do in that same period of time.now, continue the way things are. we spent trillions for wall street. this is an electrical for main street. >> steve liesman, what about it? i think that really puts a fine point on how difficult a problem this is, but speaking of keys, housing is really the key to getting this economy back on its feet. >> yeah, it's certainly one of the keys savannah. i think that display underscored the political problem that the administration faced and the pressure that they were facing, that there were all this money that was given to wall street and they kept trying to do different programs and kept kind of nudging up to the edge of where they are right now. now they've taken i think a more significant step. what everybody has been screaming, people in the housing market in the know who i've known have been like principal write down. you must write down the principal. here's the administration with a series of incentives to help banks write down principal and keep people in homes. i would add th

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

unsure about the auto companies and we still have fannie and freddie.itigroup will be the last of the big banks to pay back the money they got. >> which company does the u.s. stand to make the most money from? >> it could be citigroup. remember that the other banks like jpmorgan chase and bank of america have already paid back the money with interest. so it's going to be the banks. this is great news for everyone who hated the bank bailouts. the government can hold on to the shares as long as it wants to. it doesn't want to hold on to the shares. we need the government to get out of the business of investing in banks and private companies in general. most agree about that. the government can sit and wait. >> talk to me about the obama administration's efforts to save the housing market, giving incentives to lenders to stem this huge flow of foreclosures. good idea? >> this is the main street bailout. the other part. the results from this are going to be much more ambiguous. it's very hard it to solve the foreclosure problem and they're now experimenting

other people are going out of business including the 1929 stock crash, insurance companies were like freddie krueger. they raised their hand it continued right along. i don't disagree with much of what you have said and will support the medical device aspect. you and i can talk all day long about it. >> in conclusion, the only.i will make him a liability, my state set up a fund, ran into trouble many years later and guess who got the bill when the claims went through the roof? the taxpayers are now paying. cigarette smokers in particular are paying for all of us now. 's be the best medical services are in philadelphia. >> it is wonderful. the best in the world. >> thank you very much. >> thank you madam chair. i will issue three words dreaded by any politician i will be brief. this amendment is a repeal of the independent medicare advisory board. 19 members of this committee thank you for the opportunity to support my amendment which is extremely simple in its intent. i'm proposing we agree on a bipartisan basis to strike the independent medicare advisory board from the legislation and resto

going through the treasury department, and a lot of this is happening through the servicing arena and freddie and fannie and that is the broader threat. >> and there is a broader threat here to the bank, because this is a political process, and now the members of the hill expects the banks to write-down negative equity and when the banks are not as aggressive as congress thinks, mortgage bankruptcy will come back with a vengeance which will consume everything. >> and some banks said they will lower principle on a number of the loens, and will that put pressure on the banks irrespective of whether we have this legislation or this intervention that we are talking about from the obama administration? >> well, of course, there is tremendous pressure right now on banks to be seen as whether, as reducing principle, and helping people with negative equity, but i am not sure it is an achievable end. at the end of the day, the banks approach this as a business decision, and it is not always in their best interest to forgive massive amounts of principle. >> we are seeing the flash here and i wonder if

staff of the board of governors on the federal reserve from 1980 to 1986 and a senior economist at freddie mac from 1986 to 1994. nick schulz is a fellow at the american enterprise institute. the cato institute in washington hosted this event. to find out more visit cato.org. >> did you know you could view book tv programs online? go to booktv.org. type the name of the author, book or subject into the search area in the upper left-hand corner of the page. select the watch link. now you can view the entire program. you might also explore the recently on book tv box or the featured programs box to find and view recent and featured programs. >> we're talking with dr. aaron sheehan-dean about "concise historicalal atlas of the u.s. civil war." your book tells the story of the civil war through a collection of maps and you created these maps if i'm not mistaken? >> ultimately. >> great. why did you use maps to tell this extremely expansive story? >> well, that's a good question. there's a lot of atlases on the civil war. there aren't many atlases that are user-friendly so i was trying to do thi

it is not just any mae and freddie mac. it is the fha.r of institutions involved in housing finance. we have a number of functions, the deep subsidy. i want to do that for rental housing. we have a shallow subsidy for home ownership. that specifically works through the fha. we have the function of replying -- the function of applying liquidity. a mixed function turns out not to work. with fannie mae and freddieok mac, a privately owned corporation with a public commission did notxd work well. warren buffett has a great quote. when the tide goes out, you see who has been swimming naked. that is what we found out. çw3we are going to close them,ç moving forward. ççlet me throw this open to ay questions and comments. ççi would be glad to respond. >> [inaudible] right now, the disaster policy [inaudible] xdthe time. qxdçv:is just too long. it is keeping us fromç getting people houses while credit deteriorates. >> this is a taxation issue. >> this is the fha rules. we need a disaster policy. it eliminated the flip rule. it allows us to g