and we saw the basil committee of the view that the g sexs -- gses mortgage-backed securities should be a lower risk rating reversed at the behest of the banks and lobbying. and once they did and all of a sudden the notion was that all mortgage-backed securities with equal ratings should have the same risk rating, you ended up seeing the banks that had branches become very aggressive in pushing mortgages through their own pipeline. but the investment banks had to figure out another angle. and that was vertically integrating, in many cases, their lending channels. the using third-party originations and then buying servicing and starting to build all of the information in advantage including the relationships which we haven't talked about with the insurers which were, again, part of the crisis, both the private mortgage insurers and the line insurers who were integral and central to the crisis and part of the goal of that financial supermarket that was intended with the repeal of glass steigel. >> thank you. this is such a rich topic, and no pun intended, but i don't even know where to

that takes internet crisis to suppose new lending, and three, a gse, create a new gse that takes onthe risk. i don't know what they would call it, maybe humpty dumpty or something like that. the most important thing is they don't have a plan for rolling out one of these points to the political forces seem to suggest most likely this would be in march of 2013. i see this as a big problem for two reasons. one, the gses are currently securitizing, helping securitize over 90% of the mortgage risk, of new mortgages that are originated. there sure was under 5% and has climbed to over 50%. if we don't get private sector in this market anytime soon, most likely the united states element will gradually own the entire mortgage credit risk. i think it is a scary thought in a time when the gse debt is technically not on balance sheet of the united states government. $75 billion has already been spent and form of taxpayer losses. there's a sense in which it could be a much bigger role from where it stands right now. so i think there are quite important resolution issues, some thoughts of how wil

and a gse should have lower return on equity. it still brings capital in. and you can still make loans. and from a position of strength even make sound loans. will the corporation go somewhere else? yes, if you allow money market and other kinds of activities that are high risk. and the perception is they would be bailed out. then you will just transfer the problem. >> but if you have banks that are 15% or 20% of credit card lending or mortgage banking, those of core banking activities. that is ok as long as everyone is doing their job? stakeholders, rating agencies, investors. that is okay? but with -- combined with specter to purposes that is when it's out of control. >> not only combining but when you give the state collective activities a safety net so i can gamble. look, if a large bank or any bank can make $100 million offer of a trade, guess what? they lose 100 million of of a trade -- even though they say they can't because they are perfectly hedged. >> jimmy diamond should agree with you, if he wants -- jamie dimon shoul

. >> the, we had before this committee and before the house in 2000 a gse reform bill, and it didn'tgo anywhere. 2005 we had a gse reform bill, um, with the royce amendment that really would have tightened things up with regard to lending. that didn't go anywhere. it had passed the house but didn't go into the senate. we had numerous hearings here with the president of fannie mae showing how they cooked the books in order to make themselves eligible for the pensions down to two or three mills to come within that particular window. and it just appears to me that the evidence was out there. both presidents bush and clinton encouraged the gse to buy up subprime and alt-a loans into these packages. and the reason i quoted your statement -- and i'm glad you recognize that you are, indeed, the author of that sentence on page 4 -- is the fact that that really is the core reason for why we're in this financial crisis today. dodd-frank addresses a lot of issues, and that's fine. they're interesting, but do you, do you believe that the power existed within the federal agencies that they could

a gse should have a lower return on equity. you can still make loans. you can make sounder loans. will the corporation go somewhere else? yes, if you allow money markets and other kinds of activities that are high risk. the -- if the perception is there will be bailed out, you have the problem. >> 20% of credit-card lending, those are banking activities. that is okay? so long as anybody is doing their job. the regulators, investors. that is okay? but combining it with speculative purposes. >> it is when you give the speculative activity the safety net. if a bank can make $100 million off a trade, and guess what? they can lose $100 million. even if they say they cannot. there is no such thing as a perfect hedge. >> he wants to be 25% of credit- card lending. that is a good american business. >> i do not know about "good." [laughter] there are things that banks do well. i think the market is theirs to define. i do not want them using the safety net to build their reserves that they then trade on to make their earnings. >> now we should be getting toward that. >> it is already being

guest: first of all, this is not ags the system. -- a gse system. those entities were guaranteed by the federal government from the very beginning and were able to do all sorts of other things to make housing loans. it was a mess. we are not doing that. and there were two. if one of them went down, the entire system went down. they had a system of multiple entities that will guarantee these loans with private capital. the entities can fail. when they do the investors in those entities will lose all of their money and the taxpayer will be protected and the system will be protected. it is much more like the banking system. host: is the taxpayer on the hook at all? guest: that is the risk. but who loses money before the taxpayer? the bank that dunne's the loan, the insurance system, the money that pays into the system, we have a fixed form of capital that is ahead of the taxpayer. that is ahead of the taxpayer. let me just get to that other statement. judge was saying that leverage created the problem. you are right. and we are not going back. what a 3

publicly, if you are too big to fail and if you have access to almost an unlimited safety net you are a gse and should have delivered return on equity. it still brings capital in. you still have that and can make loans and from a position of strength economic sound loans. will the corporation go somewhere else? if you allow money markets and other kinds of activities that are high risk and the perception is they will be bailed out and you have to transfer the problem. >> if you have banks that are 15 to 20 odd percent of credit card lending and mortgage banking, those are the banking activities that's okay as long as everybody is doing their job and stakeholders and regulators and the investors but combining it with speculative purposes that's where it gets out of control. >> it's not only combining it, it's when the could you give us back to the safety net so i can gamble, and feel large bank or anything can make $100 million off of the trade, guess what, they lose $100 million even though they say they can't because they are perfectly hedged but there's no such thing. >> jian-li dimond wa

publicly, if you are too big to fail and if you have access to almost an unlimited safety net you are a gse and should have delivered return on equity. it still brings capital in. you still have that and can make loans and from a position of strength economic sound loans. will the corporation go somewhere else? if you allow money markets and other kinds of activities that are high risk and the perception is they will be bailed out and you have to transfer the problem. >> if you have banks that are 15 to 20 odd percent of credit card lending and mortgage banking, those are the banking activities that's okay as long as everybody is doing their job and stakeholders and regulators and the investors but combining it with speculative purposes that's where it gets out of control. >> it's not only combining it, it's when the could you give us back to the safety net so i can gamble, and feel large bank or anything can make $100 million off of the trade, guess what, they lose $100 million even though they say they can't because they are perfectly hedged but there's no such thing. >> jian-li dimond wa

he will travel to paris next %gco@ç@ç;gse taxpayers.nd with all due respect to my colleague on the other side who is opposed to this amendment, i think that when it's all said and done, the bottom line is, these projects, labor agreements, and this executive order while not requiring the use of project labor agreements, will give an added tool in our arsenal to get the most bang for taxpayer bucks to enhance what we do for our country, for our citizens, we put to work, to make sure that conditions and terms of their employment and work they do are done within appropriate standards. with that i yield back. the chair: the gentleman yields back the balance of his time. for what purpose does the gentleman from maryland rise? >> i rise to strike the last word. the chair: the gentleman is recognized. >> thank you very much, mr. chairman. i thank my colleague from ohio for introducing the amendment. once again on an important issue. although i brings up the fact this has been decided in the chamber twice already on other similar circumstances,

it seems that the obama plan what they're talking about is, gse there is seeing understanding on both sides we want to kick that down the road until the next presidential elections been a clear still in the depths of the housing crisis because foreclosures are so massive that there is a sense we cannot deal with this right now. >> although that is an opportunity as a catalyst or as a real policy also as a solution to define what the housing policy can change your transformed into a. >> i went to talk about the programs that personal knowledge and experience that one is a mortgage we hold on our house in washington is in a neighborhood where house prices have risen, we have equity and are clearly not the sort of people that need to be helped by the government but last year our loan servicer called us up to say because your mortgage is held by freddie mac you qualify for this program. within one week we had no appraisal, at no cost, no documentation of it come refinance at a lower rate. it was wonderful it was the best i have never done. >> you must know somebody. >> no. but the other m