mr. demarco? in his testimony he said it was a series of poor business decisions that led to the conservatorship. do you agree or disagree with that? >> um, in my tenure at freddie mac, i've tried very hard to -- >> i'm not asking about that. i'm asking about decisions that led up to the entering of a conservatorship. it's a very simple question. were there poor business digs that led to that? -- decisions that led to that? the answer's, obviously, yes. i mean, we can have this exercise as long as you want to have it, but the answer has to be, yes. right? or else there wouldn't have been a conservatorship. >> it's difficult for me to say that because i don't want to second guess my predecessors. >> well, we are paying you a handsome salary because you're supposed to be an expert in the field, and you not going -- you're not going to second guess your predecessors? >> it's because it's very difficult to say what one would have done at that point in time given those circumstances and pressures that

mr. demarco's opinion on this, which i do, we differ on the bonuses, mr. demarco said very clearly that, in fact, that they are making a profit now on current operation. they -- since 2008 when mr. paulson use the authority to put them in receivership and the appointed mr. demarco's predecessor, that they have, in fact, been profitable. >> which are exactly the employees that we are punishing now, the ones who are now making a profit on the new portfolio. we are punishing them because they are not making a profit, or all of the losses on the prior port for the, which is what is, what is overdue just about what we are doing. i just, let me just, i'll invite you cink's. i hope the senate saves us from this dubious political maneuver that we're undertaking your. it's wonderful politics we are doing. i conceded that in my comments. but the substance of what we are doing i think is irresponsible, and we just come in this amendment, we are making it even more irresponsible. so, i'm happy to yield to the gentlelady. >> i'd like to ask mr. green, i understand mr. w

mr. demarco. my own confession -- the profession before i came to the congress already had a bad name when i was a lawyer. i must say i think fannie and freddie have given home ownership of bad name. that is what i am interested in your oversight of your own lawyers. i want to continue -- i was particularly struck by the major law firm you used which new york district court judge, this is really unusual for judge. it may even be a call for someone to go before the ethics committee or the bar, talk about finding falsities contained inside paragraphs inside ten entire position that the firm had submitted. this was a foreclosure case. the case was federal home loan mortgage corp. and the judge went on to say the misrepresentation here of the material statement was outrageous and the firm had unseated the proper administration of justice. what struck me is the judge said this was not the first time that the firm had been unethical. how could the law firm operate on behalf of fannie and freddie after b

mr. demarco? >> i think they should be compensated at a market rate retainingws fhfa' suitable executives. >> i yelled back. -- yield back. >> the witnesses testified that part of their conversation is based on how fannie mae and freddie mac perform. i have serious questions about some of their so-called achievements. let me give you an example. states that credit losses were actually lower than expected in 2010. that sounds like good news but the reason for the lower losses is that many services for caught up in the scandal and were forced to halt their foreclosures during the fourth quarter of 2010. mr. demarco, how can you take credit for fewer losses if it was from the scandal? >> the performance over the last year that was better than fhfa projected is reflected only in part by the foreclosures. it we have had better performances then were projected and have a better performance of loan modifications than had been projected. it is reflective of the fact that the steps that have been taken are

mr. demarco. >> thank you. >> question -- does fannie and freddie and fha's dominance of the mortgage market allow for innovation in the private sector? you know, we're already heard about some of the businesses being shut down and jobs loss because they can't compete with the taxpayer government programs like fha, so should we continue to allow the government sponsored housing programs to compete and reach out throughout the private sector? >> well, to the first part, i don't believe having the model of fannie and freddie in conservativeship is conducive to innovating new productses, and we're not introducing new products, so i think the sort of, you know, market framework that would allow for innovation and introduction of new instruments and so forth would better happen outside of the realm we're in today. >> okay. then, you know, in the white paper, treasury's option one was a privatetized system of housing finance with government insurance role limited to the fha, the usda, and department of

mr. demarco? >> i believe they should be compensated at a market rate that allows fhfa's conservator to ensure that we can attract and retain suitable executive -- executives to run these companies. >> thank you. i yield back. >> the johns time has expired. -- the gentleman's time has expired. >> compensation is based on how they perform, but i have serious questions about their so-called achievements. let me give you an example. fannie and freddie's filing states that the credit losses were actually lower than expected in 2010. it sounds like good news. however, the reason for these lower credit losses is that many of these services were caught up in the robo scandal. mr. demarco, how can you take credit for fewer losses that resulted from the robo signing scandal? >> congressman, the performance over the last year that was better than fhfa had projected in a published report in october, 2010, and it is reflected only in part by delaying foreclosures. in fact, we have had better than projected un

mr. demarco for his presence today to come and testify on your draft legislation. title 3 of the discussion draft prevents federal departments or agencies from engaging in forced principal writedowns. i am not clear whether or not you're talking about a ban on principal writedowns as it applies to new loans or existing loans. this is with respect to any securitized mortgage loan. you have said that given the calculations of fhfa, fiscal writedowns on freddie mae and fannie mac loans are not

mr. demarco. you, your staff have in many ways almost been stunningly accessible when we've had technical questions, when we've just wanted to cut through some folklore. there's very few people in the bureaucracy i've found here in washington who will return a phone call that fast and be willing to be that detailed with us. so there's a great appreciation there. be um, as i've shared many times with the chairman and many of the members here, my personal fixation is the proper pricing of risk. because i believe that the failure to properly price risk is actually what's caused many of the cascades that we see around us today. as i'm being told, freddie mac lost another $6 billion last quarter. you know, we are basically suffering through, you know, sins of the past but sins of not pricing risk. um, the other thing i do want to stand here and make it clear, um, i understand this is a draft bill. there's a lot of things in here i am excited about, there's a lot of things i'm hoping as we hear testimon

mr. demarco. we welcome your comments on what is the 15th proposal the subcommittee has reviewed in the area of subcommittee mortgage markets this year. i know that this question is not exactly on point with what we are reviewing today, but since you are here, i wanted to follow up on something i have been involved with your with your office in the past several months. a recent story was in the october 19 issue of the new york times entitled "rush to drill for natural gas create conflicts with mortgages." it has raised important questions about how many of these new gas leases on private property is in many states that do not have a history of such releases -- such leases and how this will impact mortgages. the article reports there are concerns that these leases do not ensure compliance with certain standards set by secondary lending institutions and earlier this year, i sent you and your staff questions on this area. i appreciate your response. but your counsel's response raises questions in lig

mr. demarco would like to handle it going forward. >> mr. demarco would like to see housing finance reform, and so would i. the administration has not taken the lead. the president has not taken the lead. two large entities where he could have a larger and direct say. he tends to make speeches rather than actual consultations. >> their discussions about fanny and freddie's losses going forward. mr. williams at what point will your institution be able to pay the taxpayers for this extraordinary support? >> congressman, i do not venture a time frame in which we would do that. we are very focused on our credit losses. as you have seen from the conservators report. the activities we have undertaken are reducing future expectations around this area. we will continue to focus on this. bear in mind, much of what we are dealing with is also driven by the state of the economy, unemployment, and declining home prices. >> mr. alderman. >> as you know, we pay a 10% preferred dividend on our outstanding draw which for freddie mack is now $70 billion, so o

mr. demarco, as soon as possible he said. >> demarco is the regulator over fannie and freddie, right?that's right. >> so is he the one -- is he the one who actually authorizes the bonuses, or is it congress? who authorizes it? he supports them and thinks it's a good idea and a good way to attract talent. but who greenlights it? >> in the end, mr. demarco has to sign off on this. the federal housing finance agency is an independent agency that congress created in 2008. and they didn't intend -- congress didn't intend for the agency to be around 3 years on, it was supposed to be a temporary thing. but congress and the administration have not really figured a way to -- to replace fannie and freddie or to figure out what to do next, so this temporary conservatorship continues to this day. >> does he have any sort of reflection that he might have a tenure? they have lost $2 billion more this year than last year in just a quarter, from $6 billion to $4 billion was the difference. so they are so unsuccessful that they need another bailout of $6 bill whereon and they make incomes in the range

mr. demarco. does fannie mae and freddie mac and fha's dominance of the mortgage market allow for innovation in the private sector? we already heard about some of the businesses being shut down and jobs lost because they cannot compete with the taxpayer back in government programs like fha. should we continue to allow the government sponsored housing programs to compete and to edge out the private sector? >> to the first part, i don't believe a model of having fannie mae and freddie mac in conservatorship is conducive to innovating new products and we are not introducing new products. i think the market framework that would allow for innovation and the introduction of new instruments and so forth would better have an outside the realm we are in today. >> in the white paper treasury's auction one, there is a privatized system of housing and finance role limited to the fha, usda, and department of veterans affairs. it looks a lot like the plan that the republicans have been promoting for a couple of

mr. demarco, is appointed by the president.ernment jobs in republican administrations as well. it's sort of appalling that he has his fingers on the purse strings of enormous sums to gra gratuitously grant bonuses. is there no one that can block it or do you have to go through a procedure? >> well, i've been told that treasury the department also had to sign off on it and has signed off as well. >> greta: so secretary of treasury geithner has in theory signed off on this? >> that's what i was told. the treasurer. i don't know if it got to his level or not. he's a busy man. it's just symptomatic of the reckless behavior. michael lewis book, the big short, they talk about this misbehavior of fannie and freddie, especially fannie all during the 90s and into 2000 and this guy johnson made huge millions and millions of dollars in bonuses while they were scamming the american public and the regulators. i mean, it also is indictment on members of congress. they were part of this whole deal, and it was just a ponzi scheme that could no

mr. demarco, the conservator trying to figure out how did he justify these bonuses. >> this issue can comep during the cnbc debate last week when john harwood asked newt gingrich what he did or his firm or he as a consultant to earn $300,000. let me play that tape for you. >> your firm was paid $300,000 in 2006. what did you do for that money? >> are you asking me? >> yes. >> i offered them advice precisely what they didn't do. when they walked in and said to me we are making loans to people with no credit history and have no record of paying back anything but that's what the government wants us to do. i said to them at the time this is a bubble. this is insane. this is impossible. >> i guess you can take from that it all would have been fine if they would have listened to newt. >> i think he is saying that, too. he will have to answer that question a little bit furter. that's the kind of money i'm talking about. $300,000 to go newt gingrich to tell people something they should already know what are they doing with the money they already have. maybe shea should pause and do something for t

mr. demarco, basically, asking him to rescind this action.oping that we will be able to get a good, bipartisan representation from the united states senate saying, if you fail to correct this, congress will take action to force it. so that's something we will be working on today and tomorrow and hope to get that letter on. >> reporter: you are holding that now? this letter? >> i am. >> reporter: that will go to fhfa, tomorrow, let's say? >> we are hoping. it takes a while to get as many senate offices as we can, contacted. but we want the senate to be on record that we disapprove of what has been done and we want that action reversed double that this should be part of the discussion, double it may hurt -- do you believe it may hurt president obama? >> i think it's part of the subtext. obviously, we are in a political season. we are heading into a political season, based upon the campaigns that are underway and the way that the president's campaigning around the country on his bus tour, he's clearly in campaign mode. so i think that this is th

mr. demarco as a regulator to permit the bonuses to go forward? >> i think congress, and here's the problem with the bonuses. fannie mae has lost money in 16 of the last 17-quarters. you can't be rewarding that kind of nonperformance. that's what has people outraged. but to your point about whether or not congress can do anything about it, they can but it takes some time to get things through the congress. my question is where is the president in all of this? why can't the president, these people work for him, he sets the pay, and they set the pay, he should come in and suspend the bonuses right now. but there is legislation working its way through the congress. the house, as you said, has already acted. there was a vote yesterday in the committee, financial services committee, 52-4 in favor of suspending the bonuses. the senate has a couple amendments filed we are hoping to get action on it soon. it has congress worked up and i think it has the american people worked up and with good reason. >> where is the president. has he said anything? and ha

mr. edward demarco is the acting director of the federal housing and finance agency.ant to the rules of the committee, i will ask you all to rise and take the oath. please raise your right hands. do you solemnly swear and affirm that the testimony you are about to give will be the truth and nothing but the truth? let the record indicate all witnesses have answered in the affirmative. please be seated. i will not have the heaviest gavel today, but i will tell you when the yellow light comes on, try to summarize. i recognize mr. williams for five minutes. >> i appreciate the opportunity to speak with you today. >> the closer you have the microphone, the better. >> i appreciate the opportunity to speak with you today about the important work that fannie mae is undertaking and the compensation program put in place for the executive team. fannie mae has a dedicated team of talented professionals working to carry out the critical work of the company in the housing finance market. we have immense responsibilities. the complexity of the challenges we confront each day require

mr. demarco -- told congress last year, those at the head of the mortgage companies during the time of collapse were dismissed but said the pay lures qualified executives. whatever happened to asking patriotic americans to come and serve and help homeowners out of this crisis? whatever happened to patriotic americans who would serve and help the nearly half of the homeowners in my state of arizona whose mortgages are under water. marco told lawmakers he's concerned that a federal pay system could put the company in jeopardy of mismanagement. could put the companies in jeopardy of mismanagement and result in another taxpayer bailout. they just asked for $6 billion more. he said the compensation packages at fannie and freddie are part of the plan to return them to solvency while reducing costs to the taxpayers. a march report by fhfa, obviously ignored by mr. demarco, their inspector general said the agency lacks key controls necessary to monitor executive compensation, nor has it developed written procedures for evaluating these packages. in other words, the beat goes on. business as usual. fann

mr. demarco of the housing agency will be testifying about? guest: i have no idea. we think of that as one tool in a broad range of tool to help people. we are grateful for the harp program but i would not say it's the dominant solution out there. we have seen a higher number of loan modifications be helpful where refinances don't make sense. host: thank you. >> we'll talk about spending and the budget on "washington journal." jim mcdermott joins us and representative bob goodlatte talking about his balanced budget amendment. also, yuval levin about his story on the philosophy underpinning everything. that begins at 7:00 a.m. eastern on c-span. >> for those who say my -- my friends, for those who say we are rushing this issue of civil rights, i say to them, we are 172 years late. for those who say, for those who say that this civil rights program is an infringement on states' rights, i say this -- the time has arrived in america for the democratic party to get out of the shadows of states' rights and ato walk forthrightly into the bright sunshine of human rights. >>

mr. demarco from the federal housing finance agency will be testifying about today? guest: no idea. that is one tool in our arsenal to help people avoid foreclosure. we are very thankful to the program, but we have seen a higher number of loan modifications where refinancing does not make sense. host: live now to the house floor for morning speeches. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] the clerk: the speaker's rooms, washington, d.c. november 15, 2011. i hereby appoint the honorable allen b. west to act as speaker pro tempore on this day. signed, john a. boehner, speaker of the house of representatives. the speaker pro tempore: pursuant to the order of the house of january 5, 2011, the chair will now recognize members from lists submitted by the majority and minority leaders for morning hour debate. the chair will alternate recognition between the parties with each party limited to one hour and each member other than the minority and minority leaders and the minority whip limited to five minutes each, but i

mr. edward j. demarco. >> you know -- >> that's the guy we just heard. >> i agree with almost everything that mccain p said there with the exception of the beginning part of it. he literally said fraud and corruption. i don't think there's anymore fraud and corruption going on in there. that's not what this is. this is a really sloppy housing market that's not getting any better but the other part, the second half of the statement. they should never get bonuses and that's the part i agree with. don't pay out bonuses when really all they're doing is overseeing an entity, a holding bank for crappy mortgages. >> what i'd like to know is what are the modest goals they had to achieve to earn these bonuses? because apparently, they only had to meet modest goals and after the taxpayers gave so much money to these two firms, why did they put in the fine print that you only had to meet modest goals? i mean, for gosh sakes, you've already taken the whole housing market under. why would you only have to reach modest