mr. hennessey? >> naked, mr. chairman. mr. mudd, in your testimony you said, let me quote here, i believe in retrospect it was over investment in housing, rigid nation standards slipped, there was too little skin in the game, homeownership rates probably rose too high. i agree with that assessment, and i want a better understand your view about whether fannie's actions contributed to each of these four outcomes. my personal view is either the policymakers on both sides of the aisle contributed to each of these four problems. and i'd like to ask about the contribution of your decision to guarantee roughly $350 billion of alt-a mortgages. let me go through each of the for quickly entering. you said there wasn't over investment in housing. but he is not just a market follower. when penny takes an action to become a market leader just because of their size. do you think your decision to increase participation in the old a market cause of this market to expand further? detainees guarantees contribute to over investment and alt-a mo

mr. hennessey? >> thank you, mr. chairman. mr. lockhart, can we talk all little bit about the failure of fannie and freddie, and specifically why you felt they had to be put into conservatorship, in particular could you talk about what might've happened to mortgage markets had you not done that, and why you drew the line with secretary paulson between equity and debt? >> okay. that's a good question there. we put them in to conservatorship because we felt, and as we really laid out in those various reports, which i think you all have seen copies of, that there capital was it really extremely quickly. we saw credit losses that were significantly more than their capital. we saw the deferred tax asset was not going to be worth anything. we saw that the low income housing tax credit would therefore not be worth anything because they would be losing money far into the future. and that their private-label securities were really suffering badly spirit why not just let them feel? >> why not let them fail? we felt that if we let them fail,

mr. hennessey? >> thank you, mr. chairman. mr. lockhart, can we talk all little bit about the failure of fannie and freddie, and specifically why you felt they had to be put into conservatorship, in particular could you talk about what might've happened to mortgage markets had you not done that, and why you drew the line with secretary paulson between equity and debt? >> okay. that's a good question there. we put them in to conservatorship because we felt, and as we really laid out in those various reports, which i think you all have seen copies of, that there capital was it really extremely quickly. we saw credit losses that were significantly more than their capital. we saw the deferred tax asset was not going to be worth anything. we saw that the low income housing tax credit would therefore not be worth anything because they would be losing money far into the future. and that their private-label securities were really suffering badly spirit why not just let them feel? >> why not let them fail? we felt that if we let them fail,