Fannie Mae and Freddie Mac, Industry Analysts and Academics

Dec 9, 2008

U.S. House of Representatives House Committee Oversight and Government Reform

Witnesses testified about business practices and operations at Fannie Mae and Freddie Mac that eventually led to their takeover by the federal government. They focused on risk management practices and warnings to key company executives about the hazards of the subprime mortgage markets and over extension of credit to home buyers. They also .. Read More
Witnesses testified about business practices and operations at Fannie Mae and Freddie Mac that eventually led to their takeover by the federal government. They focused on risk management practices and warnings to key company executives about the hazards of the subprime mortgage markets and over extension of credit to home buyers. They also talked about the housing industry and its role in the current financial crisis.

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TIME SPEAKER TEXT
00:00:11 Towns, EdolphusU.S. Representative

Here in this committee that we swear all of our

witnesses in. So will you please rise and raise...

00:03:01 Pinto, EdwardChief Officer

(Off mike.)

00:03:05 Towns, EdolphusU.S. Representative

Pull your mike just a little closer. Yes, thank

you.

00:03:07 Pinto, EdwardChief Officer

(Off mike) -- published elsewhere. Here we go. In

my prepared testimony, I show that there are...

00:10:59 Towns, EdolphusU.S. Representative

Thank you very much, Mr. Pinto.

Mr. Kling.

00:12:04 Kling, ArnoldSenior Economist

Thank you. Thank you, Mr. Chairman, distinguished

members of the committee. I would like my...

00:12:18 Towns, EdolphusU.S. Representative

Without objection.

00:12:20 Kling, ArnoldSenior Economist

Thank you.

It was a privilege to be asked to testify in this forum today

regarding the...

00:16:46 Towns, EdolphusU.S. Representative

Thank you very much, Mr. Kling.

Mr. Calomiris.

00:16:52 Calomiris, Charles W.Professor

Thank you, Mr. Chairman. It's an honor and a

pleasure to appear before you and the committee...

00:18:09 Towns, EdolphusU.S. Representative

-- (inaudible) -- Yeah, let me just say that, based

on that, let me just read this, and you...

00:18:51 Calomiris, Charles W.Professor

Thank you, Mr. Chairman. Actually, it was

through the kindness, I guess, of the Chairman --...

00:19:16 Towns, EdolphusU.S. Representative

-- (inaudible) --

(Cross talk)

-- therefore, I'll give you an extra minute --

00:19:19 Issa, DarrellU.S. Representative

Mr. Chairman?

00:19:19 Towns, EdolphusU.S. Representative

-- in your testimony. We'll give you an extra

minute.

00:19:22 Issa, DarrellU.S. Representative

Mr. Chairman, I might ask, from a parliamentary

standpoint, wouldn't it be in our best interest,...

00:19:45 Towns, EdolphusU.S. Representative

Without objection.

00:19:45 Issa, DarrellU.S. Representative

Thank you, Mr. Chairman.

00:19:47 Calomiris, Charles W.Professor

Now I'll read the replacement text: "Tables 1

and 2 show that, comma, for each category of mortgages...

00:24:20 Towns, EdolphusU.S. Representative

Dr. Calomiris, could you summarize?

00:24:22 Calomiris, Charles W.Professor

Yes. Well, I conclude that counter -- actually

the crisis would have been less than half as...

00:25:15 Towns, EdolphusU.S. Representative

Thank you very much, Dr. Calomiris. Mr. Stanton?

00:25:19 Stanton, Thomas H.Fellow

Thank you, Mr. Chairman. I would ask please that

my written statement and two attachments be...

00:25:24 Towns, EdolphusU.S. Representative

Without objection.

00:25:26 Stanton, Thomas H.Fellow

Thank you, sir.

Mr. Chairman, Ranking Member Issa, members of the distinguished

committee,...

00:32:13 Towns, EdolphusU.S. Representative

Let me thank you very, very much for your testimony.

You know, I think it would have been wise...

00:32:33 Issa, DarrellU.S. Representative

Mr. Chairman, I totally agree with you,

and in fact, of all the things that -- my hope as ranking...

00:32:55 Towns, EdolphusU.S. Representative

Thank you very much for your comments.

Let me move right along. I would like to ask our guests...

00:34:02 Stanton, Thomas H.Fellow

Yes, sir, I'd be delighted. If you look carefully

at the law -- and I'm a student of the charters...

00:35:52 Towns, EdolphusU.S. Representative

All right, do the other members of the panel agree

on that?

00:35:56 Pinto, EdwardChief Officer

I have a little different take on that. When the

original goals were set subsequent to the 1992...

00:37:37 Towns, EdolphusU.S. Representative

Yes, Dr. Calomiris?

00:37:40 Calomiris, Charles W.Professor

I just want to add that I think that there were

obviously other motivations too for getting...

00:38:41 Towns, EdolphusU.S. Representative

Thanks.

00:38:44 Stanton, Thomas H.Fellow

I have something, Mr. Chairman.

00:38:44 Towns, EdolphusU.S. Representative

Sure.

00:38:48 Stanton, Thomas H.Fellow

These are two companies funding $5 trillion in

mortgages. The whole point of trying to underwrite...

00:39:25 Towns, EdolphusU.S. Representative

All right, thank you very much. I yield.

00:39:28 Issa, DarrellU.S. Representative

Thank you, Mr. Chairman. This is a wonderful panel

and I appreciate your statements, and obviously...

00:40:18 Pinto, EdwardChief Officer

No. Alt-A actually stood -- one of the meanings of

it was alt agency. They were things that...

00:42:23 Issa, DarrellU.S. Representative

I appreciate that.

And Mr. Calomiris, I see you're shaking your head "yes".

So...

00:44:31 Stanton, Thomas H.Fellow

Absolutely! And that's the logic that led me to

recommend these companies be removed from conservatorship,...

00:45:53 Issa, DarrellU.S. Representative

Okay, thank you.

00:45:54 Kling, ArnoldSenior Economist

Congressman, I have a -- I hope that you will keep

raising the issue of investor loans and not...

00:46:40 Issa, DarrellU.S. Representative

Thank you.

Thank you, Mr. Chairman. And I think with that we'll probably

realize that...

00:46:52 Stanton, Thomas H.Fellow

Homes ownership.

00:46:56 Towns, EdolphusU.S. Representative

Thank you very much.

Congressman Bilbray from California.

00:47:00 Bilbray, Brian P.U.S. Representative

Thank you very much.

And let me thank the panel and thank you for throwing darts at

both...

00:49:28 Kling, ArnoldSenior Economist

Sixty-two trillion (dollars) or something.

00:49:28 Bilbray, Brian P.U.S. Representative

How much?

00:49:30 Kling, ArnoldSenior Economist

Sixty trillion (dollars) outstanding at the end of

last year -- gross.

00:49:32 Bilbray, Brian P.U.S. Representative

Sixty --

00:49:32 Kling, ArnoldSenior Economist

Trillion.

00:49:34 Bilbray, Brian P.U.S. Representative

Sixty trillion (dollars).

00:49:34 Kling, ArnoldSenior Economist

And it came from nothing 10 years ago.

00:49:36 Bilbray, Brian P.U.S. Representative

Yeah, which was really a product of our regulatory

reforms squeezed off one side and left it...

00:50:30 Calomiris, Charles W.Professor

Yes. I'd just like to say something briefly

about that.

On an optimistic note, remember...

00:51:37 Pinto, EdwardChief Officer

And that was demonstrated by Lehman Brothers when they

unwound. It was, I believe, it was a...

00:52:29 Stanton, Thomas H.Fellow

I think the issue of credit default swaps has been

covered. But I want to point out something...

00:53:32 Bilbray, Brian P.U.S. Representative

Mr. Chairman, I just want to say, the three of us

up here actually are sons of areas that were...

00:54:35 Towns, EdolphusU.S. Representative

Thank you very much. Thank you.

The gentleman from Ohio -- Idaho --

00:54:38 Sali, BillU.S. Representative

Idaho. (Laughs.)

00:54:38 Towns, EdolphusU.S. Representative

-- Congressman Sali.

00:54:42 Sali, BillU.S. Representative

Thank you, Mr. Chairman.

Gentlemen, I'm sorry that I was gone for a short while while you

were...

00:55:44 Pinto, EdwardChief Officer

Excellent question. In my prepared remarks, I

proposed two solutions, a short-term and a long-term....

00:59:45 Sali, BillU.S. Representative

You're suggesting that the mortgage lenders are going

to have to take the loss of writing down...

00:59:52 Pinto, EdwardChief Officer

The mortgage lender -- well, the federal government

is on the hook for -- I hate to tell you...

01:00:06 Sali, BillU.S. Representative

Well, we spent half a trillion dollars in deficit in

last year's budget. That doesn't count...

01:00:34 Pinto, EdwardChief Officer

You already own these loans. You're responsible for

them -- $4.6 trillion of the $12 trillion...

01:00:40 Sali, BillU.S. Representative

But you're suggesting we can create value out of thin

air --

01:00:44 Pinto, EdwardChief Officer

No, I'm not creating value out of thin air. You have

to write down these mortgages to a level...

01:01:22 Kling, ArnoldSenior Economist

I'm going to disagree with that. We've agreed on a

lot of stuff so far, but I'm going to disagree....

01:02:31 Sali, BillU.S. Representative

Aren't those same 8 million people going to live in

those same houses, though? I mean, they're...

01:02:40 Kling, ArnoldSenior Economist

Or they will rent their houses. But I think we have

to get to a natural market with supply and...

01:07:06 Towns, EdolphusU.S. Representative

Let me say to the gentleman, your time has long

expired.

Let me thank all the witnesses....

RELATED PROGRAMS

PEOPLE GRID LIST

  • Calomiris, Charles W.
  • Kling, Arnold
  • Pinto, Edward
  • Stanton, Thomas H.
  • Bilbray, Brian P.
  • Issa, Darrell
  • Sali, Bill
  • Towns, Edolphus

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