Transcripts For CSPAN Newsmakers 20140518 : vimarsana.com

Humanitarian, economic, and military assistance to the rebels, how to engage the International Community on a path toward political transition to eventually a post assad regime. I think we need to reassess our policy in syria. Host we thank you very much for being with us on this sunday and giving us your perspective on the situation in syria. Appreciate your time. Guest thank you very much. Host and by the way, well continue the conversation tomorrow morning. Cspans washington journal, congress is back both the house and the senate. A busy week here in washington d. C. We hope you tyne in at 7 00 am tune in. Newsmakers is next. I hope you enjoy the rest of your weekend. Have a great week ahead. Captioning performed by the national captioning institute. [captions Copyright National cable satellite corp. 2014] coming up today on cspan, newsmakers with mel watt. After that, va secretary Eric Shinseki testifying before the Senate Veterans Affairs Committee about his departments efforts in providing healthcare to veterans. And later a Senate Foreign relations hearing on whats being done to address the abduction of nearly 300 school girls in nigeria. Newsmakers is pleased to welcome this week mel watt, the North Carolina congressman in january became the head of the federal Housing Finance agency which oversees fha, Fannie Mae Freddie mac, housing assets and has an influence on the Housing Market in this country. This week director watt gave his maiden speech in your new position. This is your First Television interview. Thank youthank you for being here. Clea benson covers housing policy and nick is the correspondent with lots of coverage of housing for the wall street journal. As was mentioned, you gave your first public speech this week. One of the things that you said is that you dont necessarily see it as the role of fhfa to be shrinking fannie mae and freddie mac. That marks a significant departure from the philosophy that was pursued by your predecessor. So i was wondering if you could talk a little bit about what actually do you see as your mandate at fhfa . Well, we have multiple mandates. We have the preserve and conserved mandate, assuming the conservatorship part of the statute. We have a mandate to assure liquid resilient Housing Finance markets. And i think we have a mandate to reduce the risk exposure to taxpayers. But thats different than shrinking the footprint. So i try to make the distinction between shrinking the current footprint of fannie and freddie and shrinking their risk exposure which im committed to the latter but i dont think its our role, necessarily to shrink the footprint of fannie and freddie. And why not . Why wouldnt you want to do that . Well, if its not that im opposed to it. We will certainly allow it to happen to the extent that the private sector is ready to step into the space. If the private sector is not ready to step into the space and you shrink what fannie and freddie are doing, then you do damage to Housing Finance in this country. That does damage to the economy. It does damage to the possibility of Affordable Housing and homeownership. I think our responsibility is to reduce the exposure of taxpayers to risk. And thats different than reducing the footprint. Its a subtle difference but it is different. Another big thing that happened in washington this past week was that the Senate Banking committee passed bipartisan really the first major Bipartisan Legislation to deal with fannie and freddie. I wonder if you view the bill as a template or a road map for conservatorship even if it doesnt become law anytime soon. Well, thats hard for me to answer because i havent reviewed the bill. Ive been focused on running fan any and freddie in their current state fannie and freddie in their current state to the extent that i get focused on things that i used to be focused on in congress. I think im doing a disservice to the responsibility that i have. Theres nothing in the statutory mandates for fhfa that gives us a role informing what will happen next. Our role is in taking care of what were doing now. I take that seriously. So i just havent had i havent reviewed the bill. A lot of my Staff Members have reviewed it for the purpose of providing technical input. But weve been careful to say, look we dont support this approach or that approach on a substantive basis. Well tell you how to carry out whatever your objectives are in a more efficient way because we have the experience in that area. Thats technical advice. I dont even do that part of it because i dont think thats my role. I know you said tuesday you werent going to get involved in the legislative process. You also said tuesday, though, that your agency has the power to end the conservatorship the Legal Process through which the government has taken over fan any and fred fannie and freddie. That your agency put them there your agency can end the conservatorship. I wonder if congress is unable to pass legislation over the next few years, which doesnt seem look a remote possibility because it was a close vote on the Banking Committee, what if any steps do you think you should take to end the conservatorships of fannie and freddie . I think about it in terms of i dont think about it in terms of taking steps toned the conservatorship. The statute would tell us to back out. Stat the ute doesnt tell us statute doesnt tell us back out. It tells us to continue to create a National Resilient Housing Finance market in this country. That role is there until Congress Tells us that it is not there anymore. I never think about it in terms of how am i going to end this. I think about it in terms of how are we going to perform what is our task under the statute today. I was very clear about that during the confirmation process. I was asked by the Senate Banking committee, what do you see is the role . I see the role is the role that the statute has given to this agency. And that is to maintain a resilient, efficient Housing Finance market. Thats what were trying to do. Are you saying you dont think, then, that it is your role to take steps to wind down fannie and freddie . A couple of years from now Congress Still has enacted you cant really think just about the present but you have to think about where are these Companies Going in the future. Does it make more sense to spin them off as private entities again or would you just be continuing in limbo and not take any steps in that direction . Youre asking about things that are not in the space that has been given to me. You know, i know its frustrating when i say that to people, but im totally focused on the responsibilities that have been given to me. I dont think about what might happen two years from now or what might happen five years from now. Im totally focused on what are our responsibilities today and if we dont do those responsibilities today there wont be a Housing Market. People dont understand how critically important the Housing Market is to the country. Somebody has to keep that Housing Market going. And right now the Major Players in that space are fannie and freddie. Now, if somebody says ok, fannie and freddie are out of business, a new statute says fan fannie and freddie are out of business then they will tell us how to unwind fannie and freddie. I dont any thats my role to make that determination. Well, fhfa every quarter allows fannie and freddie or requires fannie and freddie to give all of their profits to the u. S. Treasury. This is something thats creating a lot of unrest among the company shareholders. Folks make the point that fannie and freddie cant really be Healthy Companies if it theyre not allowed to recapitalize and have some cushion standing between them, you know, taxpayers and the next crisis. Is that a fair arrangement would you say . Do you think shareholders are right in airing a grievance about this . Not my job to talk about whether its fair or not. I have a responsibility to the taxpayers. My responsibility in the conservatorship is not to the shareholders really. I dont lay awake at night worrying about whats fair to the shareholders. My responsibility is to think about how can i do what is responsible for the taxpayers. Those responsibilities include doing only what is safe and sound in the lending space and maintaining an efficient Housing Market in the housing space. And walking that balance is sometimes difficult to walk. And thats a fulltime job. So i just dont have time to think about what might happen in the future with the shareholders. Its just not my responsibility. You have, though, talked about how the fhfas job is to conserve and preserve the assets of the company. So i wonder, how is allowing the treasury to take almost all the profits of those companies every quarter consistent with a conservatorship designed to conserve and preserve the assets of a company . Well there would be no fannie and freddie but for the taxpayers. So this arrangement was in place when i got there. I didnt create the agreements that set up this arrangement. I dont know whether i would have thought differently had i been there, but i dont have that luxury. Im operating under a set of agreements that were put in place. They require that any moneys that fannie and freddie are left over at the end of the year, they get swept to the treasury for the benefit of the taxpayers taxpayers. I think they consider that a reasonable quid pro quo for keeping fannie and freddie afloat when they could have just, you know, gone out of business. I didnt create this. So its not my job to worry about whether its fair or not fair. Its my job to operate in these constraints. There are multiple constraints that i operate in. Thats one of them. Your agency last month published stress tests that were mandated by the doddfrank act. And the worst Case Scenarios showed potential 190 billion in loss that would be born by taxpayers. Of course, one of the reasons taxpayers would be on the hook would be because those companies havent been allowed to save any of the money theyve made over the past few years. So how are taxpayers being protected against future downturns if the profits are being swept away . I know you didnt make those changes, but would you consider changing them to protect taxpayers . Well, i dont think its my role to change them. If im invited to have discussions about that, i certainly would have discussions about it with treasury, with whoever is counterparty to those discussions. But right now thats not my role. Thats not my responsibility. You know, in a sense, most corporations would fight for the chance to have the taxpayers saying, you know, you dont really need any capital because the taxpayers are standing behind you. Thats really where we are at this juncture. Capital is important for a private corporation, but this is a corporation that is in a conservatorship with the taxpayers having committed to back it in conservatorship. Right . So i kind of flippantly said in the question and answer session after the speech the other day look, the taxpayers are back there. I dont think that its a Bottomless Pit or a bucket that could never be drained. I dont think the treasury thinks of it that way, but right now its not creating problems for them to operate under this sweep structure. I assume that the treasury believes that this is reasonable compensation for saving fannie and freddie when they it. Thats the arrangement that they set up. Its the arrangement that i inherited. Its an arrangement that im comfortable operating under. We have 11 minutes left. In your speech this week you also talked about one of your goals of the organization, of getting more people into homeownership once again, to encourage more people to be able to qualify for loans. How do you make the public feel comfortable that we arent heading back into the same sort of scenario that created that bubble in the first place in 2008 . Well, i try to make them feel comfortable by always starting the sentence by saying were going to do this in a safe and sound way. If you look at the maintain goal that we put in the Strategic Plan right after word maintain, you see that phrase. Im committed to that because while i advocated for people to have access to credit, i was also the first person to introduce a bill that said dont issue irresponsible predatory credit to people. Thats a balance that weve been walking in this country, you know, every time a lender makes a loan to anybody. Theyre thinking about safety and soundness on one side and the availability of credit on the other side. Its a delicate balance. You want that bar borrower to be able to repay the loan. Thats safety and soundness. But you want that borrower to have the benefits of that loan. Thats the availability of credit. Thats the balance that we operate in our banking system, in our housing and finance system, in our entire credit system. Our credit card system. You know, theres no nobody should want to make a loan to anybody whos not going to be able to repay it. Thats the way i think about it. I dont think those two things are inconsistent with each other, but they do have to be carefully balanced and calibrated. So there were a lot of folks who were hoping who were really happy to see a democratic nominee get into your job because they wanted to see some policy changes in the way that fanniefannie mae and freddie mac treat troubled borrowers or pay for Affordable Housing. One of the things you havent talked about yet is the Affordable Housing trust fund which siphons money from fannie and freddie to pay for lowincome housing. Your predecessor didnt allow the companies to fund it. Are you going to fund it . Hes smiling because he knows what my answer to that is going to be. I was joking with him before the speech the other day. I said, you know, the press has been waiting for 120 days for me to Say Something and im going to Say Something. And the first question thats going to be asked to me is, why didnt you talk about what you didnt talk about . Your question falls in that category. It doesnt mean that were not working on those things. There are a bunch of things that i didnt talk about. I carry around i still have my little sheet. I carry it around in my pocket. I have a list of things thats very long that were working on. And the Housing Trust fund is one of those things. Were going to have to make a decision about that, and we will. Well make it. Well articulate the reasons that we go one way or the other. But i cant make every decision in the first 120 days. Right . You know, there are multiple things that fall in that category. Housing trust fund is one of those, but well get to it. What are some of the other issues that youre hoping to tackle soon . You want to share your list with us . Yes. No. No. My staff always gets concerned when i pull out the list because they think somebodys going to tablingle me and take tackle me and take it from me and it will end up in the press. You know, there are things like like we didnt talk about rubbings until somebody asked me. That wasnt in the speech, not directly. We didnt talk about Housing Trust fund. We didnt talk about the stress test. We did all of that in the leadin to the speech. I said theres a bunch of things weve been working on. We didnt talk transactions. Theres a rule that there are multiple issues that we have to make judgments about and we have to do it responsibly. Sometimes the longer you take to evaluate something, the better the result is that you get. I dont feel a particular timetable, a rush to a judgment, on any of these things which is why it took me 120 days to give the speech. Im sure people thought that was counterintuitive for a member of congress that had been somewhat outspoken. Not shy of the press. I hadnt had a press interview. I probably wont have another one after this. Not because im afraid of it. I just dont think thats my role. I think cspan, in all honesty serves a slightly different purpose than some of the other news programs. Well get to all of those decisions. Im comfortable with the pace that were going. Because i think its a reasonable pace. How much consultation did you have with the white house about the announcements you were making on tuesday . None. And have you had discussions with them about any other policies that youre looking at before or since that speech . I meet regularly with other regulators. I meet periodically with treasury. Im on the team. There have been multiple discussions. A regulator doesnt report to the white house. I didnt think i had any responsibility to have a discussion with the white house or anybody from the administration. We were doing what we were told to do by statute. And were doing it. That doesnt mean that we are operating in a vacuum i dont think. Why did fannie mae and freddie mac, in your view, fail . Well, i think fannie mae and fred fred probably failed for the same reason that the whole meltdown occurred. There was a bunch of irresponsible things going on. I think everybody shared in the responsibility for that. You know, whether you were an appraiser, a broker, a lender, or fannie and freddie everybody kind of lost sight of the objective to provide responsible Housing Finance in this country. It became, ok, i make money . Can i make money . So everybody wanted to make money. And everybody was making money. But it was unsustainable. So our responsibility now is to not worry about making money. We wanted to make sure we didnt lose money. But we want to provide Housing Finance in a Sustainable Way until somebody tells us to do it in a different way. Right . So thats the way i view this. Does the fact that fannie and freddie are now making record profits make your job a little easier in terms of doing things to help the Mortgage Market that might have been tougher to do when the government was regularly sending them bailout checks . I think it always makes life easier if youre making money. Generally does. But you also should be sure that you are aware that it was sustain whats sustainable and whats not sustainable. The record level of profits that fannie and freddie have had over the last couple of years certainly are not sustainable because they result in large part from large settlements of litigation that has been in process, from tax adjustments that were made, reserved, set aside for major losses. And when those losses didnt occur and housing prices went back up and things look better then you bring those reserves back on to your books. It doesnt mean youve made a bunch of money this year. It means you did some things to hedge against losing money in if prior years. In prior years. And the bulk of the profits that theyve made have been in those categories. They havent been from the regularized Housing Finance operations of fannie and freddie. So how do you feel were almost out of time. That things are going at the companies . Have the problems been fixed . Are they still a little shaky . There are substantial things that were still working on. Fannie and freddies infrastructure needs a lot of work, which is what the bill part of the Strategic Plan is about. We worry about losing employees in this kind of market. If you had alternatives and your news agency, you didnt know what the future of it was, or you didnt have confidence in the future of your news agency youd be looking at other alternatives a lot more aggressively. I think thats natural. There are a lot of issues that were dealing with that are ongoing issues. Were trying to deal with them responsibly. Our time is up. Im going to ask a question that i hope isnt too big of one of im just curious. After 20 years as a lawmaker where banking and housing policy was often on the plate, whats the most significant thing you have learned now as a regulator in the Housing Market . Ive learned that every single one of these issues is a lot more complicated than people could ever imagine. The members of congress imagine . That even i as a member of congress contemplated. Which means that members of congress have to be really studious and energy what the territory they are operating in. And i really had that challenge. I think we all had that challenge when we were putting together doddfrank. I had that challenge on judiciary when i was put when i was working on intellectual property reform. These are very difficult issues. Unless you do them every day you know i couldnt walk in and do your job. You know a lot more about cameras and camera angles and how you deal with things in the press. You dont really understand the depths of complexity until you get on the inside, which is why i never argued with the Senate Banking committee when they said you dont know everything about the center. Youre absolutely right. I need to surround myself with people who know it. And i have done that. I think were going to be successful running this agency. Thank you for being here this week. When youre ready for your Second Television interview, come back. Thank you. Newsmakers is back with clea and nick after a conversation with mel watt, the new director of the federal Housing Finance agency after 20 years on capitol hill. Lets start with the legislation. In your questioning you both suggested that it doesnt seem togoing anywhere. This is the fannie mae and fred fred reform legislation. Why not . Its a tough issue. Right . Its a very heated partisan issue. And even once you get to a consensus on what should happen, the Banking Committee did have seven republicans and six democrats this past week together on it it still wasnt able to get the kind of majority that you would need to push it to the floor. Its a complex issue. So its going to take a while. I think that now that fan fan and Freddie Mac Fannie mae and fred fred have stable freddie mac have stabilized, whether its the right thing to do to remake the whole system. Particularly on the part of democrats. Worried if you do it wrong,