tv Washington This Week CSPAN August 14, 2011 10:30am-2:00pm EDT
from the second tier of leadership on both sides. i think it's pretty clear they will be having their marching orders from the highest levels of leadership in congress and it won't be one of these freelance deals like the gang of six where these guys were in a private room3. . there has been legislation filed requiring that meetings be public and members of the committee disclosed their cake and contributions -- their campaign contributions. >> for those who are hoping for a deal, the idea that they will be accountable to leadership is not entirely a bad thing. the gang of six is all well and good the la is notw. if you want to see something -- something become a law - that may help make this
happen ve. the super committee is guaranteed if they get an up or down vote in the congress with no other plans that had. -- this does not mean there cannot be a deal. host: what about the role of the white house? >> the white house does not have a direct role. they are more of an influence in terms of setting the tone. the white house has set a tone for the democrats which is that we are willing to compromise. it is unlikely that republicans will come to the table and
propose a raise in taxes and democrats say now. they have gone through several rounds of this already. there were intense rounds of negotiations with speaker john boehner. the question is less about how we do it and where we can cut and more about where the politics of art? are. host: what about senator sanders relationship with harry reid or democratic leadership in general? do they feel the pressure from my center centers? >> -- from senator sanders? >> he is out on the left. i'm not sure they pay that much attention to what he says. he said loudly and he says it clearly and often. he cannot help but get their attention from time to time.
there is a pretty powerful political dynamic going on here. i think we will see this debate carrying on into next year and straight out to the election. i think you can pretty easily see next year's election being almost a referendum on these two deeply divided policy positions. host: thank you both. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> as an aspiring journalist, i'm preparing myself for the very small salary i will be starting out with. >> to be a good journalist, you have to be disciplined to put aside your bias and report the facts, the truth than the reason why people love fox news and movies so much as because it is an experience, is emotional, it is love and hate. >> from bought washington journal -- from the washington
journal media conference, where they get their news and information in today's multimedia environment, tonight on cspan's "q7a." what's more video of the candidates and see what political reporters are saying and track the latest campaign contributions with cspan's web site for campaign 2012. it helps you navigate the political landscape with twitter feeds and facebook updates from the campaigns, candidate bias, and the latest polling data plus links to cspan media partners in the early primary and caucus states all c-span.org/campaign 2012. >> next, former treasury secretary henry paulson talks about the wall street bailouts of 2008, the current financial climate, and u.s. economic relationships. china he spoke at his alma maters dartmouth college in new hampshire. the forum begins with a question posed by his former dartmouth classmates, former labor
secretary robert reich. this hourlong form is moderated by the former u.s. senator judd gregg. [applause] >> the first question to each speaker comes in the previous secretary. last week we welcome robert rice to have the following questions ch.-- robert reischau >> you get to pose a question to our next speaker and the next speaker -- maybe this is a site with your next question -- but our next speaker is your dartmouth classmate and former
treasury secretary henry paulson when. is sitting in that chair, what would you like him to answer? [laughter] >> i have two related questions. why in the wall street bailout did you got condition those funds on wall street doing several things it needed to do, the delay with regard to mortgage mitigation and making money available to main street through small regional banks? also, putting some constraints on lobbying by wall street firms, particularly during the time congress was trying to reform the financial system? [applause] secondly, after you explain all of that -- [laughter] i would like you to tell us
whether the social benefits of wall street exit the social costs. thank you. hank. [applause] >> some things in life never change. [laughter] that sounded like two questions rather than one. i will start with the first one -- i will start the second one and go to the first one, social security verses benefits. i'm a capitalist. [laughter] i believe that we have the most prosperous country on earth which has been for a good while for many reasons but one of the reasons is that we have world- class capital markets. if we want to stay on top and we want to remain competitive, we will need strong capital
markets. why do we need this? jobs and growth. it is funding the companies that will compete in the global marketplace, create jobs and prosperity for americans. why do we need good capital markets? to provide credit for families that need to buy homes or send their children to school or automobiles or cars or for retirement security and investments. i know what bob ask the question the way he did because our financial markets and wall street failed us big time in 2007 and 2008 that there has been a lot of focus on that and deservedly so. there were mistakes and for risk-management and business practices, flawed business practices, abuse. if we just leave it at that can only blame the banks who deserve a lot of blame, we will be right back here again. there has been much less talk about the flawed government
policies that created this problem. we as a country say too little had borrowed too much. -- saved two little and far too much. that drives from policies that are flawed and encourage us to do that. why did we have a housing bubble. we stimulated the living daylights out of housing through a series of things like tax laws, fannie mae and freddie mac, fha and so on. we need to deal with some of those things. we had a flawed regulatory system. it was not a matter of enough regulation, we needed better regulation but we had a system that was plane broke. someone put in place after the great depression and had emergency powers to deal with banks but no mercy authority to deal with non-banks. the lesson to take away is not that capital markets are not worthwhile and provide social
benefits. the lesson we need to take away is what mistakes were made so we can correct them. the purpose of the tarp-bank capital program in october when we announced of that program and on a single day, we put capital in nine big banks with over 50% of the deposits and the days and weeks after that, we re- capitalized many banks that were not failing. the idea was that rather than nationalizing banks as they failed and putting restrictions on them was to get ahead, inject confidence and prevent a collapse and re- the banking
system. you can only do that if it was a voluntary program. we need to design a program that was going to protect the government and they would get paid back and the banks would voluntarily accept. let me really quickly put that in context for you. in early september, we had been forced in order to prevent a real calamity, come in and essentially nationalized fannie mae and freddie mac. they had $5.40 trillion in securities outstanding. it would have been an incredible disaster if we had not done that we did that and fired the ceo's wiped out the equity shareholders. the following weekend, we had lehman brothers, merrill lynch, and aig going down at the same time. we tried very hard and could not find powers that worked to save lives and brothers. we tried. merrill lynch avoided failure
because they were acquired by bank of america. aig was taken over and the ceo was replaced. it was nationalized. we have to have treasury guarantor -- guarantee $3.80 trillion of money market. wamu had essentially failed and was acquired by j.p. morgan. wachovia was acquired while it was failing. after we had tarp, six european nations have come in and had to nationalize certain banks. we had to do something very dramatic and move quickly. we were tired of dealing sequentially with one failing institution after another and dealing on an ad hoc basis. we want to do something that did
not look like nationalization and does not have government control. we wanted to design a security and i had hoped to expected we would get 2,000-3,000 banks to accept it. no sooner than we announced it, people started saying that you cannot let the banks get away with this because you have to put up restrictions. you have to make them land more. we said more than what? how are we supposed to make them land. lend. as soon as that happens, the banks got concerned and congress passed legislation to retroactively change the rules. we had many banks that applied and had been approved and many others did not apply3
. rather than having 3000 banks, we had roughly 700. it worked. they also rushed to pay back the government. i save 3000 banks had taken captive for three-five years, that would have been more useful than a stimulus plan is interesting to me that the same people that stigmatized the program and criticized it and said you have to make the banks do this or the ones that cause the banks to pull back and regional banks not to take money. they're the ones that now say why don't you give money to regional banks? why did more banks take it and why did not that lend more? i care a lot about it. i was in a class and tried to explain it and the class did not understand.
when i left government, thought tarp was one of the most successful government programs of all time. a poll showed 92% of the american people were against the tarp and 60% were against torture. what do i know? [laughter] i think there reason is that we don't like bailouts or rescues. in our country when we believe that if people take risk they can make money but if they take risks and the taxpayers have to bail them out and they will pay bonuses, that is wrong. i think it is wrong. everybody thinks that's wrong. i did things that were aborted to me but i did it for the american people. what would have happened if we had one of these big institutions go down? i was never able to make that connection between wall street
and main street. even though bob asked two related questions, they are really one and the same per. if you don't understand the role of markets and how important they are to main street, you'll never understand why we had to do what we did. on that note -- you can tell i don't care about this, right? [laughter] >> i'm sure you would have in bob's class. >> bob was a better student and i was and he was a great public speaker even in college and a tremendous actor. [laughter] he was. he was the started all the plays. -- he was the star in all the plays. >> we want to thank you for
putting this program together. is this working? >> they said they regard to have a hand held. >> there is a green light. i want to thank president kim for putting this program together. i think they have been great. i want to take a moment of personal privilege. it is a great honor for me to moderate this program with secretary paulson. i play small part in the effort to try to address the financial problems of 2008. we were on the brink of a disaster of extraordinary proportions as a nation. as a world. one person stood between this country in the fiscal meltdown of catastrophic proportions which would have impacted main street in an incredibly dramatic
way and that person basically thought outside the box and did things that were not typical of governments and got the congress to do things that i did not expect they would do and let the world -- and let the world by process of stabilizing and trying to correct what were some fundamental failures of our financial markets. as a result, we avoided a massive disruption which would have affected every american in an incredibly difficult way. unemployment would have gone beyond what it has gone. we probably would have had an event equal to the depression in my opinion that one person stood up and did what needed to be done he was hank paulson. [applause] it was probably something he learned here at dartmouth. [laughter] first off, we appear to be
facing another significant financial issue, europe is in a difficult situation. our own country has just gone through a touch of turmoil over the debt ceiling. do you see similarities between what we are going through now and 2008 and do you see greece as being a precursor like lehman brothers to the possibility of a significant devastating physical events? >> that is a question many people are asking now. i see these as different situation. let's take the u.s. in 2008, our issue is growth. we need growth and jobs. this is an issue for the whole economy. in 2008, the housing bubble the oldest proportionally on the banking system. -- fell disproportionately on the banking system. a bubble by definition means it
is unrecognized until it burst. there is no doubt that people saw the ball but the full extent of the housing bubble was a surprise to the markets. in 2008. today, tourists are pretty obvious. -- the risks are pretty obvious. people understand them and are focused on them. the banking system has more capital and is better regulated and the banking system is stronger in this country, much stronger. the challenge is growth. the consumers have so much debt in 2007, it was 150% of disposable income in 2007.
today we are still delevering. it is 110% of disposable income. it is still way above any historical level. it is unrealistic to think that the growth will be led by consumers anytime soon until it adjusts itself. that is the challenge. let's look at europe. the effect of the housing bobble in 2008 are taking longer to play out in the capital markets and the banking system in europe. by far the most pressing problem and the important problem and a challenge in the global marketplace today are struck -- are structural issues in the european union. i am talking about a large fiscal deficits in a number of
nations there. there are structural issues in the eu itself. the leaders are working on this and it will take some time to resolve these problems. they have made some progress to date. they have taken a number of steps and i have not been easy to take -- and they have not been easy to take. they have more to do and it will be messy politically because there will be tough political issues. one thing you should not underestimate is the willpower and commitment of european leaders to preserve the european union and preserve stability. in terms of lehman brothers obverses greece -- i see that very different. lehman brothers was an institution that we worked to save and did not have the authority to save it. we did not have immerses -- emerges the hours for the non-
banks. the eu has been taking steps and has the powers for months to deal with sovrans like greece. leaders everywhere have requirements for banks to have more capital and i'm a big believer we need that. there will be a spotlight that european banks and the one similarity is it will be important for the largest and most important european banks that much that almost sovereign debt to be well capitalized. >> thank you. what about the s&p downgrade? what we need to get our fiscal house in order in the united states? >> first of all, the s&p downgrade -- our political process, our government has not been working at a aaa level.
despite that, i would take u.s. treasurys over other sovereign debt, other triple a sovereign debt any day of the week. that is not to say we don't have important issues we have to deal with in this country but in my judgment, other major countries all the more significant and more difficult to manage economic issues than the united states of america. you are asking me that question. senator gregg was a key member of the bowles-simpson commission and the biggest structural issue in the united states is our fiscal deficit. is a formidable issue. -- it is a formidable issue. the bowles-simpson commission
showed that we are such a rich country and such a big economy that if we act soon and have shared sacrifice, we can solve this problem by spreading the sacrifice throughout different segments of our country so no group has to sacrifice too much. the longer we wait the more difficult it will be. what we have to do to get our fiscal house in order? i think it comes down to that with the growth and so when we go about, we have to reform entitlements and we have to reform the credit system and have to reform the tax system to give us the revenues we need and as growth. i start off by saying that despite all the criticism and how poorly the government performed in all of that -- i
think the criticism is deserved. beginning with bowles-simpson and throughout the summer, i think this is the best debate we have seen in my lifetime. as important as cutting is and cutting expenses and that is essential, that alone will not get you there. you need reform. you have to reform entitlements and when you talk about entitlements, think of medicare. that is where the huge dollars are. you need to reform the tax system. i find all this stuff very uninteresting and not terribly relevant about whether the bush tax cuts should expire and what we should we do with the rates. the question that should be asked is since we need more revenues, how do we get them in a way in which we have as little
drag on jobs and growth as possible? how can get them and remain competitive? no one who is credible and i have heard defense our tax system. i don't think our tax system will get us there. we need reform. we need basic reform. gg -- your the first one to think of the super committee. the way i look at it, congress took an underwhelming step in terms of the first cut but it was a step. now we've got the super committee and we can hope they undertake reform. getink it's unlikely we'll reform until we have a new election by can hope. even if we don't get reform, if
they get their objective, $1.50 overion which isn't easy five years, -- 10 years, and excuse me. i can make it worse than it is. over 10 years, it is an easy lives. and hopefully that will build some momentum. you cannot get reform -- unless it is on a bipartisan basis. both parties need to compromise and cooperate and i don't think we can do that with the players we have in washington. i think we need a new election and i hope we are wrong. if i am right, i think we're headed in the right direction. >> that leads to another question -- we went through this rather artificial event this summer. let me get your thoughts on the
tea party and its influence on the cheap -- on the process and the possibility of a threat of default to our debt. >> let's start with the tea party. i want to say something about political process. one of the lessons i learned in washington is it is almost impossible to get something big and difficult and controversial without a crisis. twice we got congress to act and get it before the system collapsed. cleve and of the vast majority of members of congress, in my judgment, understood the deficit and were determined to deusen about it, it would still be an ugly process to get there. it would take time. i have all my republican friends and democrat friends, mainly
democrats asking about the tea party and trying to put me on the spot or get me to defend them. i say the tea party did not come on capitol hill with guns and take over by force. they were elected. elections have consequences and voters from both parties respond to the people voted for them. a lot of people that came in the last election, the voters want them -- i am hoping that the next election -- and voters will say, you know what, we wanted to come in and compromise and solve problems -- want you to come in and compromise and solve problems and fix what is wrong. we want you to do that. maybe i am being naive, but i would like to see the fiscal deficit be the centerpiece of the campaign.
whoever wins can feel motivated to come in and solve these problems. the electorate has got to be educated. right now, voters are telling people in washington, we want benefits that we do not want to pay for. we want the benefits that we do not want to pay for. how selfish is that? all of you who are students here, your parents want what i want for my kids. i want them to have the same opportunity i have. i made great sacrifices for them to have that opportunity. in our country, my generation is being incredibly selfish, not willing to make a sacrifice. the people who will pay for it are the next generation. i think we need a mandate. on the debt ceiling, what i say to people on that -- and i have said it all along -- what i say is that there is no danger of default.
leaders on both sides have said repeatedly that they were going to raise the debt ceiling. it wasn't a reprocessed to get there. it was not pleasant. again, i come back to what i said earlier. -- it was an ugly process to get there. at least i never thought we were in danger of default. the american people have now have our real education. >> i want to change of focus and then get some questions from the audience. you have been one of the leading experts, one of the most knowledgeable people in the country on china. tell us where you think china is going. is it a threat to us either economically or militarily? what are their future? what are their problems? tell us about this institute, which should be a start with, by the way.
[laughter] them that if i lived in new hampshire, it would be, -- >> if i lived in new hampshire, it would be. i love this school. i think you are getting as good an education as there is. it has shore improved. sophomores were asking me all kinds of sophisticated questions. i did not even know what an investment banker was. i did not know the stock -- difference between the stock and bond. what we have set up at the institute, the university of chicago, an independent institute that is affiliated with chicago. it will be focused on china. when you look at major problems in the world today, i do not care if they are in the economic arena. i care a lot about environmental issues.
i care about foreign policy, national security. if you look at these big issues, if the u.s. and china are not cooperating, we have almost no chance of solving them. if we are working along with others, we have a good chance. i view this relationship as very important. this will not be like other institutes. it will not be a think tank. it will be a do tank. have people that our action oriented. we're point of focus on -- i have people that our action oriented. we're going to focus on things, negotiate, look to get important things done. china -- the question -- the first question you asked was, it is china a threat? i get asked all the time. are they going to knock us off
our perch. are the a threat to our position, our economic leadership, our global -- are they a known threat to our position, our economic leadership, our global threat? let me say this simply. we are, by far, the largest economy their richest economy in the world -- the largest and richest economy in the world. there is not another major economy. we have significant issues, but all of them, including china, have much more daunting issues than we have. our ability -- our problems are of our own making, not try nepos. our ability to solve them is going to be more difficult if china has problems. those people who are rooting for china are rooting for their own thing. be careful what you wish for. if they have problems, our problems will be more significant. number one.
no. two, if you look ahead, people say, where are we going to become a 10, 15, 20, 30 years from now -- going to be, 10, 15, 20, 30 years from now. i would never bet against the united states of america. if we continue to be the most powerful leadership -- leader in the world, -- if we do not continue as the most powerful leader in the world, it will not be because of another country. it would because -- be because we did not do what we should have. in terms of strength, our strengths, including our military strengths, are rooted in our economic strength. china understand that. everyone understands that. the most important thing we can do is fix our economy. that is number one.
there was a story -- i saw it in the wall street journal. there was a picture of the chinese aircraft carrier. when i said i cannot speak from experience -- in the u.s., in china, there are a fair number of people who are concerned about china's military involvement and the motives behind it. there are a good number of people in the region that are concerned about it. i believe the key thing we need is trust. you only get trust through transparency. i am a big believer of military to military dialogue, transparency, trust building in those areas. when you look at the economic relationships between our countries, we have a lot of economic tension. that is the nature of economic relationships. 30 years ago, we did not have
any economic relationships or tension. the good news was, no tension, but the bad news was, we had no relationships. we have a lot of people who are used to working with the chinese. there are problems, we know how to deal with them. when military's do not trust each other as much, we need the trust building. that is really important. i am all for coming with a position of strength. that means fixing our economic problems and being strong in asia, of being strong diplomatically and militarily. >> thank you. let's take some questions from the audience. to has questions -- who has
questions? >> the thank you for taking my question. there are several western countries -- >> thank you for taking my question. there are several western countries where the discussion has been about how we control debt. unfortunately, the answer has been cut in spending, which is leading to higher unemployment and lower gdp. i have not heard a plan on how to create jobs and boost gdp. are you aware of any plant anywhere in any country, most importantly, what would you do to create jobs -- any plan anywhere in any country -- most important, what would you do to create jobs? >> i will not comment on politicians.
i was trying to stay out of that. i will say, for myself -- i think this is about job growth, economic growth, job creation. as you say, it is a problem in many parts of the developed world. even in the developing world, china has got a really difficult job to keep doing this. nowhere in the history of any world -- in the history of the world has any nation transformed itself so dramatically, so quickly. the demand for change is unrelenting. the chinese people have been demanding -- have high demands on their leadership. it will be difficult for them to continue to do things as well as they have been doing if they do not speed up the pace of our
reform. i think it is a challenge everywhere. to get to your specific question, i do not think -- i do not believe in the silver bullets. i think we need fundamental reform. the question is our political system. can our political system adapt. -- adopt? a kinds of reform we need -- i talked about taxes -- of the kind of reform that we need -- i talked about taxes a little bit. to incentivize savings and capital accumulation, let's raise revenues in away where we can still be competitive. -- in a way where we can still be competitive. it takes tax reform. i think trade is very important. i believe in trade. i think it is disgusting and we have not had a -- disgusting
that we have not had a wto agreement. we have not passed a free-trade agreement in congress, in places like colombia. that would benefit us to get those trade agreements. immigration -- my gosh, the idea that we have all of these bright people from all over the world that come to the united states and, rather than stapling the be sent or green card to their diploma, we send them -- stapling a visa or green card to their diploma, we send them back, out of the country. the energy policy -- we could talk about what we need to do with the energy policy. i have got one. i think you have to wait awhile to figure out how to fund this. when you look at unemployment
among men, 20 to 50, and you look at the danger of young people being out of work, you can afford anything when you are young, other than not to work and not to grow. so, dealing with that -- i think we need to think out of the box. this is a great country. maybe there should be universal service for everybody, not just the military. everyone should get training. there should be some kind of g.i. bill. we should get the skills training, the training we need. there are a lot of things that need to be done. i think the reason it is hard for politicians to talk about them options is because they are not that difficult conceptually, but they are not easy issues in washington. if they are politically
difficult, they are not politically difficult -- if they are politically difficult, they are politically difficult -- analytically difficult, they are politically difficult. >> thank you. we have a student question. >> i did not even get an education, which is just huge -- get to education, which is just huge. >> secretary paulson, in early 2008, when brokering not deal between bear stearns and jpmorgan, you famously asked -- brokering an act to deal between bear stearns and jpmorgan, you famously asked about that moral hazard. why did you think the shareholders should take the punishment for moral hazard and
not the managers? talke managers -- let's about moral hazard. i really believe in moral hazard. no matter how good regulation is -- it is not realistic to think regulators will uncover the problems that the banks did not uncover themselves, unless you thought the banks or intentionally trying to blow themselves up. you need every customer, every lender to the banks, every shareholder, every borrower to be focusing on that bank. i believe in that. but we did not have emergency authorities to deal with bear stearns. it was either bankruptcy or being taken over. if you do not think management
lost their jobs, let me tell you, the management was gone, etcetera. there is no one at bear stearns who thought there was a bailout. i was conscious of the fact that the fed, the united states of america was assisting that transaction. we got a call on thursday night that said we would fail. there would be bankruptcy if the government did not come in. there was something wrong with the picture. the government -- if there is more room, then i felt the government should provide less incentive. why should the government be paying more so that the shareholders would get something? later, the deal could not get done. it was not going to get down without raising the price. a number of others said to me, you are right. let's not let that get in the way.
it was not that was mean- spirited or wanted people to have their equity wiped out. aig, fannie, freddie -- we went to the equity shareholders and the preferreds when we structured the deal. the government was taking big losses and big risks. can you imagine -- and people call that a bailout. can you imagine what they would have done if we had packed. -- had tax payers come in to pay for the shareholders? we had autopsy goes -- we had top ceos who wanted fannie and freddie. we did not have all the tools we need did. -- needed. >> thank you.
i have a follow up on moral hazard within the firms. you talk about regulation of the firms. as somebody who ran goldman, it seems like, henceforth, we will always have a situation where traders and managers are doing extremely convoluted, complex mangles. nobody at the top 10 really understand what they are doing. within the firm, how can we do a better job of managing that risk? >> that's a really good question. that's a huge issue. people focus on compensation and the amount, because some of the amounts are obscene. it is more important -- the system is more important. this is something we focus our, and i focused on very hard at goldman sachs. traders have a formulaic compensation -- people say that we should pay traders buy a formulate -- formulate a
compensation -- formulaic compensation. if traders get a percentage on the upside and trade -- it will not work. we were very careful. we give a big part of the compensation in the equity to be held. the other big protection you have in these firms is having experienced people on the trading desk, who are shareholders, and they really had every incentive to look out for the firm overall. the last thing, which i think many ignored, was the control side and operations were looked at as being the back office. they look at cutting costs. you need to put really
experienced, capable people, former traders, former bankers in the control side. you have to pay them the same way. you have to have great people. if there is an argument between them and the traders or the front office, they have got to win. these institutions are not easily run. risk-management is very important. >> i think we started with a fairly balanced balance sheet for this country. i did not go to dartmouth, so i am a little slow. i do not understand why we haven't had a war tax, why aren't we asked to pay for those two wars, rather than out of our debt on an ongoing basis.
>> allow the people ask that question. what i come back with is the answer i gave before. we clearly, in my judgment, need more revenue. if you look at revenue, if you look over a 40-year period. g.d.p. een relativel to revenues are about 15% and expenditures are about -- >> 22.5%. >> we need more revenue. but we have a tax system that is really broken, just really broken. it is filled with loopholes eat, which is just one form of social
spending or another. look at the mortgage deduction. i do not happen to have a big mortgage, but, if i did, why should i be able to -- their huge loopholes -- there are huge loopholes. the system does not let us be competitive, in my judgment, in terms of the way we tax corporations. it is antiquated and out of step with the rest of the world, filled with loopholes. different industries pay different amounts. there are all kinds of crazy incentives. almost half of the people in this country do not pay federal income taxes. they pay other taxes, but it is a system where we need to fix -- taxes are very important. i tend to focus on the rate.
we're not the titanic, but it is like moving the deck chairs around. what we need is fundamental reform. we need a tax system that lets us get the revenues. we need to use that -- do that in an equitable way and be competitive. i am being repetitive. >> one of you down here. do you have to sit in the front row as a student to get a question? >> i have a question about another one of your passions, the environment. given what seems to be -- the commission has been divided on a very partisan basis. what can we do to raise awareness about the marital issues? what role -- about environmental
issues? what role can the federal government play? >> to me, this is hugely important. i will just tell you what i am doing. my interest, personally, has always been in wild, beautiful places, biodiversity, working to help create the first national parks -- create diverse national parks. that is fun for me. i am very concerned about global warming and about issues with energy efficiency, alternative sources of energy. the paulson institute at the university of chicago, when we
engage with china, one of the major issues is going to be in our mental -- to be environmental. we have common interests. my view is that the only way we saw this problem is the development and deployment of the new, alternative sources of energy that are cost-effective. governments are not going to do that. governments cannot create the policies that help do that. there are a lot of things that need to be done. china is well ahead of last in terms of what they're doing. -- ahead of us in terms of what they are doing. they have one. 2 billion chinese. we have given them a very bad model.
1.2 billion chinese cannot live the way we live in the u.s. there are not enough resources in the world. they need -- we need new models of growth and energy efficiency. there is a lot that is going on in china. we need to do sustainable urbanization. i would rather be in and over than in new york. when you look at where the problem is and the issues around water, which is a huge issue, and you look at energy use -- if we want to get things done, we need to have major breakthroughs. if it does not get done in countries like china and india, it is not going to get done.
the kinds of things i have pushed -- i often talk with people in india, china, other developing nations. there are two things that are different. we now know how bad it is. it is very wrong turn up using the cleanest commercially available technologies -- very wrong to not be using the cleanest commercially available technologies. there is a whole series of things that i pushed on. i think these issues are very important issues. i happen to be an optimist. i believe that the experts are often wrong in terms of technology development.
i love to tell the story of years ago, when i was working -- i forgot when it was -- i was working with motorola. they had a study of the market for mobile cell phones. they said it was 900,000. there were this big. battery lasted -- they work like this big. battery lasted like 15 minutes. >> we have time for a couple of questions -- actually, we are out time, but he will take a couple more questions, right? [laughter] >> thank you for sharing with us this afternoon. my question -- you spoke about the united states being strong
economically and militarily in china. could you expand on that more and say how you think we should be stronger? >> it is almost the way i answered a last question, certainly not spending more money on military. we spend multiples of what other countries spend. even there, there is little to cut and still be strong. we have to spend in the right ways and places. it is hard to cut military spending. what i think we need to do -- we need fundamental reform. i believe that the chinese understand economic strength. i think that the question about wall street -- it was a good
one. there was a time when people looked at us as having the pixie dust. our capital markets were the nba of the world. they wanted to look like us. we have lost that. i asked them to open their markets. i told them they would not be able to open of their markets unless they reformed and allocated capital and had investment products for consumers to that they were not rip off, putting deposits in blank -- in the banks and getting inflation. my teacher does not look so smart anymore, given what has happened in the capital markets. for us, our strength has got to
be -- i do believe that our economic -- our strength, our global pre-eminence is rooted in our economic power and all of the other things america represents. i think all of that is still here. we just need policies. the chinese are no different than anyone else. they understand the strength -- and understand strength. we do not look as strong as we are. we have great underlying strengths. we just need some strong leadership ban some policy reforms. they are going to put our economy back on the right footing. it is going to take a while. >> we go to a student for the last question. we are a little bit over time.
>> thank you very much for coming and talking today. sorry to hammer on the china issue. i think i recall goldman sachs or maybe another american company predicted that the chinese economy would take over the united states by the 20 -- by 2025. how can compete in the long run? they have four times the population -- how can we compete in the long run? they have four times the population. >> when people assume the trend will continue, there is a lot to debate. in terms of -- china has a significant challenges -- as significant. -- has significant challenges.
no economy just goes like this and all laws of gravity forever. there are issues in every economy. i hope china continues to do well. a will be a big benefit to us. let's talk about what their issues are. enormous in my mental challenges. -- enormous environmental challenges. there are huge issues in terms of big wealth gaps and equities. they are working hard to deal with that. there are medically increasing wages. ically increasing wages. wages went up 20% last year.
they cannot and need to grow unless they develop new energy models and models for growth. one of the other issues they have got -- they are in the middle of -- it is political. china recognizes the last leadership change, almost 10 years ago, to hu, was the first time that a sitting chinese leader did not pick his successor. party apparatus did that. this is the second time. there are all kinds of -- they look through the lens of domestic stability. every decision they make in china, whether it is economic,
whether it is personal liberties, whether it is all of these things, is going to be what gives us the most domestic stability. i happen to believe that what will give them the most domestic stability is speeding up the pace of reform, and speeding up some of the personal freedoms and liberties. that is the case we need to make. they have meaningful challenges. all i have to say is, do not bet against the united states of america. it is just impossible. they cannot keep growing like that forever. they need to change their growth curve. we need to get our job done. let me come back to what i said. china is an interesting foil. this is too much about china. the question of where we are going to be, come back to what i
said to judd. it will not be determined by china or any other country. it will be determined by us. the decisions we make, the policies we put in place, that is going to be america. if china has problems -- and i hope they do not and i am not predicting that they will -- our challenge will be there. we are integrated into a global economy. >> thank you. thank you. much, mr. secretary. [applause] -- ross is very much, mr. secretary. -- thank you very much, mr. secretary. you have to ask jeffrey immelt, head of ge, the next guest in the series.
>> unfortunately, i am asking you the question, not -- for you the, i'm askin gyog question, not bob reich. [laughter] our big need is economic growth and jobs. you are serving as president barack obama's jobs council. my question to you is, what can be done in the short term to create jobs in this country. more importantly, in the longer term, what do we need to do to regain our competitiveness and create jobs in the united states of america? >> you all want to come back to hear the answer to that. thank you. [applause] >> on "newsmakers," bernie
sanders discusses the role of the super committee. he discusses campaign 20 told and the liberal discontent with president obama -- campaign 2012 and the liberal discontent with president obama. >> as an aspiring journalist, i am already preparing myself for the very small salary that i will be starting out with. >> you have to be disciplined enough to put aside your pious and report the facts, the truth. -- your bias and report the facts, the truth. >> fox news and experience. you love it or hate it. >> aspiring journalists will talk about ethics, where they get their news and information in today's multimedia environment. at this tonight on c-span --
"at is tonight on c-span's & a." this is one hour, ten minutes. [applause] >> thank you very much. i've often thought with that checkered employment career that i thought she was going to introduce me as a guy that has a lot of different jobs, but somehow manages to always get another one. [laughter] >> when i was asked to come and speak at chautauqau, i decided you are my kind of people. you started at 10:35 in
the morning. i always thought the early bird gets the worm is told from the bird's perspective, not from the worm. on behalf of those who like to start later, i'm delighted to be here. things sure have gotten more interesting in the economy the last few days. i must admit part of this maybe is my fault. if you hang around washington long enough and in the private sector, you get to know people. i thought it might generate interest if a few friends of mine could shake hings up. i think they got carried away thursday and friday. before thursday, the deficit debate was obviously not democracy's finest hour as the old churchill saying goes, americans make the right choice after they've tried everything else. [laughter] >> now that the stock rket has unsettled everybody's nerves, i know there are some here this morning who can't keep away from your blackberries or ipads.
to help all of us keep us to date and keep down on the background noises of brokens and cheers. every time the market goes up by 100 points or more, it's thumbs up. when it goes down by 100 pois or more, smack your head. all right. let's practice. people on this side of the audience are the happy people. they are going to be responding when the market goes up. people on this side are the unfortunately. okay, the market is up by 100 points. very nice. very nice. a lot of blackberry owners over here. on this side, unfortunately, the market just went down by 100 points. very good. very good. okay. for those who don't use blackberries or ipads, there will be salesman available afterwards to help you out. we also hae made available teenagers who wl help show youhow to turn them into game
boys. [laughter] [laughter] [applause] >> everyone knows we're in the middle of the worst economic downturn in 80 years. what surprised us is how long it's taken to recover. a combination of a slow recovery, and a deficit growing to unmanageable levels, coupled with an apparent inability or unwillingness to solve either roblem has caused many american to worry about our future. ter a career in the private and public sectors as a turn around manager, i'm optimistic we will make it. but in the interest of full disclosure, you should know that every crisis manager is optimistic. it's the only way to et through the sometimes seemingly unsurmountable obstacles. to understand, we'll start with a discussion about housing, it's historic role in the economy, the role it played in getting us
into theproblems that we face today, and the policy choies we have to make about the future role of housing in the economy. we'll explore the obstacle to economic recovery, presented by the deficit, and then talk about one the most significant factors that will not only positively effect housing in the future, and also the economy generally, population yout the most stunning number i've discovered in preparing for this discussion involves population growth. so stay tuned. you'll know more later. a significant part of that population growth is derived from illegal immigration. while it's clear that educating immigrates and all of our children is increasingly important, a critical factor in our past economic success is a role that immigrants have played in the capital in this country. the question is whether we are taking it for difficult for this to continue in the future. let's start with the role of housing and the economy. the numbers tell it all.
if you go back as far as 1959, you find that housing is typically accounted for about 15% of the gross domestic product. peeking at 19% in 2006, and falling in the first quarter of 2011. housing led the financial crisis and is following the recovery, not leading. it to understand the policy questions that we face about what support we want or need to provide to housing going forward, it's helpful to understand how it's financed in this country. years ago, you got a mortgage from the friendly local banker, savings and loan and they kept it as an asset, collected your monthly payments, returned your notes, and canceled your mortgage when you paid it off. the problem with this system is that it limits the amount of capital available to housing to the amount of capital banks and s&l available.
to deal with the problem in the depression, fanny mae was formed, and then they turn around and raze cash by selling securities, secured by fools of the mortgages to general investors. they might not want your individual mortgage, but they saw a pool of mortgages as an attractive investment, because the risk was pooled together and diffused. it also helped they agreed to buy back any mortgage that was defaulted. the government stood behind because fannie was a government corporation. was privatized in an attempt to cut the government deficit. to show how quaint they were, it was about $160
million. that's not the deaf set, it was the entire budget. freddie mac was formed in 1970 to provide competition. the two have competed for the last 20 years. now private, investors assume should either run out of capital, the federal government would support them. while the official washington position was oh no, not so, th assumption turned out to be correction. they still kept a large amount of mortgages on the book. by 1990, residential mortgage debt exceeded all of the banks deposits. at same time as the dot-com double was forming and bursting, the investors were looking for something else to invest in. housing prices began to
expand faster than incomes. this is my favorite slide. if you ever wanted to be a bubble bursting, here it is. that's the problem with bubbles. they are always obvious after the fact. when you are in the middle, it's never clear if you are dealing with a bubble or economic progress. >> somehow people that looked at this graph every year as it unfolded thought it was possible for house prices to rise in total disregard to the income of the population. there were a few people that bet against the conventional wisdom. they made a lot of money. they arenot giving it back. we're going to go on with the story. the appant level increasing made mortgage securities look attractive. banks and wall street competed to establish them from the securitied provided by freddie mac
and fannie mae for sale across the orld. it will would in little or no loss since the house could always be sold for more than the mortgage. with prices escalating, houses had becme a high return investment for many owners, rather than a vehicle for savings. when i was young, just a few years ago, if you lived in a house for ten years and sold it for what you paid for it, you felt like a champion, you got settler for ten years and forced savings to boot for paying down the principal on your mortgage. now with housing prices taking off, everybody wanted in the game. the increasing demand for housing was exceeded by the increasingly demand for mortgage securities. if follow the red line, you'll see the private label security market more than doubled in one
year that 22 in 2003 to 46 in 2004 and peeked at 26% in 2006. it then declined close to zero and how has come up to 6%. to meet the demand from all street, for more product, you needed more people to buy houses to generate the mrges. to = those people who otherwise had earlier, the standards to decline. you ended up with the famous no dot loans or fraudulent loans fed into the system. as the side that maintains all of this was brought on by fannie and freddie, they have the lowest rate of seriously delinquent loans among the large financial institutions. as of march 31st, the default rate on freddie's mortgages of 3.6, and the market rate was 8.1%.
put another way, freddie dman -- and fannie has have of the mortgages. the other guys have the other half and 0% of the defaulted loans. in case you didn't notice, that was an unpaid commercial announcement. but i couldn't resist because there's important information. i should also made that while the over all quality of their mortgages were better than the banks, it certainly would have helpful if fannie and freddie hadn't lowered their standards. it's hard to swim against the tide and not losing market share or profit. either was able to do that. back to my house at the atm. the fact that to pay attention to here is that from 2000 to 2005 while wages were increasing modestly and the bubble was developing, housing wealth increased by almost 85%.
it would have been a different story if it had stayed, and in the old days, it would have, because you could barely get a second mortgage, and if you got one, it was a sign f fiancial trouble or weakness and nobody advertised they were just taking out a second mortgage. as banks allowed buyers to refinance with a bigger mortgage in light of the increased value and take the additional amount of the mortgage out, someone said why require people to go through all of those complications. the home equity loan was born. under a home equity loan, you could treat your house as an atm and draw money down as prices went up. extensive use of home equity loans addedto an increase of alost $600 billion a year. it was great fun while it lasted. then e music stop.
housing wealth declined by 30% in 2005 and thyme ich translates into a reduction of $240 billion annually and consumer purchasing. the lost is part of the reason the economy is having difficulty recovering. and for future planni, it's clear it's going to be a long time because houses are going to be able to provide people with excess funding for personal use. another thing that you need to know before looking towards the future is notwithstanding all of the numbers, it's a mistake to assume it's what caused the collapse in the world economy. the housing bubble was not unique to the united states. many eu countries saw greater house appreciation than the united states with the declines that were just as large or larger. denmark experienced a 103 administration rise in price appreciation and a fall of 20%.
aye rand saw an appreciation of 162% and decline of 30%. some of those countries may ring a bell. they are the ones in deep trouble with the sovereign debt. the policy questions we face about what to do about housing in the future are important in light of the role that housing has played in the economy in the past. to begin, we have to decide how much spport as a government we want to provide to our housing to attract capital to the industry. we provide incentives in a lot of ways. particularly for home ownership in the tax code. the deduction for mortgage and property sts us about $1.4 trillion. then years is the relevant because all of the debates is about what happens. talk about cutting or ending was always one of those third rails in
politics, until the debt crisis came crashing down. dough the de -- now the deductions maybe on the table. the next question is whether we want to have the government guarantee at least some of the securities in the secondary market. the government guarantee of fannie and freddie which has moved after they were privatized, clearly attracts capital that the lenders cannot provide themselves. if we are going to have the guarantee, we clearly need to charge for it, which wasn't done in the past. without a government guarantee of some securities, we're unlikely to continue to have 30-year fixed price mortgages. investorsre not willing to ta the inrest rate and default risk over that lengy period of time. but that's not illegal or immoral. cana does just fine without a guarantee program and has home ownership rates about as high as ours. but in canada, you have
15-year mortgages with variety interest rates and significant prepayment penalties. people have talked about covered bonds as an alrnative to the secretary market. for this product, the bank takes it's mortgages and sells bonds, secured by the mortgages that would stay on the balance sheet. while there's experience in europe with covered bonds, tere's never been a covered bond market the size oour mortgage market. give you a feel for the magnitude of our market, the annual size of our mortga-backed security market is about 1.3 trillion euros. as you can see. the size of the covered bond market in europe is relatively small compared to the 1.3 trillion number. even though in some countries covered bonds make up a reasonable percentage. those are much smaller
mortgage markets than in the united states. there's also the question of how to resolve the conservatorships of fannie and freddie, some way to o to a private sector without any involvement or guarantee and we should simply wind down or end fannie and freddie. they would be known as republicans. [laughter] >> because the question is what happens during the next crunch? there's basically been no private market -- i'm sorry, there's been no private mortgage support of the mortgage market for the past three years. without freddie, fannie, and fha, there would have been no mortgages. they are now 90% of the market. this isn't a good thing. the question is how do we rstart the private market? one possible move suggested that would be a good indication of what appetize for mortgages exist out there would be to lower the conforming loan
limit that caps of size that fannie and freddie can buy. they are as high as $727,000. it's s to go to $625,000 this fall, and we'll see what happens at that time. because every mortgage abovehat side will have to be financed in the private sector. a final question is what support, if any, should housing entities provide for so-called affordable mortgages. there's a theory that it was the drive and the push for affordable mortgages that encourages freddie and fannie in particular to issue mortgages to people who are otherwise unqualified. some years ago, lending institutions were foragedden from red lining urban areas for mortgages and excluding them from financial activity. clinton administration, while i was there, decided that since increased opportunities for home ownership was an important social goal, why not require freddie and fannie to ensure that a given
percentage of their purchased supported that goal. the initial supportive housing goals were in the range of 30%. the theory was 30% was good, why not 35 or 40%. since the goals were set by the administration through hud or the congress through legislation, it really was a free good since no one had to answer the question how much, if anything, does it cost? nobody ever delivered bill. to its credit, the bush administration also supported a home ownership society and affordable housing goals suddenly were about 50%. as i noted, nobody ever sent a bill for this until recently. we've now sent one, but it's probably not the way we ought to do it. part of the problem has solved by the passage in 2008 of the legislation that gave the government to put fannie and freddie into conservatorship. it moves the federal housing goal from hud to the newly empowered regulator. this means that the
agency responsible for the safety and sondness is also the one determining what affordable housing goals are consistent with the safety and soundness. barney frank last fall when he was running, pressure, for re-election, talked about te progress they have made with the election. don't say that if you kept quiet about it, since we could then include this provision in whatever legislation is passed and point. if it's already in the system, you don't get credit for it. they will have to come up with some other way to change the requirements. some change is going to be required. but at least we ought to get credit for the changes that they had made. our position at freddie mac, since i strted three years ago, all of the questio floating around has been not to have a position. once you have a position of what ought to happen, you then are discounted in any views that you
have on it, any other options, because you are the supporter of option a. we will freddie, fannie mae have more information. can tell you a lot about how mortgages perform in any economic circumstances in markets all overthe united states. but to be honest, brokers analysis of the various options proposed it seems to me we ought to be very careful not to have a proposal ourselves. so we are prepared and have been prepared in discussions with the administration and the congress to consider any option from one end of the spectrum of putting everything into a huge federal, to we go away and you have a private sector solution. thus far, it's worked well and people have been comfortable that we will give them a straight answer as to the pros and cons of any permutation on those themes across the spectrum. what's clear in t politics of washington and has been for some
time, there won't be much movement on the question until after the presidential election. which means we have another two years to go. even the reublicans talking about l.e.t. get rid of family and freddie have a footnote that says we shouldn't do it too quickly. everybody is concerned about the fagility of the housing market and everybody understands the numbers thatwe've looked at today about the critical role that housing plays in the economy. notwithstanding our no position, position, i think it's clear we will end up with a strong secondary and appropriate amount of capital available for freddie. the challenge is keeping them happy and productive while the congress and even the administration continue to talk about the need to wind down the companies and it's clear that the state of limbo is going to continue for another two or three years. the only reason the company hasn't folded is the dedication of the employees to the mission of providing and supporting housing for people across the country. and the fact that we
keep them very busy and hope they are not paying close attention to this. even resolving the questions don't be enough. there's the $14 tillion challenge and the deficit growing as we speak. as noted, we know now a lot more about the deficit than we do a few weeks or months ago. we are also confronting that government spending is critical, but we can't keep spending at the rates that we are. government spending accountsfor 20% of the gross domestic produc interesting enough, it's just more than housing. deficit spending, presently accounts for about 37% of those expenditures. when i was at omb in the mid 1990s, when we were confronting $200 billion deficits, we cut federal employment by $200,000, we worked to make the gency more efficient, cut nondefense, and none of it made much of an impact on the deficit. today we're in the
trouble into some extent for the fir time in history during the 2000s, we trid to run a couple of wars without paying for them for the first time. as the wars wind down, the expense will shrink. there's no easy fix. the simpson-bowles in december was an artful and balanced approach to the tough issues that no onewanted to touch. unfortunately when it came out, no one wanted to touch the report here. there are only six or eight things to do to deal with the deficits. you have to do them all. social security and medicare account for 33% of our government expenditures. defense is 20%, medicare is 8%. the short answer to the debate is that if you set aside social security, medicare, medicaid, and defense, and sell the rest of the government, you still have a deficit. and if you decide not to sell the rest of the government and only deal
with entitlements, it's clear that you cannot realist click cut enough from entitlements and defense alone to solve the probm. you'll have to end up with cuts to entitlement, cuts to defense, and tax reform with improved revenues. the ticking time bomb, in fact, is the interest cost that has to be paid on our debt. debt. the biggest beneficiary, and they are abnormally low is the federal government. even with these interest rate that is are low and in some casesthat are in effect paying the government opaque their money and ke it and give it back to them, because it's easier than putting it under your matress and making it lumpy. the cost is $200 billion. the cost could easily go up another $200 billion if interest rates return to normal levels, not exaggerated levels. i think the public is ahead of the politicis on this issue. when you read the polls, they are always asking the wrong question. if you ask me, would i
like to pay more taxes, the answer is no. would you like to get less social security or get it later in life, the answer is no. but the real question is if we have a problem that needs to be dealt with, that can only be dealt with acrs the entire spectrum in which everybody needs to make acontribution, would you be willing to make your fair share of the contribution? the answer from the vast majority is yes. as long as it's fair. [applause] >> as long as it's fair and as long as everybody plays in the game. with a little luck, standard & poor's rate cutting will cause people to soften the rhetoric and work together find a solution which i think the public will support.
beyd that, why am i optimistic? because of the attention i mentioned earlier in terms of population growth. we will now find population growth. the census bureau projects that the u.s. population will grow faster in the next 20 years than in any other major economy. i knew we were doing better than japan in this area, because everybody is better off in japan in population terms. but growing faster than mexico, brazil, india, and china, i must say i find that really amazing. legal immigration is an important driver, legal in the decades of the 90s and 2000ed -- 2000s exceeded the immigration wave. without the immigration, we'd be moe at risk looking like japan, italy, and europe with a declining population,
increasingly asian with not enough people working to support growth in the economy. one the most important impact a poulation has, along with household information is the creation of a more dynamic and expanding housing market. the data shows that echo boomers, i love the way that people get generational names. why don't we ever hear about the baby busters in any event, they have delayed household formation for all of the obvious reasons. eventually they will form new households once they have more confidence in the economy a get tired of living at home wh their parents. judging by the generation here, i assume those are parents who are applauding. [laughter] ironically, we'l also get increased sales when prices go up.
i learned when i was the chairman in the downturn of the 70s, when housing prices decline, as they have recently, people stop buying to wait for even lower prices. of course, it becomes a self-fulfilling prophesy, that has fewer people buy, the price goes down further, and that's how you get to deflation. the problem for the last three years fo the first time in history, house prices and origin rates have been declining at the same time. usually house prices decline because interest rates are ricing and mortgages are more expensive. so people have had two reason to defer a house purchase. and they've been rewarded for wating. with lower house prices and lower mortgage rates. once prices start to price, people then want to buy to avoid having to pay more later. oddly enough, we should be rooting for not only higher prices, but higher mortgage rates to get peple who have been waiting on the sidelines
for a better bargain to understand that bargains are behind us. now is the time to buy. back to the increase. recent immigrants will account for about 1/3 of the new households in the ecade. which will average growth of about 1%. to keep pace with immigration and population growth, housing starts will have to average about 1.7 million a year. to give you an idea of the impact, housing reached $29,000 annually to tell how far down we've been. at some point, we're going to increase housing starts by $1 million which will provide a stunning increase in economic activity. the only thgs in our way are about four million homes -- [laughter] >> -- still in foreclosures or past due in their mortgage payments by 90 days. while the rate of delinquency is declining, the overhang
continues to be a drag on housing prices and new construction. they are firming and the housing will move through the market one of these days. but it could be another 12 months before things begin notably to pick up. that may not seem like such a long time in history, we are very impatient people. pushing for things to be done faster is why productivity goes up. expecting or demanding the gang of economic downturn that dwarfs thing we've seen in 80 years can lead you to make more policy prices. there's risk as we gear up for the 2012 elections. thisring us to the role of education and the future of our economy. this country has always met it's economic challenges through the development of intellectual capital that allows us to lead the way in areas, such as building cars, planes, trains and electronic limit. as they caught up, we moved on.
the irony is as education becomes more important, we are more challenged to provide it. we'vall heard for years about the challenges of educating students in our inner cities. when i over saw the daily operations of the city of washington, it was clear that poor schools for a pipeline to crime or welfare for our graduates. either way, many of the studentses were lost to our economy in terms of coming productive citizens. our economic future depends on more than solving energy problems. 27% of degrees with the u.s. awarded in 200 and 2008. 51% of math and statistics doctorates. historically large numbers have opted to
stay in the united states ad have made contributions. civil can -- silicon valley is full of them. they have made it difficult to come to the u.s. and stay here. in the inevitable that more fortune graduates would return home as economic opportunities expanded. as foreign universities get better, they will attract more of their st. s to -- citizens to stay home, rather than come to the united states. we have exacerbated the reversal f the drain brain, by pois -- policies in particular. when bill gates said they might have to open an office in canada to be able to hire the skilled workers he eeds, you can see the problem. the intellectual ability needed can be kept by the schools, of course. they still produce bright, energetic
college students that move int productive roles in the economy. as the irony is that as the need for more education as the age of technology rows, the cost of higher education is moving beyond the ability of many studentses to afford it. tuition growth has out paced inflation, growing at an annual rate of 7.9% since 1979 compared to overall price increases of 3.5%. when i was chairman of the board of trustees in the mid '90s, we worried because it was obvious even at this time that it was $20,000. we had a vigorous debate as we set tuition levels. arguing about whther we were giving away a product if the tuition didn't go up. on the one hand. and on the other hand, were we going to lose that provide not only through the university, but the economy, by foreclosures the
possibility of an education. our debates got to be so regular, i suggested this we assign numbers as the joke went that people in favor would get numbers 1, 3, 5, and 7, and people against would have acts 2, 4, 6, and 8 and we'd have a speedier decision. the rate doubles in nine years. so in 2020 at this rate, private school college education that costs $50,000 todawill lost already $100,000 a year. those are after x dollars. change may not come in forcing tenured professors to teach more than one course a semester. [applause] >> i assume that laughter and applause is not from anyone in ademia. there are developments going on in technology and web and information flow that are exciting and may prevent an
revolution. there's a young man that's not a educator, he's a graduate from m.i.t., educating his niece. he was giving her advice and sending it to her by e-mail. he discovered it was easier to send it over youtube. everyone on youtube saw the lessons, 10-15 minutes solving a particular problem. and the audio began to grow and grow. there are now -- he quit his job, started doing it, there are now 2400 microlectures on the web for free from his site. he's had 69 million visits. at the same time, major europes are making videos of their best professors teaching important courses and making them available. with a little luck and continued growth of our intellectual capital and innovation, the education students need maybe as available as
youtube videos. there will be appropriate concerns about quality, but my pe is that we won't let that interfere with the development of this new technology in way of pursuing education. ultimately, in the long run, it's going to be critical for us to provide as much education as we can to those that are able to absorb it. notwithstanding the people that maybe something their what happened, i don't see anybody. we must be all right. some the things we need to do in the country in the days ahead are clear. we need to support the return of a vibrant housing economy. we need to take realistic steps to solve the growing deficit problem, and we need to do whatever it takes to continue to develop the intellectual capital that will allow us to lead the way into the future. :
where do you start? >> where you start, is you have to start across the board. population growth is going to happen unless we take some draconian measures. that will influence the housing market effectively over time. we need to be patient and make sure we do not screen up and try to come up with short-term solutions that aggravate the problem over time. the deficit needs to be dealt with. the standard and poor's shot across the bow is a harbinger of things to come. the real risk is that standard and poor's is correct. we are enabled to deal with the deficit problem. things will get more difficult.
in in terms -- in terms of education, we need to understand it is a high priority. when i was in washington, everybody knew the schools need to be fixed. we said that and moved on. if you could fix one thing in the city of washington -- there were a lot of things that needed to be fixed when i was there. i said i would fix the education system because of its critical role in preparing young people to be productive members of society. [applause] you have i would say my philosophy and the question and answer sessions as the nice people bring them and there's no question is off-limits so feel free to ask any question you would like and i will answer it. now i've done that for years ever since i went into the government 20 years ago, and i decided that what happens is i've never gotten into serious trouble with an answer which les me to conclude nobody is paying attention to the answer.
[laughter] so until that changes, have at it. >> this person notes 71% of college students have student loan debt of $55,000 asks want this damned in the housing recovery since gradtes have less money to pay for a home mortgage? >> we are all worried about the dead students have and especially at the graduate level if you incur a lot of it as an undergraduate and in business school kuhl law school, medical school you end up with a couple hundred thousand dollars in debt. not only does it ipact your ability to have a hose but in practice your ability to buy anything. so while universities increased significantly their financial aid -- deutsch is one of those that still has the admission -- the way that happens is because people take out a lot of loans. and i think is going to be a drag. there is no simple answer to that except i think having spent
a lot of time on higher education we are going to have to figure out a way to make it a less expensive undertaking because if you measure it by the relative cost -- when i went to duke for four years i once on a scholarship and i can't close track because the a.d. $800 for four years. there was a long time ago but you could have brought for chevrolet's for that amount. now it's 200,000 you can buy a lot chevrolet's we have to come to grips with that problem. >> freddie mac and fannie mae have also just been downgraded by standard and poor's. can you comment as to what this will do to the home market? >> in the short run, it will increase incrementally our borrowing costs and therefore it may increasemortgage rates. a will not i don't think have in our analysis of a significant effect by itself. the risk is as i say that if we get another of the two remaining
agencies that as a downgrade and investors start to not flocked to the treasury's but go elsewhere and rates go up, that in the long run is a problem. as i noted ironically, i thought that if we could get mortgage rates to stabilize and increase somewhat it might get people off the dime - talk eclectic. my daughter but her first home this spring with a mortgage rate 8.5. she left the house and they don't hink of it as an investment so they aren't paing attention. i hope they aren't listening. when their rates are back down to 4.5% your fault is i should have waited and bought a house with a mortgage rate lower. so we've really got to break that cycle of the people who are waiting on the sidelines, get them out of the habit of making them think they will go to 4% slide on wait another year before i buy a house. >> this person says i'm not planning to move for my home and i'd still working on my job. why should i be so concerned my mortgage is temporarily under water? >> you shouldn't be. there was a good question. all right. actually, most people --
notwithstaing their experience with the house as any team -- most don't calculate the value of their house every year, very week or every year. you get an assessment from the city every year and they tell with the assessment is because the people that bought the house are going to live in it, they live somewhere and understand values go up and down, so if you're going to be in the house a while, house prices will rebound over time. so i've always thought that the idea that men and somebody's house is under watethey are going to walk away from itis a failure to understand human nature and how people respond to these things be big if you are waunder water and there are condos in florida u might have a $250,000 mortgage on a $100,000 house some people have a legitimate question uly keep paying on this mortgage wh i'm going to end up owing the think a lot of money but we didn't see a significant increase in people walking away. those do terrible things to your credit. but most people are comfortable in their houses and are not going to in fact be microtimers and say i'm getting out of this
house and then i will wait and get back into the housing market another time. >> this probably falls under that category of "ask anything." >> walz. i was just kidding. [laughter] >> is anyone going to be held accountable for the economic problems? [applause] >> for those of you that saw the documentary quote coat the inside job," -- [applause] which i thought, by the become a was a very thoughtful analysis of the entire suite of the problem. obviously everybody has this everybody ought to suffer. one thing to bear in mind is a lot of people have suffered who worked in the companies. most of the people for instance which as i see participat were not necessarily a leader in this, had that compensation in their savings tied up in their company stock, which at one point was at $70 a share and is now about 70 cents a share. so a lot of people have had significant declines in the
personal wealth because the invested in their 401k and pension plan and the company stocks and if they are in a financial institution, they got wiped out pretty effectively. the other problem the sec and the justice department has is not a cime to be dumb or ignore what's going on. you have to intentional we intend to commit, lead a criminal statute and so there have been very few successive prosecutions. tayler whiteaker is going to jail for clear fraud. his was not the question of just ignoring the bubble gum it was actually faudulent beating at freddie mac and others. i think in some ways it's been aggravated by the fact that after the bailouts in the t.a.r.p. program which is making money for the government in the long run, bankers and investment
bankers and wall street were ne deaf enough to decide the issue large bonuses. and i think people have actually paying a really large businesses and lobbying against the regulation and i think that's fair. [applause] estimate my advice would have been to keep the bonuses down and the argument is if we don't pay them somebody else will pay them it is not the most astute political move on their part. >> this peon wants to know an irony in the title is a non-executive chief executive officer. [applause] >> good corporate government people have argued for years that the ceo of the company ought not be the chairman of the board at the same time. [applause]
that's an investor and not a ceo who is chairman. the argument is the board ought to be independent and run by an independent executive. about 70 per cent of the fortune 500 companies have the ceo and e chairman has the same person and about 30% last 15 yearsor so have segregated the duties. fannie and freddie have a combined ceo chairman. so when zakaria calls and asked me to come in and restructure the board and to go for the company as they went into conservatorship, the regulator asked them that they wanted to segregate the title for the first time so you will see the determination and the chairman of the board the vana executive chaian which is i'm not the ceo, the executive leadership of the management is the ceo, chief executive officer. the, executive chairman is an independent board chair who actually controls the operation ofhe board of management. i've never seen the term either until i was one to be on was the
chairman of the board which is what i norally see people and don't know we might the ceo or just the chairman of the board soon on executive is in fact diminutive and i am just the chairman of the board. >> what do you think about reverse mortgages offered to senior citizens? >> well reverse mortgages to the senior citizens are attractive, a little like the trademark phenomenon. you've got an equity built up in the house and you would like to rely on its for retirement planning to read it think the property is well structured they work well for people and i think they are an attractive way to enhance retirement. your children may not appreciate it that much, but it does seem to me all we have to do is be careful and some people did get caught. you don't get carried away and suddenly the government to create a mortgage significantly under water and at some pont you created interest rates that
are going to shoot up more of the equity in you plan on. >> what about the credibility? >> another discussion can be what about the rating agencies clacks as people discover the rating agencies, standard and poor's, moody's and fitch, all else thi debacle and sold it were paid by people to read the documents and securities and that sort of sounds like a conflict if he says here is my security give me a reading and i will pay you would not lead you to expect you're going to get a bad reading. so as a result, she's very complicated securities, straightforward. i have mortgages it to the medical it's pretty easy to understand. it's when you start slicing and dicing them and leaving the securities on top of those securities it's hard to figure out what they are worth. clearly the rating agencies would tell you they didn't really understand the level of risk and clearly provided ratings that they quickly tried to unwind all through 2009 and
2010. so the question as how credible are the ratings. people noted much of the guys in new york who were they to say that the rating of the united states credit rating of to go down and there is move by some people who say we should get away from credit-rating agencies doing that. in this particular case the reason it's thoughtful and sound and it doesn't tell you anything it doesn't know basically we've got this huge deficit that's growing at a rate that is unsustainable and we have a political system that seems on capable of dealing with the of the fed therefore, sooner or later the treasury securities are not going to be as risk free as they used to be so whether they are credible and other ways or not the reasoning was sound. >> apparently david brooks has written that fannie maes the greatest political scandal since watgate. woulyou agree with that?
[laughter] we competed vigorously for 40 years against them. so now is my chance. i think there is a book out that gretchen has that takes jim johnson who was the head of finney in the early 1990's who built the political machine to task and what they did if you haven't read the book is basically i they were purely a private-sector company and said what is wrong with because everybody else is doing it, you provide the fiancial support to the campaigns for legislature, legislators, you announce programs in the districts and try to ingratiate yourself with them and fight against stronger regulation of try to get people to leave you alone. you wrap yourself in the mantel of homeownership as the public good and try to preserve the bargaining advantage you have over t slightly lower rate because of the implicit guarantee. if you are a private sector company everybody would say that's what they all do. i think what discourages people
that are not happy aboutfannie mae is there was an era in the kind of what we are really doing god's work, the ship is important people should leave us alone and the implicit guarantee of their relationship w such thatpeople felt they ought to be held to a higher standard. so, i don't think it is the greatest political scandal since watergate. it's a little light penalties. when you have the president of the united states conspiring against the country that is when you call the scandal. what fannie mae was engaged in you might say was disagreeable, ana fortunate, and why is that it wasn't the watergate scandal. most of my friends appreciate the fact that i did not go forward. >> why are we talking about growth and the ustainability? [applause] >> gereed question. >> i think that's theright question. the way that we got out of the problem in the 90's was true
growththe and in my years as a managing turnaround you can't shrink your way out of a problem you have to grow your way out of it so the question was right we ought to sustain where we are and not go backward if we can affordit but what we have to figure out is what is it that will ve us forward and how well we grow everybody knows we've lost a lot of manufacturing jobs a we need an appointment to sustain that growth, and that's why i think you're going to hear a lot about -- you heard about job creation and you're going to hear more about it and infrastructure development and infrastructure banks but it's one of the reasons i feel strongly that the intellectual capital. we formed a lot of companies and a lot of jobs by being smarter and being the first mover in a lot of areas. and if we don't pay attention to that and lose that vantage that we are going to have trouble sustaining growth. >> some questions about unemployment. how can we look at growth of the
housing market with so much unemployment, and what you equalize the gap between the minimum wage salary earners and professional salaries clacks spin a lot of questions here, all right. the problem with unemployment for hiring is not just the number. although it is larger and clearly over the last year, year-and-a-half the delinquencies we've had in the mortgage market have not been the subprimal and the lighter ones, those all got washed out some time ago. the challenge now comes to people who've lost their jobs or had some normal reason they can't pay their mortgage and the unemployment problem has exacerbated that. but my experience watching over the last 30 or 40 years as the the actual number is not what is important. what's important is not who was unemployed, it's how many people think they could become unemployed. and when you have going now -- there are not a lot of people very secure that hey can guarantee themselves that six months from now they necessarily should have a job, because companies continue to retrench
and continue to reorganize and continue to restructure. and so, until you can get people confident that unemployment is stabilized and coming down as a general matter, and therefore, they are more secure in their jobs, it's going to be harder to get them comfortable making a major commitment. so i think we don't have to worry about can we get on the planet from 9.2 to five before everything starts. all we have to do is start to show progress and growth in the economy where people feel, after comfortable and confident things are great to get better. in terms of wealth prosperity, we are back to wall street. and to a large number of companies where everybody says you what to measure the gap between t guy on the front lines or the woman on the front lines and whoever the ceo is. and clearly the last 20 years that gap first hatfield has widened substantially and if we take a harder look at what we are paying people of the entry-level do have to be competitive worldwide and the other issue is we ought to look at what thepeople are worth the multi millions of dollars they are paid costs and that is where
part of the regulatory reform is getting investors say on pay and telling them to voice their views and hold them accountable because they set up the ceo pay and everything else follows underneath that. so my experience on the different parts is that directors are starting to take that more seriously, but likely to have more focus on that and again, the public needs to what people understand that it's hard to know who's worth $30 million a year. [applause] >> we have an announcement here with a thing to do half of the market has increased by 50 points since you started speaking. [laughr] >> well i will be invited back tomorrow. [laughter] >> the question is will you continue to speak for another six hours. [laughter]
>> how should underwater mortgages the results from of the freddie mac prospectus? >>hat's a good question. you've heard a lot of what can we forgive debt or should there be a way to recognize the debt goes down. there's the question on the moral hazard in that, and that is how do you distinguish betwe the people who are hard working and paying thei mortgage even if it is under water and sustaining their obligations from the people what the reason the site to throwing the towel. one kind of behavior and not another. ve alays thought, and we've done a lot of that and we can probably do more that equally important for people a lie for them to refinance even if they are under water as significance because we are exposed to the mortgage as it is now. you can refinance your mortgage to buy tickets now 120%, 125%
under water. but there's no reason you shouldn't be will allow wider body to refinance if they are too wondered% under water because we are stuck with that on any way and might as well have somebody that has a stake in it. [applause] >> and the advantage of that when we have done literally hundreds of thousands of refinances under the president's program the average refinances saved people $200 a month in the mortgage payments which is a 2400 dollar and that is an ongoing stimulus for an answer to some extent if you want to get more money into the hands of people, you would in fact refinance the mortgages. the question is why doesn't everybody do that? the only people unhappy with the better the people who bought the mortgage securities and assumed there would be a certain flow of income out of the securities and it gets refinance down their income goes down. but on balance i think we've moved to some extent in that direction and i think that is an easier way to proceed pish than trying to figure out how to
write mortgages down and to get interested get the money back of the house es back up. >> there are several questions about people who are being left out of the system and there are some disagreements about who they might be. whether it is the lower class, lower and middle class will citizens need fuel to have food and these questions are asking if the population increase really is a solution. you have said it is that people want a little bit more clarification. >> well obviously onof the issues about particularly immigration is the concern that immigrants come to this country from mexico in place great demand on the social infrastructure increase the cost of food stamps and other issues and at the expense of people who've lived here longer who have the same challenges and i think those are significant
issues ao historic plea the lesson and that immigration has been that anybody who has the wherewithal, the initiative and the strength to lead their home and leave all of their friends and families and move to a new place to start a new life generally make a significant contribution to the economy. and i think over the years -- over the years i always thought, and it's not coming tru we had a great advantage over europe because we were a much more open society. in europe immigration and citizenship have been much more tightly controlled. it's very hard to break into the system and therefore their societies stagnated in a lot of ways. we had a tremendous amount of energ flow into our economy with immigrants and the guy that does our yard is fro central america and started to years ago and he has three huge trucks and
seems to stick of the world. he's bought houses had made investments and he's the guy that came with nothi, spoke broken english but is a wonderful human being and has made the most of his opportunities and has hired now he's got i don't know, probably 30 or 40 people and seems he is kind of a role model flight that kind of infusion of energy will continue to help us as we go forward. >> these folks the que are very smart about the issues that you've spoken about, but you haven't spoken about the deterioration of the environment and health care. so i think there are flks who want to know everything. [applause] scud freddie mac is wonderful when you read each weekthe mortgages put together she's helped me with the information to read iold him i was going
to have a slide that says the satchel information and the presentation was prepared by intelligence people if it got lost in translation it's not our fault. now what's the question? [laughter] >> they want your comment. >> i told frank tiahrt for here was to speak fast enough and get off thestage efoe people figured out how really delighted know. i actually know something about health care and on the positive about health care i grew up in ashlawn kentucky, a small town of 35,000 people on the ohio river which it had a huge rolling mill, six chemical plants and turn out to be a terribly unhealthy place to live, but on the other hand it was economically dynamiand all that indust has gone away. what saved the city is it has become the health care center for all the appalachians and what was once a half block castle has to get over two blocks and there's clinics on
every street corner so health care has been a great job creator and it's not just an ashlawn kentucky but it's been in cities across the country. on the other hand, health care costs are obviously rising exponentially in a way that is not sustainable and that we have got to deal with and it's not again one of those if you ask anybody would you like to have a constraint put on what to do with health care the answer is obviously know if you ask somebody to see the whole system is collapsing and here's a rational way across the board you are more likely to get positive response. it clearly is a challenge. on the river had, what you need to understand is we pride ourselves on our health care system. it used to be the best in the world but if you look at the industry's, we are in the mid teens in terms of dealing with children's illnesses that generate the body politic and so it's not as if all the money we're spending has us number one in the world. all the money we are spending in the world has us in the midteens
so there is a lot of work to be done. the environment on the board of a power company international power company in 29 countries so we spend a lot of time investing in or developing solar and wind power and a lot of alternatives to coal and gas there again looking for a quick fix if it were only that simple. a significant amount of power produced in the country by coal and if you shut it down everybody would actually get to sit with no electricity so you have to move in a regularly from here to there. a lot of power plants are now closing which out of the oil deposits is better than coal but still provides about half the amount of co2 but that's a lot better than the coal so you see a lot of closi of the coal plants if they are not closing
just for a final reason their closing because they are no longer economic in the price of gas. so the markets to somextent are helping but it is clear if we don't do sething about it and in an organized way over time we will live to regret it. the biggest problem is we got people to quit driving them all morning. we would solve a significant percentage of the environmental problem. one way to help it is to get the 50 miles down in 2010. all walk around rather than driving their car. but they are both big problems. the of theotential, tom friedman years ago talked about the environment and the potential to be sources of growth rather than decline if we are creating an imaginative and how we deal with the problem which means we need to support here development of energy d put more intellectual capital into the fields of those are
both worth 50 minutes of row so we will stop there unless you are ready to go for the six hour version. [laughter] >> there are so many wonderful questions here. i'm going to ask to more by going to announce to the group that she will be of the women's club on wednesday so some of the questions that you have that didn't get asked can be asked that time. 3:30 on wednesday. a short question, how much money as freddie mac to ld to political candidates and lobbs? [laughter] >> zero. [applause] >> i was disappointed i told the ceo who was with me for six months before he left i said koschel kitfield for your grindle to the perks of the there were no country clubs or airports or stuff we could get rid of and claim victory because they were running a tight shift. >> you asked to be have the will and the patients. what do you think?
>> i think we do. i spend a lot of tim in the government and the senate at the white house. i worked in the private sector and i do have a strong view that the underestimate the intelligence of our body politic. i think the people fortunately don't spen their lives the way we would washington reading the paper to do not who is ahead of how first base politically. but with the vendors to the issues costs to the two and people generally come up with a pretty good dancer and they are willing to do whatever it takes to go forward. it's one of the things that has made the country great is tht people are willing as long as the system is fair to become to be surwe have moved away from that. we generated kind of an entitlement society that everybody wants everything now and nothing should ever be taken away. but that is to ask the narrow question would you like another flat screen high-definition tv answer is yes. we all grew up with one if we
had one instance four or five every house has a tv it seems. so people will win that maximize their own sitation she but if you ask people direct questions broadly people are prepared and willing to make the tough choices to be patient with them and to see us through what i think will be a better future for us and more important for a were kids and grandchildren. thanks very much. >> ladies and gentlemen, john >> as an aspiring journalist, i
am preparing myself for the small salary i will be starting out with. >> you have to be disciplined enough to put aside your bias and support the facts. >> it is an experience, emotional. it is love and hate. >> from the media conference at george mason university, aspiring high school journalists on where they get their news and information in today's multimedia environment. tonight on c-span's "q & a. watch more video of the candidates and track campaign contributions with c-span's web site for campaign 2012. it helps you navigate the political landscape with twitter feeds, kennedy -- candidate bios and reports from media
>> americans rely on railways. they do that so they can move goods sufficiently. states like west virginia need sound infrastructure desperately to boost economic development in rural communities and throughout the state. that is true of any state. massachusetts, too. particularly western massachusetts. you have a lot of crumbling bridges? >> yes. >> transportation is showing signs of wear and tear. much of it is in disrepair. people recognize that but thing,
it will not be me. we are getting past the point. we are driving on over 90,000 miles of crumbling highways. if you have a crumbled cookie, you cannot eat it. if you have a crumbling highway, you cannot drive on it. there are structurally deficient bridges. traffic conditions keep getting worse. mileage traveled by car is has increased over 94% over the last 20 years. in 2009, congestion cost consumers $150 billion in wasted time and fuel. we have to fix the infrastructure the american people depend on. some in the house i adamant
about the need -- are adamant about the need to slash funding for transportation. it is an unacceptable solution for a real problem. we need to target spending cuts with spending increases. given the harsh realities we are facing, is essential we are looking for new ways to stretch the federal dollars that do exist, which is what this hearing is about. that is why i introduced legislation to create a transportation infrastructure investment fund. there are some interesting reasons that i had not been fully aware of. we are going to discuss them this morning. they would leverage federal
dollars and encourage private investment into our infrastructure network. private investors have billions of dollars ready to be put to work on infrastructure projects. we should tap into this vast amount of capital. we should do it together as partners. the fund is dedicated to expanding our transportation infrastructure. it is an investment that creates construction jobs tonya -- construction jobs and will support america's competitiveness. i look forward to hearing from our witnesses today. you are a group of phenomenal experts. i am glad you are here. i would ask if the ranking member has comments. >> thank you, mr. chairman.
i do. i appreciate you are having this hearing and also that we share a common interest in addressing the challenges facing our nation's aging transportation infrastructure. we certainly need a new approach. a most recent estimate says the u.s. needs to invest $2.20 trillion in order to keep pace with infrastructure needs. the federal highway trust fund is broke. it has been bailed out three times at a cost of $34 billion. we need to be looking for other more innovative answers. more of the same is not going to work. raising the gas tax is off of the table from my standpoint. instituting a vehicle miles
traveled tax is a non-starter. it is time to look for new solutions that do not involve higher taxes. i am supporting and infrastructure bank that would foster private sector investment in the nation's large-scale infrastructure projects and ensure the most cost-effective projects will generate the most. i will leave the synopsis of that to its major sponsor, senator kerry, who has done an incredible job of pushing this and getting the support. i have worked with senator kerry to ensure that it was something that would be a major down payment from a revolving fund that would leverage the federal government private sector money and make it go farther. i think our bill is the answer.
i really want to commend senator kerry for not only starting the ball rolling, but also working with people had concerns, as i did, get a bill i could support and do so wholeheartedly. with that, i will let the senator who is the main co- sponsor of our bill give more of the details. mr. chairman, i would love for this committee to pass our bill. i will bet you probably want your bill passed. maybe we can work together or maybe we can report both of them. >> we usually work together. >> we do. senator kerry has really worked hard on this. i know you are working hard with
senator lot in birth. -- senator lautenberg. it is a revolving fund, it can make a difference. thank you. >> just because of the positions they have -- i know the witnesses. barbara, do you want to say something? >> i would like to give you a two manager report on what is happening in our committee. i think it would be instructive if i could have two minutes. first of all, isn't it wonderful to see the by partisanship behind the bipartisan -- behind the infrastructure bank. count me in. it is a wonderful thing. count me in on the enhancement program. this is huge. it leverages $1 billion, $30
billion. other funds will match it. this is all terrific. the one caution i want to throw out -- i want to say this to the senators. i want to throw out one caution in terms of the highway trust fund. this is a way to leverage our dollars. we have to do it. we are so behind. if i can have my full statement put into the record, its dictates how far behind we are. the highways are the bread and butter of what we do for america. to walk away when it is short is shortsighted. that is what chairman mica did. it is a 36% cut in our basic programs. >> is that right? >> 630,000 jobs.
we had bipartisan support on a bipartisan bill. it freezes the current spending and says we need to find $6 billion per year for two years, plus -- to get this country working again. how do whether we support it or not, we are spending $12 billion a month in iraq and afghanistan. we are asking for $12 billion over two years. it is a small amount. i do not support a gas tax either. but their -- but there are other ways of doing this.
>> thank you. i want to incorporate some of what senator boxer said and respond to senator hutchison. i want to thank you again for having this hearing, for focusing on infrastructure and also for your personal efforts with senator lautenberg to introduce a transportation- oriented infrastructure measure. it is important. we need to find a way to work together. bus important, we need to find a way to get this done. senator hutchinson worked with us diligently to find a proposal so that we could build bipartisan support that we now
have. we have senator gramm in south carolina and senator warner on our side. there are also others in the republican side for for this. the bottom line is this. this is why we have to get together. every expert in the country will tell us that we have a $2.20 trillion infrastructure deficit. we would have to spend $250 billion a year for 40 years, which we're not about to do, just to bring our roads up to par -- up to par. china, meanwhile, is putting 9% of gdp into infrastructure. europe puts 5% of gdp into infrastructure and has an infrastructure budget.
the good old united states of america that we all love and have enjoyed the pre men -- pre- eminence of puts less than 2% of gdp on infrastructure and we're living on infrastructure. there are no great, enormous, challenging infrastructure challenges. the fact is that we are just falling behind. we have a train that goes from washington to new york that can go 150 miles an hour. it goes 150 miles an hour for 18 miles of the trip. you can go under the baltimore tunnel to fast because the cave will cave in. this is crazy. this is lunacy. we can do better than this. particularly those of us who
have the pleasure traveling a little better than going to china and traveling on a train xinxin.ijing to gentia the bullet train -- run around the world and they're all making investments that we are not. this is the one way we will leverage private dollars to do what, unfortunately, too many people in washington do not want to do, which is invest in the future of our country. by putting up a small amount of money, we can leverage money that will fund and create things that are attractive, that will bring sovereign phones, pension funds, private investment funds to the table for revenue- producing projects.
it can be independent, completely outside, not for profit -- we learned the lessons of all those things and put together what we think is a proposal that can fly. we want to marry it with yours. we want to try to find a way to get everybody to the same plate because this is too important for our country. i want to thank you for focusing on this and for your own proposal. i hope this is the one way we will get america building. for a billion dollars of investment in infrastructure, you get 30,000 jobs. we have 12% unemployment in nevada and 10% in california and rhode island and other states and people are screaming for jobs, here are the jobs with minimal public tax expenditure. we would be crazy not to do this. i hope, mr. chairman, you and
others will help create the critical energy here to get it done. >> that was a superb statement, senator kerry. senator -- >> i want to hear from these five and i will be leading in a few minutes. i will be back, but i am looking forward to this committee. >> we are privileged to have an incredible panel. >> i will wait for the witnesses. how was that? i look for to hearing from them. >> did you put your statement in the record? >> i would be happy to put my statement in the record. >> the assistant secretary of
transportation for policy, which is what we're talking about .ere, let's start out with you >> thank you. thank you for inviting me to testify before you today at this very important hearing. president obama believes that, to complete call blake, a must invest in maintaining -- to complete locally, we must invest and maintain a robust than long- term surface transportation program. at dot, to encourage that investment, we have discretionary grant programs. the credit assistance programs are an essential ingredient in many of the innovative transportation partnerships
currently in the u.s. our role in supporting these projects is likely to grow. the infrastructure bank is one of the promising ideas to leverage more private-sector dollars into infrastructure. president obama has been a long time supporter and the administration 2012 budget requests $20 billion over six years for a new infrastructure bank. it will use a competitive merit- based selection process to provide grants and loans to a range of passenger and freight transportation projects in urban, suburban, and rural areas. the infrastructure bank will use rigorous analysis and performance metrics to select projects that will produce the greatest long-term public benefits and outcomes of the lowest cost to the taxpayer. it construction bank -- the infrastructure rank will boost manufacturing, facilitating goods movement, and doubling u.s. export. we propose to help the bank so
they can build upon the expertise that we have already developed through our existing programs. one of the department's most successful programs has beentpia. since 1999, we have provided a $0.3 billion in credit assistance. that let rest $31 billion for investment in transportation. in the last two years, it has outpaced the existing authority and it has become increasingly competitive and required us to get creative in combining funding. approximately $20 million in tiger funds will support $446 million loan for that project.
in a private concession is providing $80 million in equity and $342 million of private banks that. dot got creative and combined funding to provide credit assistance for real projects. the $560 million project will create a regional transportation hub in downtown denver connecting commuter rail, light rail, bus rapid transit, and regular buses. it had to work with each of these federal programs independently and work with each requirement and deadline. they succeeded in creating a financial plan. projects like loss and loss and miami and denver require significant capacity and sophistication on the --
angeles ande loss angelelos miami and denver require significant capacity and sophistication. we already provide guidance through our program experts at dot and we hope to better collaborate and happened to the expertise represented here today from the private sector, liver, and other stakeholders. onto -- labor and other stakeholders. i would be happy to take any questions. >> thank you. mr. robert dove is the director of the carlyle group. i want to hear what you have to say. >> mr. chairman, your hutchinson, and members of the
committee, thank you for the opportunity to testify and i commend you and the committee for holding today's hearing on such an important issue. the carlyle group is an global alternative funding group. i would like to highlight for the committee the recent investment by our fund involved in partnership with the state of connecticut. in this case, we formed a 35- year private-public partnership with the state of connecticut to finance the development and operations of 23 highway service areas. we created a project that all sides of the political landscape, including labor, supported. carlisle will invest $180 million in improvements over the next five years. that is investment that we
create will -- we estimate will create 3500 additional jobs. the state will receive $300 million in benefits. our partnership in connecticut is a good example of innovative financing and product delivery. the completion risk, cost overrun risks held in shifted to carlyle and its partners. i would recommend the committee to look at three general points. first, innovative financing, particularly direct private financing, is essential. this shift from how much to fund to how to treat more funding is an important opportunity for this congress. by making programmatic and changes in the law, state and local governments can develop innovative financing models. it is important to note that this kind of financing those not
mean wanting to sell off america's public infrastructure to private investors. the assumption of them must babe -- say this judgment of an infrastructure bank is the means to a to the delivery of the infrastructure project improvements. it can accelerate large capital projects by leveraging direct private investment into projects that are critical to the nation's infrastructure. although i have lived in the united states for 30 years, as you can tell from my absence, i was not born in the united states. -- as you can tell from my accent, i was not born in the united states. i believe we can all learn from the infrastructure bank in europe. the infrastructure bank provides loans and guarantees. they are expected to be repaid.
the eib lends money for longer periods of time, sometimes as much as 40 years. in doing so, it provides capital that allows for participants, for both commercial license private equity sector investors to participate. the lending policy of eib is led by government, but the projects operate independently within the bank. but the eib, in an -- in a u.s. it infrastructure bank, is should be led by congress and other officials. you decide what infrastructures to be built, roads, bridges, high-speed rail, water facilities, or whatever. the bank's function is only to determine which projects that are submitted for a loan or guarantee our credit worthy. its function is to make sure that the projects are a
consequence of the policies you have set oand are financially strong. to be successful, congress must provide additional reforms. the creation of an infrastructure back should be a manifestation of a deeper, more profound change to transportation policy. lifecycle costs should be an established criteria in evaluating a major capital projects. without it, a true comparison with the benefits of private investment, public debt financing this not a floor cost of capital analysis. the need for investment in our infrastructure is significantly larger than anyone revenue source. there is a need to design policies to access different funding sources while being a
good steward of the nation's infrastructure. in national infrastructure bank by which private investment can serve as one of the sources of capital. >> an excellent statement. i think you very much. >> my group at morgan stanley focuses utilizing private capital for infrastructure projects. as a financial advisor focused on private-public partnerships, i appreciate their virginity to share my perspective. morgan stanley estimates that
over $300 billion of private capital is needed to invest in private-public and the structure projects. many of these funds, typically pension or infrastructure funds have the ability to invest in various geographies around the world. however, they tend to focus and jurisdictions with stable economic and regulatory governments and can invest in various infrastructure radicals. -- if your structure verticals. -- various infrastructure verticals. given that private capital can
focus on a variety of areas outside u.s. transportation and infrastructure, it is important to demonstrate that a project is financially viable and has pledged support. because of the return expectations and a stable cash flow expectation, some may not lend themselves to p3's. it can be if they are secured by liability mess to protect against recurring losses. i another challenge is convincing the private sector that there is the will to create p3's. leadership from the federal government, as done in canada, australia, and the u.k., can help attract more private
capital to key infrastructure project. how many states and local governments are focusing on these matters, top down leadership is also needed to apply a vision for the country and p3 principles. currently, no entity exist to share best practices across states and localities. the creation of a non-partisan commission could help address that. in addition, states are in need of capital to soak port projects. in order for the nation to finance a wide variety of projects, sponsors need to have access to a large variety of public and private financing alternatives that could include grants, loans, and loan
guarantees, all of which i think are very important. in summary, the p3 programs developed in canada, australia, and the u.k. are very successful. if the u.s. institute's several programs at the federal level, i moreve p3's can be accepted as a viable alternative. thank you very much for the opportunity to testify this morning on this very important topic. >> think you for that very hopeful statement. this is the vice-president of locomotive packe-- >> my name is steve bruno, vice
--lar's sit on the silence dollars sit on the sidelines while unemployment remained at record levels. infrastructure reinvestment creates jobs and careers the economy, but we need to finance it. for that, we need to rely on the private-sector. and a proper balance must be achieved. private funding must be used to supplement, not replied, current sources of funds and certain questions -- not replaced, current sources of funds and certain questions must be answered. who is liable if private entities encountered difficulties? where the long-term costs to the garment? when does it to pursue the private investors agenda? the leaders of our country certainly recognize that some
projects will never produce a profit. bridges, highways, passenger rail, and public transportation facilities are intended to provide for the public good, not for corporate profit. the people of the united states are the beneficiaries of any infrastructure legislation, not the shareholders. there's right way and a wrong way to pursue infrastructure funding. president has previously testified, amtrak has issued a request for proposals for a financial plan for a high- speed trial as part of their long-term vision. it has been fully vented and peer reviewed. conversely, the recent proposal by representatives mike shuster is the wrong way to go.
it would endanger passenger and commuter rail across the country and cost significant job losses among amtrak employees. it places corporate shareholder interests ahead of the general public. they are like corporate locusts. they swore man and leave nothing but the house to rot, which is what you would find if these schuster proposal were successful. it cannot be the only determinant for infrastructure investment. safety and other public benefits must carry greater weight. we are concerned that, when private investment is the exclusive or predominant source of financing, profitability is the deciding factor. inevitably, safety will be compromised with the end result being that imports and safety projects or improvements will be deferred due to a lack of profitability. projects with the highest profitability will be pursued while other less profitable but
nonetheless essential projects, such as those the service corps or rural communities, will languish. or orch as the service pou rural communities, will languish. thank you for your time. >> thank you very much, mr. bruno. we have mr. peter wayne, the ceo of the road and transportation association. i assume you have no point of view on this matter. >> yes, i do. good morning. thank you for inviting me to participate in this discussion about employing innovative methods for the nation's infrastructure needs. the bill is commonly referred to
as a jobs bill. while it is certainly true, the characterization under-solves the value of this project. even though our industry's interests coincide with the public interest, it is not the federal government's responsibility to support my industry. however, it is the federal government responsibility to ensure that efficient commerce occurs amongst the states. it is something that our economic rivals have already recognized. furthermore, every manufacturing plant in the u.s., every retail store, every service worker, and nearly 80 million total american jobs are dependent upon our
highways, our airports, and our railroads for inputs to deliver products and services. the efficiency of the nation's network directly impacts the health of these dependent industries. given the nation's best transportation needs, we must utilize every available potential solution. that includes the private sector. for over 20 years, our organization has been looking for support through private- public partnerships. we continue to push for reforms as detailed in our written testimony that would further incentivize private-sector investment and transportation improvements. the potential contribution is enormous. it must be considered in its proper context.
first and foremost, private- sector involvement requires the opportunity of return. the private-sector will engage in transportation improvements based on their business objectives and not by some formula or preconceived mechanisms. there is also lack of legal authority in approximately half of the state's to conduct private-public partnerships. congress should certainly pursue innovative methods to pursue improvements and attempt to leverage public-sector researchers with private-sector resources to proven programs
like tfia build an america of bonds and a national infrastructure bank. it recognizes that financing is a supplement to court public sector involvement. the reality is that there is not an abundance at the moment of viable ppp transportation projects. the forecast is two to four projects a year, 5% of the market. i urge you to take a look at the city we commissioned. it is attached to our statement. we have looked at the sector for the last 22 years and identified the scope, 54 billion project, but only in half of our states. this should not deter establishment of an infrastructure bank.
while not a panacea, bank projects could in fact be gained changers. these projects could be the catalyst to major productivity and efficiency gains for our national economy. mr. chairman, it is no secret that the biggest obstacle to moving the current multi-year utilization bill and transportation bill is the outlook. the trust fund can no longer maintain current investments. investment in these programs, if the senate or the house does nothing, we will see a 35% cut in investments. there is no doubt that increased involvement of the private- sector can help when projects are viable. make no mistake about it we believe that congress must supplement highway project
receipts. the nation's long-term economic projects as well as our jobs are at stake. in a little more than a month, we will be two months away from the end of our eighth extension. it is time to get on with enacting a multi-year transportation authorization bill in a bipartisan way. the most important thing that congress can do is to pass legislation to move this process forward. a look for to answer your questions. >> thank you. senator lautenberg has joined us. since she is the chairman of the subcommittee, frank, you can say something now or i will give you
an extra three minutes in the q&a. number one, i feel alone leave -- i feel a little naive. i know it is the case in the commerce committee -- we have never had a hearing on the public-private partnership approach. all of a sudden, the reading of hundreds of billions of dollars available and easily available and i am looking at the scheduled people who are testifying and -- no
i am not sure where we have been. i cannot worry about the past, i have to worry about the future. it seems to me an extraordinary opportunity. it may be that a number of other people have also offered bills on this subject. it is imperative that we come together to make a common cause on this and i think it will happen. bridges are not made to last more than 50 years, are they, mr. brunner? >> -- mr. bruno? >> that is right. >> let me give you a hypothetical. this is not being parochial about my state. it is a complex problem. help me understand how you look
at what you do. you indicated that you cannot do everything at two to four projects a year. i have been watching for 40 years the building of something called carter age. -- carter h. it go right into the heart of west virginia and probably transform in time. property values are increasing. neighboring counties -- there are only 50 miles left to build. it would transform the future of west virginia. i cannot help but be interested in that. so my question of you and whoever wants to answer it --
things have to be paid back. in a sense, there is a respected nature to this. on the one hand, nothing will happen if we do not have this road almost done. it has been 40 years building it. it costs $25 a mile. that is now. on the other hand, if it is built, the world will open up in west virginia and that is not a casual statement. industries are moving at a rather rapid pace from the congestion of the washington, d.c. area into the eastern part of our state, which is where this would have the greatest impact. i am interested in how you would evaluate a project like that.
it is not new york to boston, but in a state that is opening up. >> the way we would define and enforce assure project is where is it combines social benefits with economic benefits. clearly, all over the long run, it should generate significant economic benefits. the question is how do those -- how does the private-sector debt involved? how does that turn into a an for a return in investment? if it is realistic development or potential revenue strange or
investment opportunities that do not directly correlates to the actual road, that can develop a whole bunch of either jobs or other types of economic benefits. it is always very difficult when we see projects like that, too narrowly focused and say that this route can generate this amount of tolls and therefore it is a good project. i think you have to look much more broadly. if it can generate benefits for the state and create other jobs and lots of other inherent benefits, therefore, we would define it as a very successful infrastructure project. >> to have ways of figuring out how large a that growth and development might be. you cannot do that out of the top of your hat. >> that is right. professionals at morgan stanley can be helpful in a peace to that. there are people who specialize in quantifying economic benefits. those professionals can be very helpful to put a project like
that in perspective. >> i have overrun my time. i will be back. senator hutchinson. >> thank you mr. chairman. the differences in the two bills that have been introduced, a basic program and the other is a bank that would be more of a revolving loan fund that would require a revenue stream -- my question is would that make the difference in projects that would be put forward? also, would it attract more private sector leverage and funding if you have the bank concept with the revenue stream,
as opposed to grants being involved? or do you think there could be cases where grants can be an enhancement? >> that is a good question. i think the important thing to understand is that there is a need for funding sources for infrastructure. the infrastructure bank that are proposed around the eib model is a bank that makes loans and guarantees and seeks repayment. that does not mean that grants cannot continue. but the idea of an infrastructure bank, which could be used to supplement the chairman's particular project is the way of providing air level of capital, which will attract people like me as an equity
provider and commercial banks to come on top of that to fund the project which could not otherwise be funded. you can see the infrastructure bank as an additional source of capital. >> i do see a benefit of having grants in some form, as either part of the infrastructure banker separately through the tiger grant program. i think some projects require a piece of the project to be subsidized or supported with grants. once the project is built, the and the project can support itself. and a lot of cases, it is a matter of where the cost is such that you need to have a portion of it in grants to be able to overcome the overall capital requirements. >> thank you.
>> let me build on that. i think it is a key distinction and a keyed identifier of differences. one thing i wanted to emphasize -- in vision or what are believed that there will be any encroachment, this is completely and above and beyond a for. the infrastructure demands from the country -- grants will be needed. tiger and tfia will all be necessary. our bank is structured so as to
really be above and beyond that. there is a $100 million limit for the project. it has to be $100 million or more. those are big projects. there is also a set aside for rural communities. you go down to the $25 million level. they may not have the same kinds of projects. we want rule to be able to participate as much as other ral toof the -- we want rul be able to participate as much as other parts of the country. given the political mood or climate of washington, there was a powerful feeling on both sides of the aisle, bipartisanly but there's not a lot of stomach to create an apolitical department.
there may be different administrations or different attitudes about it. the theory was to make it freestanding with its own set of rules, performing like a bank professional way, without the possibility politics getting in the way. i think that gives greater comfort to the investor. i wanted to ask you if you would address that question. you put emphasis on "independent. " i wonder if that is something that is of value to you as a private-sector investor as sonora to take your money. >> absolutely. the institution set up should be seen as something that supplements capital needed for infrastructure programs so the
grants are another form of funding coming into the project. but to the basic structure would be very long term debt. i am talking about 40-year debt or even longer issued at a very low rate of interest. maybe 25 basis points over were treasury can issue money. it is basically a very long term money. that makes it attractive for me, knowing that i can get equity people to come into a project which otherwise would not be feasible. kaulitz is determined has to be done by an independent -- how it is determined has to be done by an independent organization. the appointment must be agreed by congress, but all the applications that come in for the particular projects, whether it is a road in western virginia or a road in california or a
road in texas, they can evaluate it from an end and a perspective and they can say this to search to -- this deserves the often need to take this amount of money for 50 years. >> as currently constructed, we embrace water and energy. so it is energy, water, transportation. >> the project needs broader than transportation. all these things are potential. but where the bank puts its money has to be determined by congress. congress decides the policy of what to be put before the bank. but the individual projects, the sponsors, they will, they project with all the criteria.
>> the adjustment on those skills are based on the revenue stream. >> part. that does not necessarily mean tolls. there is some sort of availability pavement, like used in florida for the miami-ford tunnel. it does not always mean user-fee tolls. it could mean other structure put in place, along with one that is prepare for the west virginia in for sure project you're talking about. >> thank you, mr. chairman. i want to thank the witnesses for coming here today. i believe that we do need to take up the reauthorization
bill so people can plan on ever structure in this country. i also want to get back to some basics in making those fortresses. with respect to this fun, do have a question. and speaking of the national efforts structure bank and representing the public-private partnership, i can tell you that i think the people are very tired of valence. one issue that really leads to my mind in hearing -- tired of bailout sais. one issue that really leads to my mind in this hearing is what if the project fails? what would happen if it overextends best bank? what metrics would be used to measure success? how can we assure taxpayers that this does not become another government entity that we end up bailing out that projects and we
end up privatizing the profits while socializing the losses? >> that is a very good question. it gets into the debate that you all are having and that we have had in the administration, whether you are locating it within federal agencies are making it separate, how independent the financial authorities are. the way we work with the credit programs at dot, essentially, congress grants as budget authority and the treasury determines the possible risk. if we give a hundred million dollars loan, then we will take $10 million and the treasury hold onto it. the treasury build up their reserves and that covers the cost of any projects the faltering. we do a very careful financial analysis. it takes is a long time to do due diligence because we're the public sector.
we want to make sure that the taxpayer dollars are protected. thus far, with the federal programs, we have had a good track record. but you are right, you have to design it so there is no risk to the taxpayer. i think this is -- when i think about a project, for example, high-speed rail, why would they private sector to invest in that? can you help me understand what that would be a project you would want to invest in? >> and the florida high-speed rail project was being considered, we had lots of conversations with construction companies, private resources, those who were interested in being part of the project. but the assumption was that it would be structured in such a way that, when the project was
first introduced, writer ship may not cover the cost -- the operating costs. and ultimately, over time, it probably would. it would need a bridge to make sure there were not operating losses that would need to be covered by the private sector over that time. there is an example where the availability payments have been used to try to smooth out that development. if it is structured appropriately, high-speed could work. but it is a much more difficult type project. >> if i remember correctly, and having looked at this, there really is only one place in the world where you have actually been able to break even with passenger fare and rail. this is an area where i would be concerned we are investing and we will have the private sector
to join in and we would be on the hook for something. it is one of my concerns a in terms of getting back to basics transportation funding. in new hampshire, there are roads and bridges that need to be fixed. we start allocating money elsewhere. this, to me, in terms of how we decide where the money is allocated, this is a very important issue, i would think, for the private sector on return investment. >> that is right. i highlighted transit because it is very difficult for transit projects to be able to demonstrate that the revenues from the fares does cover the operating cost and able to ensure that safety is not jeopardized. and our state and in many other states, local officials spend a tremendous amount of time trying to come up with an infrastructure plan based on
local parties, state priorities. if we create -- local priorities, state priorities. how do we preserve the local feed back? i think the people in new hampshire make better decisions on where to put the funding then someone in washington. that is one of my concerns. i wanted you to address that. >> first of all, to reiterate, i think these types of programs are to supplement regular highway and transit formula funds. this is not to replace that. i will give you the example of the tiger program, which is a hybrid of grants and loans been one thing we did that had never been done before, instead of just having state dot and transit agencies apply, we
opened it up to all communities across the country. we got a flood of creative obligations at the local level. -- create applications at the local level. one nice thing that an infrastructure bank can do is open up the door to all kinds of communities and different entities to apply. i think it can open the door to more local creativity. the ideas will come from the local level. but, it is true, the models we are discussing is that the decision making is here in washington. i do not think it is to supplant the bulk of the funding. >> i and stand it will be a supplement, but how do we know that it will not be washington's priorities versus the absolute need within that state as to make these decisions? >> i think that as part of the notions -- part of the
negotiations that we will have, hopefully. i think we have done a pretty good job of decentralization. they have lots of the economy. we can strike the right balance. >> i want to thank all the witnesses for being here. >> excellent questioning. senator lautenberg. >> thank all of you for your presentations. it does open up the subject of the private partnerships. it appears that there are a few other routes we're willing to take now that will get us going
on our infrastructure problem. railways and runways keep our economy moving. but no one part of our infrastructure is so deficient. we look at a situation that escapes' attention, in my view. in 30 years, our population grew by 100 million people. it is expected that the next 100 million will happen in shorter time. and the infrastructure was not built for the present population. you wonder how we will resolve it in the future. across the country, one-third of our roads are in poor condition. more than a quarter of our bridges are deficient. and our transit systems are outdated. in my homestead of new jersey,
we can confirm the experience around the country. more than three-quarters of our major roads are mediocre. one-third of the bridges are in need of immediate repair. the falling transportation network impairs job creation, economic development, productivity. businesses cannot succeed when employees or customers are stuck in traffic or when every delay prevents them from putting products in the hands of customers. the development of infrastructure is hoped to put people back to business. large-scale projects are hard to get financed. this bank can offer loan
guarantees that complement existing grant programs. if you leverage public funding by encouraging private investment. it will give us a much better bang for our federal dollar. make sure that we remain competitive in a global economy. i spent a lot of time in business. an early lesson that i learned is that, if you want to be successful tomorrow, you better start laying the foundation today. start repairing the business infrastructure now to take your growth and expansion. if we want to leave their children, grandchildren, a better country, then we need to make smart investments. i think the witnesses for their suggestions and how we can
finance our infrastructure repair in a much faster fashion. amtrak has proposed a gateway toll under the hudson river between new york and new jersey to increase high-speed rail. this project will create thousands of construction jobs, expand access to good paying opportunities throughout the region. can an infrastructure fund that combines grants and loans be used effectively to support the development of these regionally significant projects? >> yes. that is a project that we have been hearing from amtrak about and talking with the delegations about. it is an exciting project with a big price tag. it will take a lot of critter ideas on how to capture the monetary value