journal live at 7:00 eastern washington-- on wednesday morning and join the discussion. texas congressman jeb hensarling was the keynote speaker at an event marking 10 years since the 2008 financial crisis. the outgoing chair of their house financial committee discussed concerns about the mortgage industry and to questions from the audience. this is 45 minutes.

we will try to get as much useful information as we can but i want to be sure that you know that this conference is a retrospective on the financial crisis 10 years afterwards so a lot of the things we are talking about are things that happened in the past rather than things that could happen in the future. i'm going to ask you questions about both. let's start with something that's kind of personal but if you don't mind, that is, you have announced that you are going to retire and this has been a puzzle to many of us. you are highly respected member of your caucus. you were mentioned as a potential speaker at one point, and so i'm puzzled why you want

to leave congress at this stage. granted your time ends naturally by house rules. but why do you want to leave? >> before you are just that-- before i adjust that if i could just think you for the invitation. i'm having to speak so i did not get a free lunch but we still got lunch. the rest of you, please enjoy your lunch. i'm used to speaking and having no one pay attention to anything i say as a member of congress, so please enjoy your lunch. to answer the question, more people should be asking the question not why are you leaving but why did you stay so long? that probably is the more appropriate question to ask. so yes, i am term limited as

chairman of the house financial services committee and it's hard for people in this town particularly to believe it but a lot of us do have families and for those of us who have families in our district, i live in dallas and i work in washington and commute back and forth, i have frequent flyer miles. when i went to congress my daughter was in my arms, she's driving now and he has a mustache. i'm told that your children may always be on the family payroll but they will not always be in the family nest. so, i want to go back and capture the last few years in the nest. by the way, if you are ever in dallas texas and you see a gray ford fusion 22-- c 2255, give them a break. he's only been driving a couple

of months. anyway, i'm flattered by the question. also i have to tell you, part of me still believes in a jeffersonian model and the citizens legislature. i thought i would do three or four terms. i don't want to be a member of the permanent ruling elite class in washington. it will probably prove to be the greatest privilege of my life. having said that there's still a lot of business. >> i hope we will get to some of that. i want to ask you about the financial crisis. something that has been bothering me for a while. i was on a group of academics mostly that was studying the crisis. we came up with a proposal and at one point we had a meeting

with a very high replaced member of congress. he is no longer in the congress but he was talking to us about what was going on at the time of the crisis. he said that he was told, and i assume others in congress may have been told, that the government was so worried about the effect that the crisis was having on people that they were considering-- with washington. you are looking as if it's crazy. i thought it was crazy at the time but have you ever heard anything like that from the administration? >> the short answer is no. i was a child in the 60s. i don't recall if the capital ever had to be protected. otherwise i assume we are going back to the war between the states. i would hope that would be

rather far-fetched. and if so, i think to some extent i'm convinced that in many respects, the indecisiveness and changing the game plan constantly helped exacerbate the panic in the first place. that kind of thinking-- i was not privy to it, i was a more junior member and also being in the congressional minority at the time, i assure you a lot of information to flow to us. i would be surprised if that wasn't accurate but if it is, very sobering. >> he was a democrat so he was majority and i don't have any idea what he was-- it was just going to be a bunch of professors in order to address the gravity of the situation. he was one of the first ones to

come up with the idea. >> well what were you told in congress about the dangers to the country? what about the dangers to the financial system? what were you told as the issue became current and you had to vote on it? do you have recollections?>> well you're forcing me to have a flashback here but at the time i was chairman of the republican study committee which at the time was the only conservative caucus in the house. we now have two. from that perspective i did get to spend a lot of time on the telephone and in personal meetings because obviously they really wanted for republican work for their plan. i spent a lot of time with him but i also vividly remember

coming in and saying we don't know how much money we need and frankly we don't think we need money at all but we think we need an authorization of a really big headline grabbing number. if you give us that number we don't think we will ever have to use the money. by the way we are designing this as a toxic asset purchase program, not a capital infusion. 24, 36 hours, whatever the math was, that changed. that was what we heard and early days and a little bit thereafter it was the world as we know it is coming to an end. the sky is falling. is probably the single most used term in congress is crisis but in this case it had some weight behind it. it had some credibility and legitimacy.

so yes we were essentially being told that we were on the brink of the next great depression. i never believed it, but having said that i did have some doubts. from my perspective, we were being told choose between the next great depression or the slippery slope of socialism. i just didn't buy into it. by the way if i remember right, it started out as a three-page bill and ended up being an almost 200 page bill. like many, they don't really hope that you read it so i have that memory as well. i don't like to vote on legislation but i don't have time for me or my staff to

review. my thought is that yes this is a legitimate crisis maybe more than others who have worked extensively on its genesis, but i also thought that we should not have this rushed to one particular plan. i thought ultimately we are going to have to live with the legacy and we have. i think part of the legacy has been 10 years of tepid economic growth, a diminished american dream for many families, and i'm not convinced particularly that the same risk is not yet again building. i just play we are not on another boom bust bailout cycle.

i knew that we would have to live with it long-term and what has it led to? a far larger footprint of the government in our economy. good thing i'm not running for reelection so i can be looser on my metaphors and illusions but it's like the soviet-- soviet army coming to liberate eastern europe and 40 years later they are still there. if the government cannot liberate our economy i'm ready for them to leave and go back to a much lower profile. so again, those are some of the things that we were told at the time. that one is an argument for a very big number, that that would perhaps put people at risk.

did you vote for that? >> not only did i not vote for that, i hope this is one of the only times that i was credited for leading the charge against the bailout. so no. it's also not the only vote that i've lost in congress ultimately. the first one went down six 6789 days later. >> i think it was about 500 points in the stock market. in those days that was a big number. >> it was a big number back then. >> is that influential? >> i tried not to overreact to one-day movement. and again, i knew that long- term we would have to live with the legacy.

once you get on the road i don't know how you reinstall market discipline. ultimately that's the greatest arbiter and protector of systemic risk. i think even today we've lost a huge portion of that. so again, bailouts beget bailouts so risk builds up in the system that would not otherwise be built up but for having federal backstops. it got my attention but not enough for me to want to switch my vote. >> you are a tough guy. i will get to that in a minute but what i'm wondering about here is if the democrats have not succeeded in capturing congress in the subsequent election and the republicans

had been still in control of policy, what do you think that a republican congress would have done in the context of starting again in january starting again in january 2009? obviously one of the things on the table was a highly regulatory fall but that was where most of the planning seemed to be going. with republicans have had a different way of addressing or remediating the crisis? >> i recall putting forward some legislation at the time. i thought it was critical that we have alternatives-- alternative secretary policy. i had an alternative which frankly was cobbled together

from a few other alternatives. i know that our current speaker paul ryan-- again, i haven't looked at the details in years-- but, i believe had a plan to set up a temporary, paid for insurance program for certain mds. i'm a little fuzzy on the details 10 years later. i assure you it would not be remotely resembling-- our ranking member committee at the time has put forth a probe-- a program and settle to that would have been an advanced bankruptcy regime which i think as you well know, was part of the financial choice act as well. bankruptcy versus bailout would have been the key difference. i think hopefully what we would have done with respect to

federal we ensured omissions insist upon high levels per capital with respect to wherever we had a federal backstop be it to mortgage insurance or others that we would insist upon traditional historic prudent underwriting standards and again, far higher levels of capital than we saw in the market plates-- marketplace. you know better than most that it would take a microscope to have observed the capital letters of fannie mae and freddie mac going in. i think i just made that up. >> that about does it. >> republicans did take over congress at the end of 2010 in

a red wave so to speak. when they came in there was a lot of talk about-- repealing that. why didn't that happen? not from lack of effort on my part. i'm happy to say, as i'm sure everyone is familiar, the president did sign into law, 2155, it did not repeal it but we did a number on it. it is at least substantially repealed for community banks and never of regional banks. why didn't it get done? unfortunately, the senate is not an egalitarian institution which i think everybody knows. unfortunately it's a long-

standing debate. you will not find the provisions enshrined in our statute book or in the code of federal regulations. the cause of that, almost every aspect save a couple including provisions dealing with what we would call the bailout, almost every provision has to reach his super majority threshold. thus, this is what you ended up with. when i became chairman we put forth legislation that i believe effectively repealed and replaced dr. frank-- dr. frank. it did not quite see the light of day. never underestimate the capacity of the senate to do

nothing so they did at least finally act on something so that's what we have. if you are looking for some reason, most legislative matters -- >> what we see is whenever legislation is passed groups form around that legislature and the organize themselves in such a way as to take advantage of it. so it becomes very difficult to repeal legislation. but at the very beginning there was a lot of talk at the beginning of the republican congress in 2011, about the possibility of trying to repeal dr. frank. you would think because of the senate-->> not

only that, i vaguely recall that barack obama was president.>> this was a problem. >> this was a challenge. for frame of reference, since donald trump has become president, i have been to the oval office maybe 8 times for signing ceremonies for bills coming out of the committee. the eighth that barack obama was president i want to know ceremonies at the oval office. peter, that one was simply not in the cards because let's face it. along with obama care done frank was one of his signature legislative accomplishments. you are talking about the family jewels. unless we amend that part of the constitution, that just wasn't in the cards.

but are you saying that certain financial interest gets tested in certain aspects of the status quo? absolutely. i find it most ironic that postdoc frank the big banks became larger and the small banks became fewer. quite the contrary of what we hoped. unfortunately we are seeing more and more federalization of credit allocation. this is not a good thing for americans.>> that's one of the reasons why this kind of legislation has many far-reaching effects. it does affect competition tremendously and we've talked many times about this. the smaller institutions have to spend much more than the larger one. >> while the larger ones did not necessarily like it at the

time but they learned to live with it and recognized it as a competitive advantage. it is a huge barrier to entry. we see it all the time. the small have gotten smaller. hopefully for those that are left, and i haven't checked the stat recently, we were losing a community bank or credit union every other day in america throughout most of dr. frank. with a 2155, hopefully we arrested that before it was too late but so much more remains to be done. >> turning to things that are most current, you have reintroduced the packed act but at the same time you have expressed an interest, for the first time in my knowledge, of allowing the government to continue to guarantee something in the housing market. that was

a surprise. >> but you invited me anyway. >> we will always invite you because you always have a good answer for these things. why is it that you made this change as you described, in a conservative nongovernment view of how the economy should work? >> my principles have not changed but my time horizon has changed and my rate of time preference has changed. i'm not sure who the patron saint of lost causes is because i'm not catholic but between trying to get rid of the farm program and get rid of the gsc,

i've taken on a lot of very tough causes. unfortunately after having battled for 16 years, i have not found a lot of allies. early in my career, richard baker and ed royce have championed the cause. free-market capitalism in the secondary mortgage market, but there has not been a lot of people to take this up. it is not the first version of the act through the committee. it's probably the toughest legislative assignment that i've had. and as i lobbied the house republican congress-- caucus, i did not have the vote. i battled this for 16 years and i think you know the administration is on record

favoring continuing the government guarantee. i don't believe in the government guarantee. i think it is risky and unneeded . i certainly believe in the tenure that i have left in congress that will remain part of our housing finance. perhaps this is the texan in me, but if there's going to be a government guarantee i think it might be a little better if i helped assign it as opposed to somebody else. i feel very strongly that systemic risk is building within our housing finance system again. there's a guy over there who appeared at our can-- our most recent committee that up-- that convinced me. you were unavailable apparently. i answered your invitations but you apparently don't respond to mine but we will let that be as it is. so i am careful that the

systemic risk, i do not offer the bipartisan plan. i offer it as a better plan than the status quo. if there is a pitbull in my backyard harassing my dog and i've called the dogcatcher for 16 years to take-- to pick up the pit bull, i eventually conclude that the dogcatcher is it coming. if the pitbull is there, i at least have to put a muzzle on it and put it on a leash, preferably a chain-link leash. i believe we are probably headed towards some type of bipartisan plan that credibly preserves the government guarantee. maybe over the course of another generation but if we cannot get it done with a

republican house, senate, and republican in the white house, i'm not overly optimistic. if you are going to do a bad housing plan, this is a better way to do it. >> let me put it to you this way. if it is true that systemic risk is rising in the united states-- >> i think you said it was. >> it's rising in the economy and because of the housing market. they are rising at about the same speed as they did before the last financial crisis. many of us realizing that it is almost impossible to get legislation through congress that would stop this have talked about it-- talked about an administrative solution.

there is to be a new director of the housing finance agency hopefully in january. the new director has the power to withdraw fannie mae and freddie mac from the market and reduce their footprint. is that something you would favor? it's something that i do favor and the decision makers within the administration and what i wrote in the journal a week or two ago, i alluded to it. the only problem that we have is that it could be a five make your plan or maybe a 10 make your plan. the president gets to appoint a new director. powers over the housing and

finance market. i'm familiar with your plan and i thoroughly endorse it, and unless the plan is enacted by an fe director you will never get a long-term bill out of congress that is better than the status quo. again i guess i left my crystal ball in dallas so i don't know who is going to win the next election. what you offer is good and right and brings parties to the table. it brings different stakeholders of be it realtors, you may have to shake things up and know what is taking us back to status quo. it pretty well has been done.

i prefer agent legislative fix. if i cannot get one, a five- year administrative fix. and again, catalyst for legislative action is called for. if you had a plan where at least i believe you can take the pressure down and narrowed down the types of mortgages mortgages wrap around can ultimately put their wrap around. to ensure that gps properly calibrate. if you reduce conforming loan limit, and if you let the patch begin to expire, then yes, i think you will have some action. but i also think you reduce the systemickesque -- systemic risk that's building in the system now. i very much endorse the plan.

and have said so again. to key administrators at the administration. >> that's good to hear. >> they don't always heed my call or take my advice. >> i have the same complaint. the market has continued to grow. the likelihood of systemic events or a systemic event continues to grow. and so my reference is not to talk about it. because it's too enticing sometimes for people in the administration and in congress. because it's where the action is. and there's a lot to be gained from trying to put a bill

through. having many interesting meetings with people who are for or against. so that's why i am a little bit concerned about what -- >> i don't see it as an either or proposition. and i don't think it sucks so much oxygen out of the tube. i don't see again why you can't do both. but the fhsa sa director, whatever program they put in place at most has a five-year life span. that's what we know. where as congress could write something that's generational. it could clearly be so much more enduring. and so, you know, to think that ten years later, three administrations, five congresss, and we're pretty well exactly back to where we started is a proposition that i just -- you know, i'm just not at peace with it.

i can't abide by it. and again alongside you and others, i've been fighting this battle for the 16 years i've been in congress. i hope somebody smarter and better might succeed where i have not. but i don't know who's going to take up the fight. ed royce is leaving. i'm leaving. richard baker has left. and i haven't found the person who's going to take up this fight. but it is a fight worth fighting. and last i looked, housing is still roughly 80% of our -- 18% of our economy. and again, there's no reason we ought to have a government guarantee in the second mortgage market. none whatsoever. as you know, most oecd nations don't have it. they don't have anything remotely resembling of fanny and freddie. most of them have, you know, fairly comparable rates of home ownership. and none of them have the

forclosure prices that we had. >> i just believe, alex, if you can't get it done now, how are you going to get it done? how do you rationalize a bad system. i think you can do both at the same time. and i think one may have to be a catalyst for the other. but please know, hopefully nobody in this room is satisfied. because it's too risky. and as americans we shouldn't settle for it. >> let me just say that i doubt that in the future we will have someone as head of the house financial services division that is the quality of the man who we have now. >> thank you. >> and we will all miss you quite a lot. >> thank you. [ applause ]

>> q&a. >> apparently we're not done. >> okay. that's a good idea. i didn't know we had that time. >> apparently i didn't either. so any questions? yes, sir? please give your name and your affiliation. >> hi, carl. sir, you mentioned the politicalization of -- he warned that if we had another central bank that the largest corporations and the most powerful financial and political interests would conjure more credit financial existence until the wealth of those labors insure been stolen

and precious libates sold or bartered away. no state shall make anything but gold and silver coin. is it possible and relevant to pay attention to those words to use the monetary metals ? >> well, carl, you have an advantage on me. i haven't read jackson's fair well address. i'll say this, a little bit somewhat elated to the gsp argument. i've learned a few things in my political career. and sometimes -- one thing i've learned is there are a thousand ways i can fight for freedom and prosperity everyday. i've got the bandwidth to handle four or five fights at any given time. so taking on the fight of our current fiat currency controlled by a federal reserve

is not a fight i've chosen to take on. i mean i've not been an advocate of returning to the gold standard. i have been intrigued at times. the currency to a basket of commodities. i have studied that proposition before. and so i think number one, probably not a whole lot of appetite to be taking that on. simply because also, something else i've learned. we put forward some reforms in the federal reserve so i like making speeches. i like makes votes. most importantly, i like making progress for the cause of liberty, the ground of liberty is to be gained in inches. i often think he measured in

millimeters instead. so again sometimes icons trait on what do i think can -- where can i make a difference today? but it also keeps the debate alive. because i think some of the work i have may not realize progress for several congresss. one more. yes. wait for the mic please. and identify yourself. >> was there ever like any serious attention paid to studying the extent and role of regulatory forbearance towards large commercial banks during the banking crisis? the reason i ask is over 2008 you might have noticed that banks like citi failed to

recognize a lot of clauses that were known and were probably required by the standards. and this is kind of a standard procedure of bank regulators. and the reason it strikes me as important is that had these been contemporaneously recognized, banks like citi would have been forced to recapitalize in different markets and you wouldn't have had entire -- tuition that you did. >> it sounds like a great question for somebody who might have served on the financial crisis committee. i wonder if any such person would be available. so i'm sorry, you're speaking of a retrospective, at the time, is that the question? >> yes, it's sort of retrospective at the time, but also going forward, i know you're interested, and you've worked a lot on trying to figure out the right capital ratio, leverage ratio etcetera. and one primary impotence of that is the numerator, which is what the account and capital at

hand. when banks don't recognize, all these things become less relevant because you have this fake capital in there. and the capital requirement ceases to be anything of meaning. >> i'm sorry. i studied it before. i'm not really equipped to speak about citi's case at the moment. i just don't have a memory. >> citi? what's citi? well, i think the question is about how you measure the capital. and you actually had a very good approach to that. with real assets. and equity and so why isn't it adequate for are regulatory organizations ? >> well, it should be. i mean again one of the great myths about the financial crisis is this whole myth of

deregulation. i think of -- you can not intellectually sustain the argument that there was any kind of deregulatory movement leading into the crisis. although i out the i can necessarily prove it, i would think almost second only to nuclear engine -- nuclear power and possibly the practice of medicine. i don't know any more highly regulated industry than banking and finance. so clearly that was not part of the problem. so i don't think you can make the case, number one, that deregulation led us there. certainly more regulation was not the answer. but you can make the case that there were inadequate capital levels. you can't make the case they were inadequately complex. and so again, our, you know, i

still remember -- i'm not trying to take away from all the very smart people in the fed. i'm not trying to take away from ben bernaki but when he announces months before the crash all is well, well, all wasn't well. and they're not gods, they're human beings. and for us to think that somehow an economy and a financial system as complex as ours can be reduced down to regulatory formulas is just humorous. it's just absolutely humorous. so the answer is again, let's have more loss absorbing capital in the system. and let's have far fewer regulations. and that was the trade off in the financial choice act. and i still -- i have a few more minutes don't i? i don't. all right. >> that's the right answer. >> that's the right answer. so i think we probably have to give in to the gods of time.

but you've been very informative as usual and we've learned a lot. thank you. [ applause ] coming up live on wednesday, a senate hearing on the trump administration's nominees for census bureau director and a seat on the postal regulatory commission. that's on cspan at 10:00 a.m. eastern. at 2:30, a hearing on the process used by the u.s. olympic committee to protect olympic athletes from abuse. in the evening at 7:00 p.m., senator tim kaine and republican challenger cory stewart take part in their second town hall debate in virginia senate race.

on cspan 2 the senate comes in at 10:00 for more debate on brett kavanaugh' nomination to the supreme court. the nomination has been delayed until the fbi investigation into sexual assault investigations has been complete. there's a system to prevent train accidents called positive train control. day two of the atlantic festival continues in the afternoon at 2:00. including senate judiciary commissioner pamela harris of florida. former vice president joe biden took part in a discussion with doctors and health advocates as part of the first annual summit of the biden cancer initiative. they talked about cancer prevention, cancer research, and helping the families of cancer patients. this is an hour and a half. [ cheering and applause ]

my name is joe biden. i'm delighted you all are here. i know this is highly unusual what i'm about to do. before i begin, i'd like my entire staff to come out here for a minute. is the staff back there? greg? have them come out. all i can see is the back of my bald head. come on. bring the whole staff out. come on out. folks this is greg, danielle, katherine, cecilia, lisa, ariel, katie, i can go through the whole list, you see this group right here, they've been working on this effort for the better part of a year.

they put everything together. the most important thing i like about these guys is not only are they smart as can be, but they put their whole heart and soul into this. they care about it. it matters. and i want to publicly recognize them. i want you all to give them a round of applause because they're the reason this has happened. greg, thank you. this is the boss man right here. [ applause ] now that i've thoroughly embarrassed them, thank you guys. thanks for a great job. folks, welcome. i want to say welcome to more than 450 summits that are going on all across america. in every state in the union there's a summit taking place all day today and right now as i speak. and folks, i want to thank my former colles