Did Fannie Mae and Freddie Mac Cause the Financial Crisis, and How Can They Be Reformed?

Ideas in Action with Jim Glassman is a new half-hour weekly series on ideas and their consequences.

The financial crisis has been blamed on many factors: Wall Street bankers, out of control hedge fund managers, incompetent ratings agencies, weak government oversight and a collapse in the housing mortgage markets. Seemingly all of these forces played a role. Peter Wallison of the American Enterprise Institute argues, controversially, that the main culprits in the financial crisis were the government-sponsored enterprises Fannie Mae and Freddie Mac. These mortgage-lending powerhouses, backed by taxpayer funds and a mandate from Congress to increase home ownership, even by people with low credit ratings, shoulder most of the blame for the economic meltdown according to Wallison. Unless they are reformed and reined in, Wallison writes, American taxpayers could well find themselves spending billions to bail them out again.

Transcript

JIM GLASSMAN:

Welcome to Ideas in Action a television series about ideas and their consequences, I'm Jim Glassman.

This week: did Fannie Mae and Freddie Mac cause the financial meltdown in 2008? Whether or not they were the primary cause or just part of it, bailing them out has cost U.S. taxpayers close to 163 billion dollars. The Obama Administration and congress plan to reform these two huge lenders but should they be abolished all together? Joining me to explore that topic are Peter Wallison, senior fellow at the American Enterprise Institute and a member of the Financial Crisis Inquiry Commission; Martin Baily, senior fellow in economic studies at the Brookings Institution and chairman of the Council of Economic Advisors during the Clinton administration; and Larry Lindsey, president of the Lindsey Consulting Group and former director of the National Economic Council during the George W. Bush administration.

The topic this week: Should Fannie Mae and Freddie Mac be reformed or abolished all together? This is Ideas in Action.

ANNOUNCER:

Funding for Ideas in Action is provided by Investor's Business Daily. Every stock market cycle is led by America's never ending stream of innovative new companies and inventions. Investor's Business Daily helps investors find these new leaders as they emerge. More information is available at Investors.com.

JIM GLASSMAN:

Fannie Mae and Freddie Mac are the two largest mortgage funders in the United States. The loans they buy in huge quantities from other mortgage lenders are guaranteed by the U.S. government, that is, by you and me. When the mortgage industry began to implode in 2007, Fannie and Freddie were at the center of the storm ultimately becoming the costliest part of the federal bail out of troubled firms. The Obama administration and members of congress have vowed to reform these two behemoths. While some believe Fannie and Freddie are crucial to a fair mortgage market where low income or poor credit worthy borrowers will be more likely to get a loan, others think that they should be allowed to wither on the vine.

Peter, is it time to phase out Fannie Mae and Freddie Mac?

PETER WALLISON:

I think so, definitely. We don't need them anymore and they were responsible, I think, in substantial part for what happened in the financial crisis.

JIM GLASSMAN:

Well why do we have them in the first place?

PETER WALLISON:

We had them because at the time they were established we did not have a national market in mortgages-- a national secondary market in mortgages. There were people making mortgages, banks making mortgages, other kinds of originators, but there was no one who could buy those mortgages from those institutions and thus give them more liquidity to make additional mortgages. Lender originator makes the loan, originator then holds the loan. What does the originator do with the loan under those circumstances? If he can't sell it to someone else he has to stop lending. He doesn't have any more liquidity. The idea was to have someone who was a buyer from that lender, giving the lender new liquidity, and then the lender would be able to make more mortgage loans and increase homeownership.

JIM GLASSMAN:

So you think it's time to get rid of the whole thing?

PETER WALLISON:

Oh yes. Well we-- it's already accomplished everything we need to accomplish with Fannie and Freddie - they're not useful for anything right now.

JIM GLASSMAN:

Martin, do you agree with that? What should the housing finance system look like?

MARTIN NEIL BAILY:

I think if we were starting from scratch, we were starting over again I would not have started Fannie and Freddie. I think part of it was a mistake to get into that and have the government as closely involved in issuing mortgages. The trouble is we're now in a situation where they are the only game in town right now and so it would be very difficult in the short run to abolish them. I mean we have certain practices here; we have 30-year fixed-rate interest rate mortgages, Fannie and Freddie guarantee against default on those mortgages. So if you pull those out from the system right now it's going to be difficult for the private sector to step in and replace the supply of mortgages that we currently have. So I'm not a supporter of them in principles. I don't think the government should be in that kind of role but we have at the moment-- we're sort of stuck with them for a while and then I think we need to think of an evolution so that they are gradually phased out.

JIM GLASSMAN:

Larry, Fannie and Freddie are kind of hybrid public institutions, was that part of the problem?

LARRY LINDSEY:

Well I think you do have a problem with mixing political objectives-- and they definitely have political commands on them particularly with regard to granting low and moderate income mortgages, which was something that grew throughout the 1990s and the early part of this last decade. On the other hand they also owe money-- responsibility to shareholders. I think in the end we got the worst of both worlds because what we had was management teams in place, which tended to run the institutions for their own interests. It was often said that the greatest capital that Fannie and Freddie had was political capital and the influence that they had through widespread contributions to working with local bankers - we ended up with the worst of both worlds.

JIM GLASSMAN:

And do you agree that Fannie and Freddie ought to be abolished?

LARRY LINDSEY:

Well I'm not sure how we would get-- I'm going to agree with Martin here. I'm not sure how we would get from here to there. Had we done it when we should have done it-- the president proposed it in-- president Bush proposed it in the middle of last decade I think we would have gotten somewhere. It was blocked in the congress. At that point we had credible private sector institutions who could have picked up the role and I think the right model would be to have competition for who buys and sells these mortgages, instead we had a monopoly. The monopoly protected itself. I think it would be hard to imagine some of the leading institutions that would have played that role being able to do so today. Because frankly, private banking institutions don't have a lot of credibility today either. So I'm not sure quite how we get from here to there and I'm sure Peter has an idea.

PETER WALLISON:

Yeah.

JIM GLASSMAN:

And in fact private institutions are playing less of a role than they did before the financial crisis.

PETER WALLISON:

Well one of the problems is, of course, that the private securitization system which worked very well for mortgages, especially mortgages that Fannie and Freddie could not market, could not buy, worked well for many, many years. What happens in the securitization system is that a financial institution collects a lot of mortgages together, creates a pool, gives it to a trustee, the trustee sells securities backed by that pool, the principle and interest paid on those mortgages is then paid out to the holders of the securities. That's called securitization.

JIM GLASSMAN:

You're buying pieces of lots of lots of different mortgages.

PETER WALLISON:

You're buying an undivided interest in a pool of securities in which money is coming in constantly from principle and interest being paid on mortgages.

JIM GLASSMAN:

Right.

PETER WALLISON:

And you get a part of that. And that worked very well. Now I do agree with Martin and Larry to the extent that we cannot do something now with Fannie and Freddie and indeed we will not do something now with Fannie and Freddie, they are the mainstays of the mortgage market right now. They are the ones who are buying loans when no-- when the securitization system isn't working. The problem is that we'll never have a private securitization system unless we establish a way for them to be gradually withdrawn from their activities because the private sector cannot compete with government backed organizations. So the idea that has been pressed, I've talked about it, many people in congress are talking about it, is that you gradually reduce their what is called the conforming loan limit, the size of mortgages that they are permitted to acquire.

JIM GLASSMAN:

And what is that now?

PETER WALLISON:

Right now it's at 429,000 dollars for a regular mortgage, as a general rule, but in expensive areas in the United States it's 729,000 dollars. And what you do is you reduce it by maybe 20 percent a year, taking it down each year and telling the private sector there's going-- we're going to open up this space for you and let the private sector then come in and do it. There is a question of course whether the private sector will be able to do it. I think it will under one very important circumstance and that is that the mortgages that are securitized are prime mortgages. Most people in this country have prime mortgages. What went wrong in the financial crisis was that we allowed sub prime and other high-risk mortgages to come into the system.

JIM GLASSMAN:

But some people believe it's in the public interest for people to own homes and maybe even for people who are not really high-income people to own homes.

MARTIN NEIL BAILY:

Well, first of all, I think there is some interest. If people own their own homes, that improves neighborhoods and, you know, George Bush talked about an ownership society so I think it was-- this was a bipartisan issue. Everyone wanted people to own their own homes. The two problems that happened is first of all there were some lower income people or people with unstable incomes that were given mortgages that shouldn't have been. It wasn't really in their interest to buy a home and then have to foreclose on that home so that was-- didn't help anybody. The other problem was that we all got on a borrowing binge so a lot of these mortgages that have gone bad that are so called 'Alt-A' mortgages and these were actually mostly middle or upper middle class folks who had accumulated a lot of equity in their home or they wanted to buy a second home and so they borrow, borrow, borrowed and then when housing prices fell those mortgages went into foreclosure.

JIM GLASSMAN:

Do you agree with that?

LARRY LINDSEY:

Well one of the many things I've done in life is I was chairman of the Neighborhood Reinvestment Corporation, which was to encourage homeownership in low and moderate-income neighborhoods. I think the lesson of that was that definitely homeownership helps. It helps stabilize the neighborhood, it helps improve the neighborhood. What we did was to-- and we had a lot of success at it early on-- was to very carefully scrutinize who was getting a mortgage. So for example one of the first criteria was that the mortgage payment would be less than the person is now paying in rent, which often happened. It's amazing how secure those mortgages were. But as low and moderate-income mortgages took hold, land prices, home prices, went up. When home prices go up default rates go down. When default rates go down the loans look safer and so you got more and more crowding in of money into those neighborhoods because in fact land values are going up, defaults are going down. It was a natural creation of a bubble. It's how bubbles are formed. I don't think going back on it there was anything else we could have done about it. Let me also add if I may-- the securitization issue came up and here's a great lesson in the unintended consequences of public policy-- back in the last crisis, which was the late 80s, early 90s with the S&Ls, all of us, bipartisan, interregulatory, looked around, what on earth are we going to do prevent an S&L crisis. The S&L crisis seemed to happen because banks held their own mortgages and they tended to hold local mortgages so lo and behold we said, 'let's securitize and make it national.' Well what we just learned in this last experience was that by doing so the banks didn't care as much about who they gave the mortgages to. So there are lots of unintended consequences in public policy, they work both ways and I think everyone in Washington needs to be a lot more modest about the ability of public policy to actually solve problems.

PETER WALLISON:

Let me just jump in on this because it's very true that a securitization system without any kind of regulation does produce the kind of problem that we had with the bubble. But if we did have regulation of the quality of mortgages so that mortgages-- the only mortgages that were allowed into a securitization system had to meet certain standards, then it's very unlikely that I think we would have this kind of problem and in fact when Fannie and Freddie got started their charters required them only to buy mortgages that would be bought by institutional investors - in other words they were supposed to have the highest quality kinds of mortgages when they bought them. They got away from that completely. It's now turned around--

JIM GLASSMAN:

--And they got away from it because congress pushed them?

PETER WALLISON:

Congress pushed them in part, HUD pushed them to a very great degree through two administrations to reduce underwriting standards and the result of that, I'm afraid, was the kind of problems--

LARRY LINDSEY:

There were actually quotas by 2000 that required that a majority of mortgages be given to low and moderate-income people.

PETER WALLISON:

Right.

LARRY LINDSEY:

And another quota underneath that-- that a large proportion be given to very low-income people. So this was political meddling and when you start putting those additional quotas on the other standards go by the wayside.

MARTIN NEIL BAILY:

Let me interrupt a-- if I may because while I generally agree with what's been said I think it was also private markets that did some of this damage too because not only did you start with the plain vanilla securities that Peter just described, but they were divided and subdivided and then re-put back together again so the people who were buying them, which may have been a bank in Germany or somewhere else, didn't really know what they were buying. And indeed when these things started defaulting we didn't really know their value and it created a lot of problems. And I agree with Larry that we did have the savings and loan crisis and part of the problem was a savings and loan would have only local mortgages. So if that particular neighborhood--

JIM GLASSMAN:

Right, right so Texas got into trouble--

MARTIN NEIL BAILY:

Texas got into trouble--

JIM GLASSMAN:

Then all these banks would fail in Texas.

MARTIN NEIL BAILY:

All these banks would fail. So securitization was supposed to give you a national market but what happened is a lot of those securitized assets were concentrated. They were in California or they were in Florida. They were not national-- not nationally spread. So you didn't get the kind of risk spreading and hence risk reduction that you should have had out of securitization. Which I think is a huge innovation. We shouldn't lose that - we just got to do it the right way.

JIM GLASSMAN:

What about Larry's point that this was-- ultimately this was a bubble and that even if you had quality underwriting standards still ultimately a mortgage's value is linked to the value of the real estate and if that value has been blown up for any reason, puffed up, then you know what good is that mort-- how safe is that mortgage going to be?

PETER WALLISON:

There are a number of answers to that. The first is that everyone should have some kind of equity in the home and one of the things we got away from was equity in the home. Down payments--

JIM GLASSMAN:

So 20 percent down payment or something.

PETER WALLISON:

Down payments went to zero at Fannie and Freddie. This is an amazing thing and not only at Fannie and Freddie but in many other places. So without any equity in the home of course as soon as housing prices go down we have these kinds of losses.

JIM GLASSMAN:

And why was that? Was that because you couldn't get someone, a low-income person, into a house by requiring a down payment because they didn't have any money--?

PETER WALLISON:

In general that is exactly the reason and underwriting standards declined very substantially because of what were called affordable housing requirements. That as Larry suggested went to 50 percent and then went in fact to 55 percent so the--

JIM GLASSMAN:

So if you had that cushion--

PETER WALLISON:

--Every time you bought a prime loan you had to buy at least one sub prime loan and that's what eventually put Fannie underwater. Let me just say though that the numbers here are important. There were 27-- by 2008 they were 27 million sub prime and Alt-A loans in our financial system. That's half of all mortgages. That's an unprecedented thing and something that we have to look at as one of the principle causes of this financial crisis and that came from these kinds of requirements by the government. That these loans be made in order to improve, increase homeownership. Which otherwise Americans support and, for the reasons Larry suggested, should support.

JIM GLASSMAN:

And what do you think Martin? What caused the financial crisis?

MARTIN NEIL BAILY:

I think it was a factor-- I mean the immediate-- you know you can take this at different levels but obviously we got a housing price bubble and once housing prices start to fall 20 or 30 percent, which nobody thought was going to happen, I mean almost nobody thought that. Then the whole house of cards comes down. So I think I agree with an earlier question that you had on that. This was a global crisis. Remember there was problems in the U.K, there was problems in Europe, Ireland, Iceland, you know Fannie and Freddie weren't lending loans in those countries. So I think this was a broader problem than just Fannie and Freddie. You saw the risk print-- low interest rates, nobody was adequately pricing risk, there were-- there was a worldwide lack of perception of the amount of risk that was there. But certainly Fannie and Freddie, you know this was a housing crisis, a housing bubble, they were right in the middle of it.

JIM GLASSMAN:

What about that? There are other countries-- don't necessarily have the same kind of secondary mortgage system that we have, right? And they get into trouble too.

PETER WALLISON:

They had bubbles. That doesn't mean they got into trouble because of those bubbles. They actually got into trouble because their banks bought our mortgages.

LARRY LINDSEY:

Yes.

PETER WALLISON:

Their default rates in their housing businesses when they had their financial crisis were very, very small.

LARRY LINDSEY:

But one of the main reasons for that is that we're allowed to walk away from our loans. We're the only country in the world where you basically have no recourse if you're the lender to the borrower. If you're in Britain or if you're in Canada if you don't pay your mortgage you're still responsible even after the bank takes the home for any additional losses the bank may have.

JIM GLASSMAN:

Now isn't that a very simple change? I guess market forces might prevent it-- but that we could make in this country?

LARRY LINDSEY:

We used to think so until we actually tried to do it and what we've learned in the last couple of years is the interaction between 50 different state laws on this, different banking regulations makes it harder to do than one would think.

MARTIN NEIL BAILY:

The bankers that I've talked to say to me, 'It's not as much help as you might think because if you're a big bank and you're going off to a little family in court it's actually quite hard.' They feel that's not a profitable thing for them to do. So even if we had recourse loans I'm not sure how much difference it would make--

JIM GLASSMAN:

So but do you agree with Peter about just very simply more equity? Down payments?

MARTIN NEIL BAILY:

Absolutely.

JIM GLASSMAN:

Should that be a federal requirement in any way? And of course and that's one of the reasons-- you have a secondary mortgage maker like Fannie and Freddie that's quasi public. They can impose what are essentially public policy constraints.

MARTIN NEIL BAILY:

I agree 100 percent. People should have value in their homes. Absolutely.

JIM GLASSMAN:

But you think there should be some sort of federal law that they have that value or banks should be more careful?

MARTIN NEIL BAILY:

The banks are regulated and so if we're going to have regulations in there I think they should be at least 10 and probably 20 percent value in the home.

JIM GLASSMAN:

Now Peter, President Obama created in 2009 a commission to look into the financial crisis and look at the causes correct?

PETER WALLISON:

Yes.

JIM GLASSMAN:

And you're on that-- you served on that commission. In your experience with the commission, has the commission properly taken into account the importance of housing and Fannie Mae and Freddie Mac and the crisis?

PETER WALLISON:

No. The commission's report did not reflect any significant interest in what Fannie and Freddie did. The commission's report focused entirely on the private sector, that is the securitized market, the one that Martin was talking about, which is of the 27 million loans it's about 8 million loans. And those are the ones incidentally that were bought by the foreign banks that's why when those failed the foreign banks had so much difficulty. But those were the focus of what the FCIC, the commission, looked at and they concluded it was insufficient regulation, or lax regulation, or the-- there was insufficient risk management in companies. All of these things were not, in my view, real contributions to the financial crisis. What were the contributions was the large number of these sub prime and Alt-A mortgages that were in our system.

JIM GLASSMAN:

So in your view, it was-- Fannie and Freddie had a major role in creating the financial crisis?

PETER WALLISON:

I don't want to blame it all on Fannie and Freddie and in my dissent from the commission's report I point out that it was the Department of Housing and Urban Development that started in 1992 with an effort to reduce underwriting standards so that people who otherwise didn't have access to mortgages would be able to get them and they pressed for 15 years to reduce those standards to the point where we now had so many sub prime and Alt-A loans in the system. Fannie and Freddie were two of the vehicles that they used to do that but not the only ones.

JIM GLASSMAN:

Peter I know has talked in a piece that he wrote for American Enterprise Institute about the importance of a clear narrative and I think most Americans really don't have a clear narrative about how this all happened because if you don't know that then you don't know what to do next and what the solution is. Do you have a clear narrative about the financial crisis?

MARTIN NEIL BAILY:

I don't have a clear, simple narrative because I think it's a bit more complicated than Peter said. I mean I think he's right, the government played an important role; it wanted to get mortgages to lower-income people. I think there were also as I said earlier a lot of middle class and upper middle class folks who wanted to spend more and buy extra houses, even those in Florida speculating on condos so there were lots of people playing this game.

JIM GLASSMAN:

And by the way that's a very important-- I don't meant to interrupt you but it's a very important point because I think one of the reasons that Alan Greenspan, when he was chairman of the Fed, talked-- was not all that worried about what was happening was he was saying that people-- people live in their houses, people-- it's not like any other kind-- it's not like buying stock, they're much more dedicated to the asset that they own. But in fact there was a lot of buying of condos where people didn't actually live in them and--

MARTIN NEIL BAILY:

A lot of buying of second homes and condos that people didn't live in and sometimes people lied about that because the mortgage application you have to say whether you're going to live in the house or not and sometimes people didn't tell the truth.

JIM GLASSMAN:

Do you think, Peter, that the right people have been blamed for this financial crisis?

PETER WALLISON:

Oh my goodness. Well it really depends on whose narrative you accept. In the crisis report they blamed all kinds of managements for being stupid and not recognizing that there was a bubble. That's one of the things. They blamed regulators for not seeing the bubble. They blamed the regulators for not controlling all of the businesses that should have taken different steps when the bubble was developing. My view is not an-- it's not an economist's view. My view is a lawyer's view perhaps and that is bubbles will always occur but it's what's in the bubble that is important. And nobody understood at the time that this bubble was filled with or at least half filled with these sub prime and Alt-A mortgages and this bubble went on for 10 years. Any bubble we've had before went for three or four years and collapsed naturally because after a period of time delinquency starts showing up. But if the government keeps pouring money in, the delinquencies don't show up because housing prices keep rising and people aren't delinquent. They can refinance.

JIM GLASSMAN:

But in general terms how do we avoid this kind of thing in the future?

PETER WALLISON:

I'm sorry to have to go back to what I said before and that is the only way that we can-- we can solve this problem is to make sure that the mortgages that are in our system are quality mortgages and we get the government out of the business of directing the private sector about where it should make it's investments in mortgages.

JIM GLASSMAN:

But that may well mean that the government has to also get out of the business of trying to encourage a good deal more homeownership.

PETER WALLISON:

Yes, that's right. It will happen naturally if that's what the American people want to invest in. They want to invest in homes then the money is there for them to do it. They have to save, they have to have a down payment, but that's how homeownership should increase. We can also have some sort of subsidized system for homeownership increase. That's fine. But we have to control it very well and make sure that the government doesn't run away with it.

JIM GLASSMAN:

And that would be kind of a direct subsidy. We want you to own a home so here's some money to buy the house. Thank you Peter Wallison, thank you Larry Lindsey, and thank you Martin Baily.

MARTIN NEIL BAILY:

Thank you.

JIM GLASSAN: And that's it for this week's Ideas in Action. I'm Jim Glassman, thanks for watching. Keep in mind that you can watch Ideas in Action whenever and wherever you want. To watch highlights or complete programs just go to ideasinactiontv.com or download a podcast from the iTunes store. Ideas in Action because ideas have consequences.

ANNOUNCER:

For more information visit us at ideasinactiontv.com. Funding for Ideas in Action is provided by Investor's Business Daily. Every stock market cycle is led by America's never ending stream of innovative new companies and inventions. Investor's Business Daily helps investors find these new leaders as they emerge. More information is available at investors.com. This program is a production of Grace Creek Media and the George W. Bush Institute, which are solely responsibly for its content.

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1 Comment

I recently had the chance to see this segment of your show and I found it to be the best explianation of what happened in housing market to date. I am a former realstate agent, I let my license lapse because it seemed to a grim future in that business at the time. I have been thinking of getting it back and now I am curious what you think? By the way you have a great show one in which I have learned more than those showa that air on sundays. Thanks so Much.

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Featured Guests

Martin Baily

Senior Fellow, Brookings Institution

Martin Neil Baily is a Senior Fellow at the Brookings Institution, and the Bernard L. Schwartz Chair in Economic Policy Development. He is also a senior advisor to McKinsey & Company’s Global Institute and an academic adviser to the Congressional Budget Office (CBO).

Previous to joining Brookings, Mr. Baily was a Senior Fellow with the Peterson Institute for International Economics (2001-2007); and served as chairman of the Council of Economic Advisers during the Clinton administration (1999–2001) and one of three members of the council from 1994 to 1996, focusing on issues of globalization, productivity and competitiveness, Social Security reform, and U.S. economic policy.

He has taught as Professor of Economics at the University of Maryland (1989-96) and served with the National Academy of Sciences/National Research Council; the National Bureau of Economic Research; and as Associate Editor at the Journal of Economic Perspectives.

Lawrence Lindsey

The Lindsey Group

Larry Lindsey is President and Chief Executive Officer of The Lindsey Group. He has held leading positions in government, academia, and business. Prior to forming The Lindsey Group, he held the position of Assistant to the President and Director of the National Economic Council at the White House (2001–2002) and was the chief economic adviser to candidate George W. Bush during the 2000 Presidential campaign.

Dr. Lindsey also served as a Governor of the Federal Reserve System from 1991 to 1997, as Special Assistant to the President for Domestic Economic Policy during the first Bush Administration, and as Senior Staff Economist for Tax Policy at the Council of Economic Advisers during President Reagan's first term. Dr. Lindsey served five years on the Economics faculty of Harvard University and held the Arthur F. Burns Chair for Economic Research at the American Enterprise Institute. From 1997 until 2001 he was Managing Director of Economic Strategies, a global consulting firm.

He is the author of numerous articles and three books: “The Growth Experiment” (1991), “Economic Puppet Masters” (1998), and his most recent, “What a President Should Know: An Insider’s View on How to Succeed in the Oval Office” (2008).

Peter Wallison

American Enterprise Institute

Peter J. Wallison is the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute (AEI), where he researches banking, insurance, and securities regulation. Mr. Wallison has served on numerous financial panels, including most recently the Financial Crisis Inquiry Commission (2009-11) and the Financial Reform Task Force (2009-10).

As general counsel of the U.S. Treasury Department during the Reagan administration (1981-85), he had a significant role in the development of the White House's proposals for the deregulation of the financial services industry. He also served as White House counsel to President Ronald Reagan and is the author of “Ronald Reagan: The Power of Conviction and the Success of His Presidency” (2002). His other books include “Competitive Equity: A Better Way to Organize Mutual Funds” (2007); and “Privatizing Fannie Mae, Freddie Mac, and the Federal Home Loan Banks” (2004). He also writes for AEI's Financial Services Outlook series. Previously, he was a partner in the law firms of Gibson, Dunn & Crutcher from 1987-1998 and 1985-1986, and in the law firm of Roger & Wells from 1977-1981.

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