Can Social Security Be Saved?

Show Transcript

How Can Social Security Be Saved?

[00:00:00] Bob Gatty: What to do about preserving social security so it's available for future generations is a gigantic political football that's been kicked around for years and years. Even now, the two primary presidential candidates, Trump and Biden, both promise not to make changes that would adversely affect beneficiaries.

[00:00:20] But the fact remains that unless some kind of action is taken, the trust fund will run out of money in just a few years. Now, it's a political hot potato that most politicians, Republicans and Democrats alike, are loathe to tackle. And for folks not yet at retirement age, whatever happens will be a big damn deal with serious political repercussions.

[00:00:46] That's our topic today and we have with us one of the nation's top experts on the matter, James B. Lockhart III, the former Principal Deputy Commissioner and Chief Operating Officer of the Social Security Administration. So stay with us. 

[00:01:03] Mr. Lockhart was a member of President Bush's Management Council, and he's the author of the award winning book, "America Underwater and Sinking".

[00:01:15] He currently is a senior fellow of the Bipartisan Policy Center, and he's had a long and distinguished career also serving as the director of the federal housing finance agency, regulator of Fannie Mae, Freddie Mac, and the federal home loan banks and its predecessor agency, the Office of Federal Housing Enterprise Oversight.

[00:01:38] Mr. Lockhart, thanks so much for joining us on our podcast today. 

[00:01:43] James B. Lockhart III: Thank you, Bob, for having me. It's a very timely topic and I'm really pleased to talk about Social Security. Government overall. 

[00:01:50] Bob Gatty: I thank you. It is a very timely topic and one that's incredibly important if only the politicians can find enough courage to take some kind of meaningful, responsible action.

[00:02:06] The campaign's heating up and in addition to the presidency, control of both houses of Congress is at stake. Candidates are dancing around this issue as usual. But why is that Mr. Lockhart? Why is it that Social Security reform has been pretty much ignored and really still is? 

[00:02:28] James B. Lockhart III: There's a lot of reasons, but if you go back to the beginning, Social Security is by far the biggest program in the United States government, much bigger than the Defense Department.

[00:02:37] Huh. They have 1. 3 trillion dollars a year to 66 million Americans and 180 some million pay into it. So it's the, the bread basket of America in a way. And it's so important to people's retirement, right? That's why it is an issue that congress should be worried about.

[00:02:55] On the other hand it is a hot potato or as the phrase goes in Washington, it's the third rail. , which is the electric rail in the subway to touch it. And as President Bush said in his book, you're Toast and. President Clinton tried as well, and those were the last two Presidents who even had the guts to try something.

[00:03:17] Since then, both our Presidents today, both the previous President and the President today, Biden and Trump, have both said that, they're going to protect Social Security, which means doing nothing as far as I can figure because, and just, when, nine short years, there'll be a 25 percent cutback.

[00:03:38] What? That's not protecting Social Security if you're doing that. Wait, 

[00:03:42] Bob Gatty: Wait. Come back to that. A 25 percent cutback if they don't do anything? Yeah. Is that automatic? Is that automatic? It's going to take effect? 

[00:03:52] James B. Lockhart III: It's automatic unless Congress does something. 

[00:03:54] And either Congress can reform the program or at that point, it would take half a trillion dollars a year to make up for the difference of promised benefits. What happens is, there's a trust fund and the trust fund was built up over the years. In the 83 reforms, the Greenspan reforms, they changed the retirement age and did some other things very slowly, but they changed it over some years.

[00:04:20] And that trust fund is starting to be eaten into the day because effectively the government borrowed the money from Social Security. And so now the government's paying back all of those bonds and in nine years, the bonds will disappear. The trust fund will disappear and there'll be a hole of a half a trillion dollars a year and growing every year thereafter.

[00:04:40] And, the only way to cover that hole is reform. Our Congress has to pass a law that says, oh yeah, we're gonna spend another half a trillion dollars a year. where they're gonna get that half a trillion given the deficits and the debt outstanding is a very big question. Wow. But to go back to your question, you know why they don't touch it?

[00:05:01] Is the third rail and one of the reasons it's the third rail is because the elderly vote and the younger generation unfortunately doesn't vote as much and they've written off social security in their mind which of course is wrong because when they get to retirement age it will be a big part of the retirement if it's still there.

[00:05:20] So that, that is the problem. When Bush was doing reforms, yeah President Bush, he said not going to touch anybody over 55. Going to keep your benefits the same. No increase in retirement age, no nothing. And yet, those, the elderly were against it. AARP came out big time against it.

[00:05:40] Bob Gatty: So what's the future? What do you think is going to happen? 

[00:05:44] James B. Lockhart III: Congress, in my experience, and I've worked for United States Congress. Four different agencies. One you didn't mention was the Pension Benefit Guarantee Corporation. Yeah. Which was for George 

[00:05:54] Bob Gatty: H. W. Bush. Yeah. We have a long, you have a long resume and I had to, cut some of it.

[00:06:00] James B. Lockhart III: That's okay. And, it took many legislative fixes to get it. And I always write it was on the brink. In the American Recovery Act. The thing that was passed a couple years ago. Yeah, they actually bailed out the Pension Benefit Guarantee Corporation's, multi-employer union plans.

[00:06:16] For 80 some billion dollars and that's how congress acts until you get to the crisis They don't act the same with fannie and freddie until we got to the crisis We had no legislation to fix them. Yeah, and that's part of the problem, we face today So what is the future of social security?

[00:06:34] We'll either have those cuts I mentioned or we'll have some reform now. There is actually Some proposals in congress the house budget committee, Senator Manchin and Romney and the Senate and many others, I think ex Senator Rob Portman just had an op ed on this, is to create a commission, a fiscal commission to look at the big entitlement programs.

[00:06:58] And when you look at the problem going forward, It's really the big entitlement programs. I guess you could say in the next 10 years, CBO says that 84 percent of government increase in spending will be in programs that Congress really doesn't control. And, interest going to grow dramatically and Social Security is by far the biggest of that.

[00:07:22] Bob Gatty: What reforms would be possible that would not harm people who rely on Social Security? 

[00:07:30] James B. Lockhart III: Okay we'll be harmed if we don't do reforms. That's the basic. 

[00:07:35] Bob Gatty: That's true. That's true. 

[00:07:36] James B. Lockhart III: Twenty five percent. I've heard a number that the average couple will have a 17, 18, 000 a year, less benefits.

[00:07:45] So it's a pretty big hunk of a many people's retirement. And so that's no reforms. So how do we do reforms? I actually co chaired with the bipartisan policy center with former Senator Conrad, a commission on retirement security. And we had 16 members, about half Democrats, half Republicans, senior politicians, the last two.

[00:08:08] Trustees of Social Security and Medicare. They haven't actually had trustees in the last eight years. Just to show you how afraid Congress is. They don't even appoint trustees.

[00:08:20] Bob Gatty: Oh, it's a wonderful system we have. 

[00:08:22] James B. Lockhart III: It really is. And so our commission came through with a whole series of proposals on retirement security and some of them have happened, Secure Act 1 and Secure Act 2, looking at 401ks and some other issues. But our big reforms was Social Security. Yeah. And we had, I think, 11 different proposals.

[00:08:41] And what we did, Unlike what the Republicans and Democrats talk about. The Republicans talk about benefit reductions. The Democrats talk about tax increases. So what we did is we cut the baby and said 50 50 each. So you slow down the growth of benefits. And you do that by very slowly increasing their retirement age.

[00:09:03] By making benefits more progressive. And 

[00:09:07] Bob Gatty: what do you mean by that? 

[00:09:09] James B. Lockhart III: Upper income people get less percentage than lower income people, basically. Ah, okay. Okay. It already works that way, but even skewing it more that way. Ah, okay, fine. And then the other thing was the cost of living increased.

[00:09:22] Remember last year it was eight some percent, yet inflation wasn't there. And so looking at a better cost of living increased. But the key thing we did on benefits was, Yes, we slow down the growth of benefits, especially for the upper income But we increase benefits for the lower income and you can do that and that's very important And then so if you go to the tax side the taxable maximum You know has to be increased and that's like a hundred and sixty thousand now and it should be increased You know president biden says we're not going to touch anybody's taxes unless they earn four hundred thousand a year You which, we have to increase the tax maximum, including those people less than 400, 000 a year. Okay. Less than 2 percent of the people in this country earn 400, 000 a year. So you can't get all the money from that tax. We have to look at FICA, the payroll tax and slowly increase that.

[00:10:18] I think our proposal is a 1 percent increase over a 10 year period, half from employers, half from workers. So it probably wouldn't even be noticed. That's a 10th of a percent a year per worker, much less than inflation. And you do that and there's a tax for higher income people and their social security benefits.

[00:10:38] You increase that tax too. And you put all these things together and you come up with a proposal that actually, in that case, fix social security forever. Okay. Yes, the benefits are slower than our promised benefits but much higher than what will happen if we don't do anything and cut benefits 

[00:10:58] 25%.

[00:10:59] I 

[00:10:59] Bob Gatty: can tell you this, that if I was running a campaign for somebody running for Congress and we brought you in to give us advice as to how to fix social security, I think my boss would probably kick you out of the room for talking about raising all those taxes and 

[00:11:20] James B. Lockhart III: yeah, I know I agree that and that's why they don't want to touch it.

[00:11:23] And that's why I think the only way to do it is this physical commission creating a committee. It's as senators and congressmen, Republicans, Democrats experts on finances and social security and getting them into a room for probably two years. And working out the series of proposals. And then, I don't remember, if you remember, maybe you do, because back in your days, when you were in Congress, they had something called the Base Closing Commission.

[00:11:50] Okay, 

[00:11:51] Bob Gatty: yes, I do remember that. 

[00:11:53] James B. Lockhart III: And no one wanted their local Army base to be closed. Yeah, or whatever. And so it's through a whole set of proposals. They had this commission bipartisan, and they came up with, which bases to be closed and they had an up and down vote. And, that's almost what you have to do with Social Security.

[00:12:10] President Bush had a commission, came bipartisan came up with a lot of good proposals, but you could never get the sign on. And so you need to the sign on from Congress with the proposal to begin with. And maybe your boss as a congressman. Wouldn't go along with the individual proposals, but when it's all there together and it's a nice balanced set of proposals and it prevents those 25 percent cuts maybe they would vote for it.

[00:12:37] Bob Gatty: It would take some degree of a sense of responsibility and political courage to do that. Now, wouldn't it? 

[00:12:45] James B. Lockhart III: Yeah, it would. And that's one of the things, unfortunately that is is lacking in Washington at the moment. And I think, as I said, the last major commission was in 1983.

[00:12:57] They called it the Greenspan Commission, and it had Reagan and Tip O'Neill. And they did a deal. And that's what you need, you need to 

[00:13:05] Bob Gatty: But we don't have Reagan and Tip O'Neill around anymore. It's 

[00:13:09] too bad. We do not, right? We need people like that in Congress and we just don't have them.

[00:13:15] I was watching last night, the State of the Union and and Biden was did a pretty good job, I thought but the new Speaker of the House just sat there shaking his head, except for when it was something that it was. politically positive.

[00:13:33] And then he didn't, he actually stood up one time. I think it was to in honor of somebody. I don't remember what it was, but he just sat there and shook his head. And yeah, no, 

[00:13:45] James B. Lockhart III: Washington is dysfunctional now. It was in my day, to get those reforms of PBDC, certainly the Fannie and Freddie reforms that we finally got.

[00:13:55] Forty days before we put them in a conservatorship. Never got such security forms. It is a problem. And that's why, again, I think this commission idea may be the only way to get her away. Or the other thing is you wait until nine years. And then Congress, has to do something.

[00:14:11] Isn't that 

[00:14:12] Bob Gatty: how they usually do it? Yeah, 

[00:14:14] James B. Lockhart III: that's how they usually do it. But when you look at it today, I said that the Social Security benefits are 1. 3 trillion. In 10 years, they'll be 2. 5 trillion. Oh, my. And, to pay those, we'll have to get half a trillion from somewhere else. And every year, it'll be that half a trillion plus.

[00:14:34] And we have a problem we, we have a, everybody loves to spend money in Washington these days even the so called fiscally conservative Republicans. And, they like to decrease taxes and, you heard last night in the State of the Union, the president had a lot of proposals.

[00:14:51] I think he had a tax proposal there to tax the trillion, the billionaires. And he said that was going to raise a half a trillion dollars over 10 years. Guess what? The hole in Social Security in one year is half a trillion dollars. And, so you see, Taxing the rich is not the only answer here.

[00:15:10] You've got to actually make some tough decisions. That's, why we hired them in Congress and the President. 

[00:15:16] Bob Gatty: Would you think either one of these two guys, Trump or Biden Can be trusted to do anything about social security that will be, that will actually work. 

[00:15:25] James B. Lockhart III: When you think about it, they're only going to be there for four years.

[00:15:28] That's true. Either one of them. Yeah, that's true. And, so that's, be five years away when they leave office. 

[00:15:36] Bob Gatty: So you're hoping that somebody with more political guts and that the atmosphere will be less divisive. Yeah. After they 

[00:15:47] James B. Lockhart III: leave, right? Yeah. Yeah. It's hard to see something happen unless this fiscal commission happens.

[00:15:54] Beyond that both of them have very clearly said they're going to protect Social Security, which means they're going to do nothing. Yeah. 

[00:15:59] Bob Gatty: They seem to be fighting over who can be tougher on. 

[00:16:03] James B. Lockhart III: Yeah. No, I actually, I shouldn't say this because my wife doesn't like me to say it, but I was actually nominated twice by President Trump to be one of the two Public trust is a security.

[00:16:14] I was the Republican. There was a Democrat. Congress, as I mentioned before, didn't even vote on it. And, Trump didn't push it. His team didn't push it. And certain Biden has, he's actually nominated people, but nothing's happened. And, but that's. Just part of the problem, because the trustees put out a report every year of the 75 year forecast of trust and Social Security.

[00:16:38] And that should be a blazing document on the Hill, that everybody looks at these giant deficits. Yeah. Trillions are so easy to say these days, but I'll give you another trillion dollar number. When President Bush was trying to fix Social Security, if we had put in 4 trillion at that point, a little less than 4 trillion, Social Security would have been fixed.

[00:17:02] Today, that number is 22 trillion for 75 years.

[00:17:07] It's mind boggling. 

[00:17:09] Bob Gatty: It is incredible. It really is. What do you think the chances are that a commission like this can be established? And do you have, is there anybody now leading the effort on the Hill to do that? 

[00:17:25] James B. Lockhart III: The I guess the House Budget Committee Congressman Arrington, I think his name is has a proposal put forward for the House.

[00:17:33] And they actually had a bipartisan vote in favor of that. But obviously it was a full House and whether anything like that. They're not sure. I'm the two big sponsors in the Senate. Romney and Manchin are leaving. Unfortunately, we're fortunately losing our centrist. And but we, there, there is Senator Conrad, Senator Portman, both ex senators.

[00:17:59] Testified on the Hill in favor of this commission. And so I, I, there could be some momentum. It's, it's an easy way to kick the can down the road, but it's at least there's a can. At the moment, there's not even a can.

[00:18:14] Bob Gatty: You do need a can if you're going to kick it. Yeah, 

[00:18:17] James B. Lockhart III: exactly. 

[00:18:19] Bob Gatty: Okay. Is the problem with the Social Security Trust Fund, does it stem from government inefficiencies? 

[00:18:28] James B. Lockhart III: There's definitely some government inefficiencies in Social Security. Systems are very old. We have You're like a hundred thousand people working in social security.

[00:18:39] They're very dedicated workers. I always, I probably went to a thousand different, a hundred different offices of the thousand they have in the country. And they're really very dedicated people, but actually they're the baby boomer generation and they're retiring and people aren't coming in, so we need better systems to replace them, so we need much better management of social security.

[00:18:59] We had a manager in there that actually president Trump put in and Biden fired even though he had no cause to fire him and then in an interim that had no management experience So you need better management, but we need the money for management Congress does not give social security the money to manage the place the way it should We haven't talked about disability benefits in social security.

[00:19:24] Really maybe talk about retirement But that program is a mess and it takes two three four years to get your benefits and it's, and once you're on, people won't leave and recover, and Congress won't give money to help do studies to help people, see if people recover. There's some fraud in Social Security, there's fraud in a lot of different programs but it's, again, better management, better systems would help a lot.

[00:19:51] Bob Gatty: Okay. What lessons have you learned from managing these four major government agencies and working for three presidents and dealing with a global finance crisis? 

[00:20:04] James B. Lockhart III: There's lots of lessons I have in my book. And One of them is simply Congress needs to be more proactive . The problem is we have so many different programs that Congress, most of the typical Congressman or Senator knows only a few.

[00:20:20] I start out my book, with a quote from Ben Bernanke, the Fed Chairman. And he says, and many people have also said this, including Paul Krugman at the New York Times that the U. S. government is an insurance company with an army. And when you look at it, we have 150 different insurance programs in the U.

[00:20:40] S. government. Wow. And, so many of them are mismanaged, none of, very few of them are based on sound insurance principles. The accounting is wrong. And so no, no one ever really understands the tremendous liabilities and that's just the insurance programs. Obviously there's all the big departments, many of the other ones that are inefficient.

[00:21:01] And part of the problem is that we have a system with a lot of political appointees and in the big departments, they go down four or five layers. And oftentimes the political appointees there because they gave money are they have some political connection, they worked on the campaign, and they don't necessarily have the management experience.

[00:21:24] And so then you have the senior career people doing the day to day management, and some of them are very good, as I mentioned. But they need leadership, and too often the political leadership is more interested in the politics, being on television, being in the newspaper, doing podcasts, whatever it is.

[00:21:44] Bob Gatty: All right. I get that. So it's it's

[00:21:47] James B. Lockhart III: a management problem, but it's also being more proactive. Congress has to look at programs on a periodic basis. I think every year President Bush had a hundred programs that should have been sunsetted. Never work. They always have a favorite child.

[00:22:06] One of my favorite stories about Social Security is we had an office, a one person office in a city in either South or North Dakota. That person retired. And so we were going to close the office. And the local congressman and senator said, no way. And that's just it. Everybody has their little area they want to protect.

[00:22:27] And they're not protecting the American people. That's just it. Yeah, 

[00:22:32] Bob Gatty: I know you were talking about base closures when I worked on Capitol Hill back in the late 70s, and I did it for two different congressmen, and both of them though represented the area where Fort Dix is. And my job, one of my main jobs, was to develop a strategy to prevent them from closing Fort Dix.

[00:22:57] And I was doing that for the first guy, Ed Forsythe, and then I had to do it for the second guy, Jim Florio. And we were successful until I don't know. I think they did finally end up closing Fort Dix. Did they not? Do you know? 

[00:23:12] James B. Lockhart III: I'm, not sure that they have I can't remember. I thought that's I can't either survive It definitely survived the base closing 

[00:23:18] Bob Gatty: commission.

[00:23:18] Yeah, it did do that and I have a soft part in my heart for Fort Dix because my dad was stationed there He was a chaplain and I went to high school. At the little town near Fort Dix and I married somebody who was, my first wife was from that area. And I have a soft spot in my heart for Fort Dix.

[00:23:38] Hate to see it close. I don't know if it ever did. But it was quite a job and had to arrange a meeting at the White House with President Carter and did that. And Carter just sat there. He never said anything, really. 

[00:23:54] James B. Lockhart III: That was my experience with Obama, too. Actually, Bush actually would get into the conversations.

[00:23:59] Because he had a joking sense of humor. He would call me by my nickname and everything. But, anyway. What, 

[00:24:05] Bob Gatty: What? Your nickname, what? 

[00:24:08] James B. Lockhart III: How I got into government was I had gone to school and college. With Bush W 

[00:24:13] Bob Gatty: Oh. Oh. You went to school with w 

[00:24:16] James B. Lockhart III: yeah. Alright.

[00:24:17] And actually school too. We were old friends and I had a nickname in in High School of Juice. And 

[00:24:24] Bob Gatty: Why 

[00:24:25] James B. Lockhart III: Juice Middle. Middle of a big meeting with all these cabinet secretaries to say Yes, juice a question and. Why did they call you, why did they 

[00:24:34] Bob Gatty: call you juice? 

[00:24:36] James B. Lockhart III: I never told that, but actually my grandchildren now call me juice.

[00:24:42] So no dignity there, but the I understand actually, I had some military background, hence partially the title of my book American Underwater is that my first job out of college was in the U S Navy as a officer on a nuclear submarine. And, the next part of the title of the book is You know, it's America underwater and sinking, let's surface.

[00:25:06] And obviously my submarine surfaced every time. I'm just hoping somehow the U. S. can figure out how to surface. But as you say it's really tough in Congress and Washington at the moment cause we, they're just, they're pulling apart. We have the left wing and the right wing and the centralists are not pulling us together anymore.

[00:25:26] Bob Gatty: Yeah. I wanted to get you to talk a little bit more about why you think America is underwater and sinking. 

[00:25:34] James B. Lockhart III: It's the most obvious thing is our annual deficits of approaching $2 trillion a year. Yeah. Our total debt of the United States is now $34 trillion. In the next, according to this congressional budget office, in the next 10 years, that's gonna go up by another 21 to like $55 trillion, interest is going to be the second biggest expense next to Social Security as we have to borrow all this money going forward. So we are underwater and sinking, and we have to figure out a way to fix it, and that's fixing Social Security, fixing Medicare, and looking at the other entitlement programs.

[00:26:12] And yes, we'll have to do something on the tax side. Yes, we'll have to do something on the benefit side. But, these are the tough decisions that need to be made or we're gonna give to our children and grandchildren, a sea of red ink. That's why we're underwater. I, we obviously, we talked a little bit about some of the management issues in the US and the lack of really a mission, a strategic plan for the U. S. But, everybody just looks day to day and they don't think about the long term and where we want to be and how we should be. Even in the State of the Union last night, there was a, President Biden mentioned a whole series of new programs. We keep creating new programs, but don't fix the old programs.

[00:26:55] Bob Gatty: Yeah, that occurred to me while he was talking about that. How are we going to do all these new programs when we can't afford the ones we already have? 

[00:27:04] James B. Lockhart III: Exactly. And it is a problem. Some of them are, good. And if they're targeted properly, what happens too often is Congress creates a program and it gets out of control one way or another.

[00:27:17] They initially don't set the rules properly. Sometimes they constrain the agency that's administering the program. So they can't change the rules to make it more efficient. And you end up with just ballooning deficits. Take, student loan thing, when it was brought back into the government, it was promised to be a money maker for the government, and yet we keep writing stone loans off and, pension bad for guarantee corporation having bail out the union plans.

[00:27:43] Obviously Fannie and Freddie had to be bailed out. The government put in 190 trillion into Fannie and Freddie. Now they got back over 300 trillion. So that's pretty good. But we shouldn't have gotten to those places, but we keep getting there because Congress is unwilling to make the tough decisions.

[00:28:02] Bob Gatty: Do you see that changing anytime soon? , 

[00:28:05] James B. Lockhart III: I, I wish I did. Yeah. And as I mentioned earlier, one of our problems is some of the centralist are leaving the ones that could try to pull things together and make those decisions. Yeah. I, you look at the latest Senate bill on Ukraine and the border.

[00:28:19] And you would have thought that would have been a no brainer. 

[00:28:22] Bob Gatty: Yeah, exactly. And, it was a bipartisan deal they finally came up with. And passed the House. And then what happened in the Senate? 

[00:28:32] James B. Lockhart III: Vice versa, yeah. Passed the Senate. What happened in the 

[00:28:35] Bob Gatty: House? Yeah. And Trump just said no. Yeah.

[00:28:41] And so the Republicans go, oh, okay. 

[00:28:44] James B. Lockhart III: Yeah, no, it's a problem that he seems to be controlling the Republican Party at the moment. Obviously, I'm a Republican. Yeah. I get, working for both of the Bushes and it, 

[00:28:53] Bob Gatty: it I wouldn't hold that against you.

[00:28:56] James B. Lockhart III: It's tough being a Republican these days. There's no doubt about it. I'm a Northeast Republican, if you will. Yeah. A little socially liberal and fiscally conservative. There you go. And it's tough. It really is tough. 

[00:29:11] Bob Gatty: Where can where can people find your book?

[00:29:13] James B. Lockhart III: You can find it on Amazon. It's right there. I'd be happy to share People buy and they want me to send a little thing of my signature on it. They just send me a note I have a website JBLockart. com Okay, a lot of information on the website It has my bio it has you know, a lot of the media events.

[00:29:35] I did I'll post yours on it And it the awards, the books won and it, it the book itself is a book about my government experience. But as I said earlier, it's a case study of how you need to do things better in the government. And it has a lot of recommendations on how to do things better.

[00:29:55] Better run those 150 insurance companies, a lot of recommendations, social security, pensions Medicare, and just government overall, how to make it more efficient, how we should have plans, strategic plans, how government agencies should be required to look out in their future and say what could go wrong.

[00:30:15] And present that to Congress on a regular basis so Congress can't ignore it. And the other problem we have is Congress is too much beholden on to the lobbyists. The first thing I did when I took, became the conservative of Fannie and Freddie is I fired all the lobbyists.

[00:30:33] And there it was. And there, there was like a hundred and some of them were my friends. 

[00:30:39] Bob Gatty: Lobbyists within the agency? No, 

[00:30:42] James B. Lockhart III: lobbyists that they were paying. Are they all? Oh, they were paying. No, in Fannie and Freddie, in Fannie and Freddie were paying lobbyists. And what they were paying the lobbyists mainly for is to not have any reforms.

[00:30:54] And so what happened, of course, is. They went belly up with reform, that's, Fannie and Freddie have a very important mission, a little sidetracked, but about 70 percent of the mortgages in this country are backed by the government one way or another. So we have a very socialistic system.

[00:31:14] Fannie and Freddie backed 6 trillion in mortgages. And the problem is that there, there was no way for the regulator to regulate them. They had capital. It was less than 1%. Banks today have 10 percent capital. And so when things go on, they really went wrong. That's Congress gave the agency the ability to change the capital rules 40 days before we put them into servership.

[00:31:43] And it would take two or three years to change capital rules. Okay. 

[00:31:48] Bob Gatty: All right. Do you have anything uplifting to say before we close this up? I, 

[00:31:53] James B. Lockhart III: I'm an optimist actually. And I think you can tell that's why I say let's surface and it really is going out and, engaging the political class to make them understand that we have some of these big problems.

[00:32:05] The deficit, the debt. And the entitlement programs, we need to reform them. And, it's too easy to demagogue them, it's too easy to avoid the third rail. Yeah. But we need to figure out how to do it, and I'm afraid that the only way we can is by a commission, as I mentioned. 

[00:32:24] Bob Gatty: Yeah, okay. Do you, Have any thoughts about running for office yourself?

[00:32:29] James B. Lockhart III: No. No, i'm at the age that 

[00:32:31] Bob Gatty: say spring chicken 

[00:32:33] James B. Lockhart III: And president trump all the way Could not be running for president at the moment. 

[00:32:41] Bob Gatty: All right. Thank you so much for joining us on our podcast today. I really do appreciate it. This is obviously an incredibly important topic and to have somebody with the expertise and background that you have is a real thrill for me, and I really do appreciate you coming on.

[00:33:01] James B. Lockhart III: Thank you, Bob. I really appreciate it being on. Great questions and great dialogues. 

[00:33:06] Bob Gatty: so much.