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guide, watch online anytime on c-span.org/history. now to a discussion on monetary policy and the economy with federal reserve chair michael barr who talked about recent bank failures, digital payments and the importance of being cautious when it comes to cutting interest rates. hosted by the national association for business, economics in washington dc it is just under an hour. [inaudible conversations] >> michael barr. just a few accomplishments from

his stellar career. before becoming vice chair for supervision in july, he became vice chair for supervision in july 2022 and within 9 months was leaving the fed response to the banking distress that arose a year ago in the wake of silicon valley bank's failure. immediately prior to becoming vice chair he was dean of the ford school of public policy at the university of michigan, 2,009-2,010, he served as assistant secretary of the treasury for financial institutions and in that role, he led the obama administration's response not just the financial crisis and also negotiated much of the dodd-frank act. i am particularly pleased to introduce michael because we've known each other since we were teenagers growing up a few

miles from here in suburban maryland, so with that i give you vice chair byron. [applause] >> thanks very much, really great to see you and have you moderating this conversation and thanks to all of you for being here and for inviting me to be here. after having had to miss this conference last year i appreciate the opportunity to join you this year around. as you might expect i was a little busy in march 2023 around this time and i will, after a bit, share some thoughts on lessons learned from the stress in the banking system at that time in particular what we've learned in terms of liquidity management but first, i will start by discussing recent economic developments and implications for monetary policy. i will then turn to the banking sector and focus on some topics

that lie at the intersection of the composition of the fed's balance sheet, market functioning, bank liquidity risk management and the fed's role in liquidity provision. starting with economic development i think it is helpful to reflect on how surprised most watches of the economy were by developments in 2023. myself included. perhaps like many of you at the start of 2,023 i had projected tighter monetary policy would cause a slowdown in both inflation and economic activity. then with the march of 23 banking stress i was concerned that a potential credit contraction could further weaken the economy. at the same time, i also worried that inflation might remain elevated even if we had weaker economic activity. supply chain problems and job matching challenges continue to

be prominent elements of the pandemic's disruption to the operation of our economy. i am glad to say that those worries did not come to pass. in part due to the official sector response to the banking stress, monetary policy and a healing economy. economic activity expanded at a solid pace, the labor market remained strong and inflation came down significantly. the current mix of outcomes we are experiencing would have seemed improbable one year ago. you might ask how to be end up with disinflation and economy with risk growth. the short answer is the healing of the economy. the pandemic brought our economy to a screeching halt. during the second 1:45,020 the unemployment rate jumped to a

high of 14. 8% and gross thomistic product plunged out of 28% annual pace. these dynamics hit some of the most vulnerable populations the most. strong government responses helped us both use the effects and make many households much more resilient. once the economy restarted, demands rebounded quickly. supply was hampered by supply-chain disappointments these supply snags were compounded enormously by a shift in demand away from in-person services towards goods, which generally have a stronger and larger exposure to shipping and supply-chain problems. supply shocks to the global economy were subsequently compounded by russia's war against ukraine which severely disrupted food and energy markets. labor markets were disrupted by the pandemic as well. employers could not find enough workers, and job matching wasn't there.

an important component of post pandemic healing has been the recovery of supply chain's after the pandemic induced bottlenecks, in goods production and distribution. recent shipping disruptions show supply-chain conditions are still an issue but compared to pandemic euro constraints we are in a better position. the price to ship a 40 foot container from china to the west coast has recently risen to $4000. twice the pre-pandemic level but far below the $20,000 rate in 2,020 one. another key component of the improvement in supply has been in the labor market. we 've seen substantial improvements in the labor force through stronger immigration and higher labor force participation rates by women.

labor demand has cooled, it has manifested reduction in job vacancies wrapped up in layoffs. at the same time we've seen the labor market working much more efficiently. with improved job matching after the large disruptions during the pandemic. improvements in labor supply and labor market function allow the unemployment rate to hold steady at a low level. it has improved the lives of americans particularly for groups that have long suffered significantly higher unemployment levels and whose jobless rates respond more forcefully. another key part of the story in the post pandemic healing of the economy has been the growth of productivity. measures of productivity tend to be volatile, productivity growth has picked up in the past year. increased productivity is in

part likely coming from components that will continue to yield improvements such as integration of new technologies, new ways of working and the large increases in new business formation. growth in new businesses leads to productivity gains likely because new entrants tends to innovate more and legacy firms must also innovate to compete with these new entrants. these increases in productivity are consistent with real wage gains, one measure of rising living standards. the net result of this healing of the economy's growth has been robust even as upward pressure on inflation has diminished. the healing has been helping both sides of our dual mandate over the past year. monetary policy has been essential in this process. higher interest rates help to restrain demand, giving supply the opportunity to catch up.

monetary policy is anchored inflation expectations. longer-term inflation expectations have state anchors and shorter-term expectations have fallen. the fomc's preferred inflation gauge has fallen from the peak of 7.1% in june 20, 2222. 6% in december of 2,023. we've made this progress while unemployment has remained at a 50 year low. central bankers need to consider the full range of risks to achieving our goals. we are always assessing risks on the horizon including the risk of an economic slowdown that could reduce employment, or the risk that inflation does not stay on its path sustainably returning to 2%. as chair powell indicated in his most recent press conference, fomc colleagues and i are confident that we are on a path of 2% inflation but we

need to see continued good data before we can begin the process of reducing the federal funds rate. i support what he called a careful approach to considering policy normalization given current conditions. january's report on consumer product index inflation is a reminder that the path to 2% inflation may be a bumpy one. given the limited historical experience with the growth and inflation dynamics we currently face, no modern experience of emerging from a global pandemic we have another reason to proceed carefully as we have been doing. next i want to turn to current banking conditions, lessons learned from the march 2023 banking stress in terms of liquidity risk management and how we can put those lessons to use for resilient banking systems. starting with the current banking conditions the banking

system remains sound and resilient and is in much better shape than it was last spring. however there are a few catches and pockets of risk of that we watch including the pandemic's persistent impact on office commercial real estate in certain central districts. just a couple of weeks ago disappointing earnings entire loss provisions at one bank precipitated significant decline in stock prices. a single bank missing its revenue expectation and increasing its provisions does not change the fact that the overall banking system is strong and we see no signs of liquidity problems across the system. nevertheless we continue to monitor conditions carefully as we always do. crucial to banks being resilient is effective liquidity risk management. that was in march 2023 and remains so now.

we have learned runs can materialize with unprecedented speed and severity, spreading contagion. slick and valid banks lost 40 billion in deposits in a single day and the firm's management expected to lose $100 billion more the following day. in total, that represented around 85%. the runs shortly thereafter on signature bank and first republic, each of which lost around 20% of deposits within hours were much faster than we had seen in previous episodes. the runs on all three were especially severe driven in part by imprudent funding reliance on uninsured deposits, concentrated and highly networked customer base. these deposits proof lighter than previously assumed. for example, as these depositors were heavily concentrated in venture

capital, the technology sector, signature bank and uninsured depositors from crypto related firms, and first republic at high concentrations on uninsured depositors, many of these uninsured depositors rapidly withdrew their balances resulting in deposits that were much higher than assumed under the standardized liquidity requirements such as the liquidity coverage ratio. at the same time the institutions face these outflows they also faced challenges meeting them with available assets. firms, even those with large stocks of high-quality liquid assets were not sufficiently prepared to monetize these assets, that is to turn them into cash. challenges with monetization can be especially acute as held to maturity or hdm securities which is interest rates increase and the value of hdm

securities go down, banks that account for them don't have to reflect the decline in market value to their balance sheets, selling even a portion of the hdm portfolio results in needing to recognize losses on the entire portfolio, a hit to capital. the ability to turn that into cash particularly when sales are not feasible is limited by a firm's ability to ramp up access to secure funding sources that proved problematic in large size last march. many banks have been analyzing these dynamics and have taken steps to address these risks. over the past year, for example, we've seen banks reducing their reliance on liquidity purposes, adjusting the composition of their hq la portfolio, and tapping different sources of liquidity. they've been updating their

contingency funding plans. these improved practices are important for individual firm resilience and aggregate financial stability. additionally, i remain focused on how we can improve bank revenue to tap the fed's discount. the discount window provides ready access to liquidity including forms of market funding under strain but banks should do some preparation to be fully ready. that includes pre-positioning collateral, and testing discount usage. banks do their part to get operational, we at the federal reserve need to improve discount window operations. bank liquidity needs also relate directly to the evolution of the federal reserve's balance sheet, the fed's senior financial officer of service shows that banks now prefer to manage to higher reserve levels than they did pre-covid with several citing the march liquidity stress as a

significant driver. right now the federal reserve is implement a monetary policy with plentiful reserves in the system even as we continue to run down the balance sheet with sizable security redemption every month. this process has been operating smoothly. so far balance sheet asset reduction has largely been accompanied on the liability side of our balance sheet by large declines in overnight reverse repurchase agreements rather than reductions in reserves. since it remains sizable we've seen a buffer before reserves begin to decline in a meaningful way. the fomc reiterated in may 2022 that it plans to operate monetary policy with ample reserve regime over time. as many market commentators have pointed out, it may be difficult to determine what

level of reserve is consistent with examples. the market dynamics from september of 2019 illustrate this. when repo rate spiked and these pressures spilled into the federal funds market the fed had to rapidly ramp up operations to add reserves to the banking system. this episode was a factor leading to the establishment to the standing repo facilities. which along with a discount window would help dampen pressures that could emerge in short-term money markets. i am pleased to see there's been a steady growth in the number of firms signed up for the facility. and that current bank counterparties in the facility engage in regular testing as a part of maintaining access. despite these improvements in our tools it is also important to closely monitor market conditions well before pressures emerge. there are a variety of market indicators that we can and do track closely to assess whether banks are beginning to have

difficulty accessing reserves in a way that could affect the constellation of short-term rates. we are also watching for signs of friction in the redistribution of reserves that may not be immediately evident in wholesale funding markets. these frictions could result from a variety of factors including the fact that smaller banks generally have less diverse array of wholesale market funding options to tap when they need to bolster reserve positions so we will be approaching these questions carefully. the committee is planning to begin "in depth" discussions of our balance sheet soon. in conclusion i hope my remarks have given you a sense of how i view the current state of the economy as well as the past that has gone this year. economic healing is helping us to lower inflation while growth remains solid. that is to the great benefit of the american people.

the banking sector is a sound. is sound. i'm focused on ensuring its continued resiliency. when aspect of this work is carefully examining the links between bank liquidity, market functioning, the federal reserve's liquidity provision and the evolution of our balance sheet. thank you very much. [applause] >> i'm told i'm sitting on this side. >> yes. >> hello. >> michael. hello. >> thank you. i will from now on. thank you for being here again and for your prepared remarks. i thought we should start in on the interaction between recent economic data and monetary policy and you did a good job summarizing what you plan to do, but in january data it was

hotter with the cpi report so 350,000 broad-based gains, wage growth in the 5% range in 3 months bar basis and core and headline cpi. on a 3-month basis so how does this affect your thinking when you are thinking about when to begin cutting? >> great question. as i said in my prepared remarks, the road down to 2% is likely to be bumpy, something i expected before and something i still expect, something the january data helps confirm. it's one of the reasons it is important for us to be careful and cautious as we begin to think about what the right appropriate time is to begin to produce the federal funds rate so that careful approach is

quite useful. i also think it is important to have a long historical perspective on this question. if you go back and look at all the different historical episodes, very hard to find an example that is exactly like the one we are in where things turned out well. so we have to be careful for that reason on both sides. we want to make sure that we don't cut prematurely and don't see a confident glide down to 2% and we don't want to wait too long and end up causing cracks in the labor market none of us want to see. the healing of the economy means we have been able to bring inflation down markedly while still having a strong

labor market which is reflected in the january report to help the overall economy but the risks are there and we are very conscious of that. each of us did ask the question a lot. the answer is we are really looking at the totality of the data. not a single data point, not a single month. the january data was stronger than expected on-the-job side and the inflation side. there is good data over time and the totality of the data coming in and inflation and broader growth. not something that looks at every fomc mating. looking at the data that came in not only on the data.

there are various forecasts for the future and the balance of risks. that the constant judgment process. there aren't really good historical parallels, the last time we emerged from a global pandemic was a very long time ago. what the pandemic has meant for the restructuring of the economy. we want to see inflation continue on a sustainable path. >> i'm a soft landing optimist.

when i look at decomposing the composition of cpi, for persistent housing inflation and persistent inflation in your other services, how does that affect your inflation outlook? we can't count on continued goods inflation. >> i wouldn't describe myself as a soft landing optimist. the data suggests we are in a good path right now but it is early to say whether we end up with a soft landing or not end up with a soft landing. i would say we have been able so far to see significant disinflation with a strong labor market and that is to the benefit of all of us, but i would be careful about where we are in that process and how

much work is still to go. you are right to call it the three major categories we are looking at. we've seen goods inflation come down very very sharply and result in goods deflation, broadly speaking and the goods deflation is deflation at a lower level than historically present and so when you are trying to think about what might happen in the future with goods inflation both because of historical trends which suggest goods inflation would be lower than it is now and because a lot of the improvement in supply has happened already, there's still more to do but a lot of it has happened already, you expect goods deflation to continue but to continue closer to 0 than it is now. so that's part of the thinking. when you look at housing, we, like most of you, look at real-time measures of market

rents, then you need to see a pretty long lag before those translate into the official measures of housing services inflation, average housing services inflation in the economy both with average rent instead of marginal rent and the owner's equivalent of that and that just takes time so everything about the real-time data suggests that we still have plenty of glide path going forward on the housing to see disinflation and that brings you to the third major component where, until recently, it has been kind of bumping along at a high level, and we see progress in that in recent periods and also with the exception of the january report gradually easing in terms of wage pressures that are moving down to levels that are more consistent with sustainable inflation and when you bring those together you get a story that is about the

gradual disinflation process that we have seen. we don't need each of them to be at 2%, we are not targeting the performance of the economy, we need overall for the economy to come down to our target. >> let's talk a little more about housing. the main policy survey, three quarters of respondents expressed concern that the rebounding housing prices preempt the cooling of housing inflation and indeed the top question from the audience is about the relationship between tight monetary policy and its impact on sensitive sectors but interaction between housing supply and interest rates and interest rates and housing prices. >> let me start with the basic thing you know it all your members no, we are not targeting house price levels in our work, we are trying to

bring inflation to the economy down to 2%. for many years, our housing supply has been far short of housing demand and that basic structural imbalance continues. you have on top of that in the current moment the fact that higher interest rates have resulted in some lock in particularly the existing home markets which means we are seeing very few sales and the sales we are seeing are at elevated prices. there's a lot less activity because people don't want to move because they can't afford a new mortgage at a higher rate and people can't move into a house they would like to because of higher interest rates so it is dampening activity in that sector. we are seeing more activity in the new home sector that realizes declines in the market, but in terms of how that influences inflation dynamics, we are still seeing

the basic story hold, which is the real-time market rent data that we saw a year ago and 18 months ago is still feeding into our measures of inflation. i expect that to continue. >> let's talk about questions of banking supervision. small banks hold 50% of commercial real estate, loans or otherwise on their balance sheet. question from the audience. talk about how confident you are about small banks ability to handle pressures given it will terminate bank term funding facilities in march. >> let me start with the back part of that and talk about the front part of it. we establish the bank term funding program under the emergency conditions that were

in place in march 2023. that program was successful in stopping along with other actions, bank runs in the system and ensuring that banks could have the liquidity they needed with long-term rates at that time to stabilize the system. we saw borrowing that was quite productive. we are not seeing liquidity pressures in the banking system. the kind of risks we face in the banking system with respect to commercial real estate are likely old-fashioned types of risks banks face in any credit circumstance. what we are seeing in the banking system, we look at this as many analysts do, if you look at the very largest banks, very low concentrations of commercial real estate we do

see some banks, smaller space with heavier concentration of real estate, then you need to look under the hood and say what kind of commercial real estate do we have, where have we seen pressures in that, the pressures are more acute in office commercial real estate, in certain central business districts, you look under the hood at that, what the ltvs look like, better than they were last time we had a downturn so the deposit thing on the negative side, vacancy rates are higher than they or otherwise would be because of the changing nature of work in the wake of the pandemic, more work from home, lower vacancy rates the translates into more cash flows for these loans, so there's going to be some price compression. there are going to be losses in commercial real estate sector. banks are provisioning for that to happen. we will see that play out over

a longer period of time but i don't expect the kind of acute pressure that we saw that was related to the unique circumstances of last march. >> host: you talked about maturity access and you highlighted that if a bank sells any of a given health maturity asset they have 2 -- it is a market for whatever loss they experience on the marginal sale but should banks be allowed to hold, to have access that aren't marked at all, enabling them to avoid recognizing losses and if so, why? >> we have basic accounting rules that banks also use that other entities use. if banks have the liquidity wherewithal to hold the asset to maturity, they can classify it as hdm, that seems

consistent with the idea of what a bank is come banks tank things on their balance sheet and hold them to maturity. that's the nature of the banking business. what we want to make sure is that banks have the right liquidity to support their hdm usage and also that to an extent that banks are relying on securities to monetize for liquidity purposes that those monetization assumptions are realistic. since you can't sell as you pointed out, you need to essentially be able to repo the securities and under stress there are limitations on how much repo can fit through the system and whether on a bilateral basis counterparties will continue to permit the hdm securities we saw indications in march of last year that there are limits on that so we want to make sure banks are being realistic about how they

are thinking about hdm with respect to liquidity but assuming they have sufficient liquidity it makes sense to permit them to hold them to maturity. >> we have a couple questions about non-bank financial institutions, how do you feel about their conditions and some are asking specifically about non-bank mortgage lenders, they are a large share. what are your thoughts there? >> let me say, we are always looking throughout the system for risks to the system. that's part of what we do. part of our financial stability work part of what we do when thinking of the safety of the banking system because the non-bank providers are all connected to the banking sector. they are not walled off, they are not separate. we do look at non-bank mortgage servicers, we want to make sure they are operating in a safe way. we don't supervise them.

but we look at how they are operating the system. we look at risk that might come from the hedge fund sector. there's been a lot of reporting about the rise of basis trade which is highly leveraged activity in the treasury markets, want to make sure there aren't liquidity traps in that sector. we look at the insurance sector and what risks are building there with respect to nontraditional liabilities and assets are really we are looking very broadly across the financial sector saying not only within the banking system but outside the banking system, out of those risks manifest, how could those risks propagate or not propagate in the system so these are areas that we are looking at.

>> giving a speech on cyber security and the banking system and critical infrastructure. what is the fed doing under its supervision mandate to ensure the largest banks that are most stable to invest in cyber defense, as difficult as it is to fully cyberdefendant, are protected from third-party vendors, and by the payments of smaller banks who may have lower defenses. >> you are right to point out cyberrisk is all around us. my guess is all of you in your companies and organizations worry about this all the time, people in your companies and organizations that worry about this all the time. it is an important risk. our role in this is to supervise banks, to ensure that they have adequate processes to

identify their vulnerabilities, to measure and monitor those vulnerabilities, protect themselves as best they can against cyberattack, to test their own protections, to make sure those protections are robust and importantly, to plan and prepare for when something bad happens because bad things happen all the time in the cyberworld. it is not enough to invest upfront. it is important but not enough to invest upfront. identification and protection from risk. you have to invest in resiliency when things go bad in resiliency planning, resiliency testing. we are examining and supervising banks all the time for that, working with them to ensure those systems are in place so that first ball they are investing in something if something goes wrong, they can take action to address it.

>> let's turn to the transition of monetary policy, the policy survey. a question on speed of transmission and the dominant view of the respondents was it hasn't really changed from 12 to 18 months but the second most common view was it speeded up somewhat, due to communication of the fed's in tension and the question from the audience is what are your reflections to transmit how the speed of transition of monetary policy is. >> a great question. >> not the speed but speed or nature. >> it's a great question. i don't think there's a definitive answer to that, the famous formulation that monetary policy is variable,

although the research can agree on. i would make the case for some aspects of transmission, communication is more rapid to the market, was about to say responding more quickly to monetary policy but anticipating more quickly monetary policy and financial conditions, just more rapidly in that sense but then there's the second and third legs which is affect of financial conditions on economic conditions and affect of economic conditions on inflation. it is harder to tell a story about why that would be faster now than it was before. you can argue some aspects in the unique circumstances with slower lags because of the fact that many people, for example, refinance at a very low rate environment into longer-term fixed-rate business loans and

mortgages and because of policies that were done in the wake of covid, balance sheets and to some extent business balance sheets were much more robust, there was more time for households and businesses to wait before needing to finance their loans. that would be to slower transmission, it's very hard to come up with a firm answer about whether things are slower or faster. they may be on net similar to the range we've seen in the past. >> audience question is about the level of deterrent premiums. i've given the elevated economic uncertainty and volatility of the last few years. are you surprised by the relatively low level? >> great question which i usually get asked the other way. i think it's too early to tell.

at historically low levels, they rose rapidly, then fell a bit. i think the market is getting used to the new normal for term premium, the fact that our fiscal entities are going to be issuing in large volumes for quite some time, playing into that, but so is uncertainty about underlying variables that affect how we think about what them mutual aid is over the long-term, difficulty understanding fully what the exact path of monetary policy is so greater uncertainty about that path. i think all these things play in. it's too early to know what the right level is or the normal level is. >> someone in the audience is asking is it time to move away

from extreme data dependence and got more of a forward-looking perspective as you did in your remarks on productivity growth and inflation bumping in? >> i don't know what it used to be extremely data dependent. i will just say what i think. data is crucial to figure out what we think is going on in the world. data reports with a lag what happened in the past. if we are really good, we get a good understanding what happened a few months ago, so of course we don't always look back and look at data, we are using data to try and inform the evolving nature of the forecast and so the balance of risk as i said, so what are our judgments about the past, help inform what we think the shape of the future might be. we can't obviously see into the future any of us, we don't have a crystal ball, so what do we used to do that?

we use data and models and judgments and those things come together to make an assessment about probabilities of different tasks in the future so i would say it is important to use data, you can't only look backward with the data, you have 2 use it to understand different ways the economy might evolve, different ways inflation might evolve in different ways from labor markets, you have to use judgment because we are in between the two, you have to use models because models help structure thinking, but you have to use judgment because we are in a historical period that is very unlike many other historical periods in terms of the nature of shock to our economy that we went through. >> i want to make sure we talk about the fed now and some of

your fomc colleagues have said at times talking about central-bank digital currencies. but now is instant, it is up and running. how is it going, and when will it enable households living paycheck to paycheck to receive their paycheck and deliver rent to their landlords on the same day? >> excellent topic area that i care a lot about and i do think fed now has the opportunity once fully up and running to contribute to financial inclusion, to contribute to helping low and moderate income households to live paycheck to paycheck to do exactly what you just said, to receive their income in a timely way. most of us take for granted that we get our direct deposit,

we know exactly when it is coming, it's there when it is there. most of us don't have to worry. most of us don't worry about making our bills on time because we have liquid buffers. we have shock absorbers in the system, we have slack, but most low income families don't have any slack. even a small problem like getting their payment made good late, or making a late payment can mean a spiral downward in their financial condition so it is absolutely crucial. the fed now is working well so far. it is going to take time so it is a payment system. anytime you develop a payment system, it is about building a network, payment systems have enormous externalities. so the more you grow the value system, the more value to those in the system.

if you think about the develop of ach, that took many decades for the development of paper checks, or before that, bank notes. these things take time to develop and achieve ubiquity. once we do, we take them for granted and assume they have been there all along. we can get there now but it would take a long time. right now we are adding to the system, the first stage by participants i mean banks and credit unions. the fed now system is a back office system, we are providing the rails. institutions that are providing services to consumers and businesses, our banks and credit unions. they are the front line of consumer interaction. it is going faster than anticipated and still at low levels. it will take time. once we have a network of

sufficient size, they start sending money to each other at higher volumes. people start sending money to each other at higher volumes, it can range from use cases so it has a build but it is going to take some time. >> i'm excited about fed now. you are a lawyer who spent a lot of your career working with economists, you do so at the fed, you did so at treasury, you did so at school and economists have gotten some knocks in the last decade or so, the housing crisis, the great recession and consensus to the fed about inflation was transitory in 2021. what is your advice? >> that's a dangerous thing to ask a lawyer. first of all i have spent a bunch of my, really all my

career around not only economists, but people from other disciplines. i've had co-authors who are economists, co-authors including economists who are career staff, co-authors who are psychologists. at the ford school where i worked for 5 years we were in interdisciplinary, our disciplinary school. a lot of different kind of deals. i always found that incredibly valuable. i will just tell a little story on the side diversion and promised to come back and answer your question. one of the reasons i am sitting in the seat now is because of an economist named ed grammer. ned was at the federal reserve on the federal reserve board when i was at the us treasury department in the 1990s and he was obviously much more prominent and well-established. i will call myself then a young person. it is true that i was a young

person. >> up and coming aide to robert rubin. >> i was an aide to bob rubin and i was his special assistant and i got to know ned through that work, we worked together on predatory lending, abusive lending, we were worried about the subprime mortgage crisis and doing work on community reinvestment act together and he really became a mentor to me and when i was thinking of going on the teaching market, it would be pretty cool to be able to do the kind of work he did. where can i find a university to teach him that will let me engage in this kind of interdisciplinary work and ned had been at the university of michigan and spoke with such love and admiration for it that, if i get a teaching job there that would be great. i went to to the munition see university of michigan in 2001,

out there for 22 years. always thought wouldn't it be amazing if i could follow ned's example in some way, so to be in this position fills a great gift and i really thank ned for putting me on that path. so back to your question. advice for economists. one of the things i would say is it is important to be open. ... two different ways of thinking about the world. there are as lots of debate within economics. those debates are really critical. we think quite differently about lots of things.

that openness is a really critical hormone of good thinking >> i see the second thing is about the point i made about models, model a really critical. they help shape our thinking of the economy and other factors. model a really critical for incisive analytical thinking. but it's often hard to know whether you are applying the right model, and maybe getting out of model brain and not always being in my brain. i think it's important and that goes to the third point i was making earlier about judgment. judgment is a really critical in any policymaking job, including sitting on the fomc or being at the federal reserve board. judgment is essential. and judgment is done over time through experience. judgment is l a learned from lok at history and other

disciplines, psychology, sociology, anthropology. we learn things about how the world works based on looking at those other disciplines. and so i would say the open, use models but be open to different models, huge judgment, look at different disciplines for ways of thinking about the world. >> that is fantastic advice and this is been a fantastic session. so thank you so much for coming to return for today. >> my pleasure. my pleasure. [applause] [inaudible conversations] c-span is your interview government. we are funded by these television companies and more

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