accommodation of the last three years combined with the requirements of the fiscal adjustments made for new and quite extraordinary circumstances. fed independent on monetary policy remains an essential feature of sound economic policy making now as before. with that i think you for your attention and i would be happy to answer some of the questions. [applause] >> our first question is from wells fargo bank. he asks the reading of the data is that it's working in that excess reserves have risen less in the expansion of the fed

balance sheet would you agree? >> did everybody here the question? i'm not sure the microphone is working. the question is from wells fargo bank. the reading of the data is that there was working and the excess reserves are growing less than the growth of the balance sheet. is that with the question was? >> the of risen less than the expansion of the fed balance sheet. would you agree? >> the balance sheet has been on balance but a growing with the recent speed purchases at a kind of moderate pace from the 2.3 trillion that it reached after lsap i, and i actually haven't the relationship of the growth of reserves specifically to the growth of the balance sheet. there may be some research shrinking occurring as the economy picks up so i have no

reason to argue that point of view but i have to look at the data specifically. can you give an example of a sticky royce and say why it deserves more attention than a change in other prices over the same time period? >> good question. an example of a sticky price that might deserve more attention, a lot of services and service contracts are built on a fixed price even sometimes in a very formal aspect of the economy and there's a service relationship often reluctant to raise those prices so i will look at the category of service contracts particularly that only periodically get adjusted for underlining costs. some have proposed and entering the mandate of the fomc to a single focus on price stability.

do you have a view on this proposal? >> well, the question of course relates to whether the dual mandate should become a single mandate and there is obviously other central banks that operate under that kind of regime. i really had lost on the subject. i don't think the dual mandate involves certainly over any extended period of time a conflict between objectives and we is essentially are -- we do with the congress tells us to do in terms of objectives. so i'm not pushing for change nor am i necessarily one who would argue strenuously against the change. >> the last time they were below a dollar a gallon was march of 1999. prices are up 270% from then. it just so happens the monetary

base is also of 270% over the same time period. is this merely a coincidence or has policy been a dominant factor in the commodity price inflation? >> i don't hold that it's been a dominant factor. much of the price inflation is not the great majority of it is based on fundamentals. based on supply and demand factors or as we've recently seen in the case of oil prices. on the geopolitical developments that have a tendency to drive prices when there are concerns about the future flow of oil particularly out of the middle east and north africa so i hold that the commodity prices as i shared in my earlier remarks we have been concerned with recently our largely driven by

fundamentals. >> you listed for exit strategies in the rate of assets is there a chronological order in your mind? >> that's a good question. is there a chronological order. i don't have a fixed chronological order although i think we will be -- we will have to be doing rate moves and the more temporary mobilization reserves before we get into a longer term process of asset sales so i would see asset sales coming in leader rather than earlier. >> thank you. >> is the appropriate monetary response to a further surge the tightening and easing or no change? >> did everybody here the

question? [laughter] >> i was hoping you didn't hear the question. [laughter] give me a little more time to think about that. >> in my mind it depends on how a further oil price surge please through to the broad economy and it plays through the broad economy and there is i think like a good research on this in a way that portends a potential recession and i will take the position we would respond with some loosening are easing. it's been a lot longer question. given the risk the eruptions will not be resolved soon any prices will remain high. this could mean it would make investors very skittish. the question is with it ending in june do you think there is enough private liquidity

purchases and so on in terms of what's in the marketplace. >> that's a question we will evaluate as we get closer to june but i think the trend line is encouraging and gives me confidence that we will be the ultimate the transition to a private demand and for that matter what would be in the markets bring sufficient the economy would be able to continue on a sustained basis with a moderate level of growth without any further action, so i see a situation developing. now, admittedly as i sit in my remarks, that is a narrow view based pretty much on looking at the economic data and the performance of the economy recently and much of it is

really a domestic framework. and there are geopolitical risks as the question points to that i think are wild cards and i call them wildcards because i can't really predict how they will play out and how they might affect economy. so as i said, i have a wide rather than narrow range of possible scenarios that could affect the economy and i think we have to sort of remain flexible and vigilant to be able to deal with those. >> the next couple of questions are around the assets in the system. financial speculations seem to be the basis of the difficulties of the system. do you think this interest rate policy is currently creating financial speculations? >> schoomaker one person it's speculative is another person's investor. i think will interest rates clearly are defunding cost

advantage to investors, the global cost of capital when you took all the major currencies is relatively low that certainly makes money cheap for investors who are looking for some kind of a arbitrage whether that be the rate arbitrage or currency but whether that is feeding some of the broad concerns related to prices as i said earlier i don't think it is the dominant contributor. >> thank you this is a related question in terms of monitoring the situation will the fomc be looking at asset prices such as the stock market has to go forward? >> we monitor all asset prices as part of our regular normal process of watching the economy and clearly equity prices are

among the prices, among the financial instrument prices that we have to follow. >> what you think the fed should do about pricing the mortgage related securities on its balance sheet? >> the mortgage-backed securities and agency notes and so forth when we did that of course was somewhat unprecedented. remains a significant but declining portion of the fed balance sheet. declining now largely impassive terms with prepayments and maturities and ultimately sooner than later down the road some process of divesting in those assets will have to take place as part of a broad decks it. >> the federal reserve bank of san francisco, you, or one of the very few presidents with

extensive experience in the private sector. what is the proper balance for the fed between academic and business views on the economy? >> depends on whether you speak to someone with an academic background. [laughter] >> first let me say i got an e-mail from john williams this morning in response to my congratulatory e-mail over the weekend coming and he pointed out, john is a ph.d. economist and has a different background than mine to people born in the san waukee and valley of california are on the fomc. this is on president i want you to know. all the people in bakersfield, modesto and fresno should be proud that we've made it. if you're from that part of the world did you know why we should be proud, right? i think it's healthy to have a mix on the fomc.

i have many colleagues who are ph.d. economists who pursue their careers largely in the economics profession, largely domestically in the academic world or in the federal reserve and the of course bring perspectives to the table that i don't have or at least not deeply embedded in my mind, and i think the few of us that have business experience try hard to bring perspectives that are supplementary to those. one of the things i do is talk to business people and admittedly this is all anecdotal in terms of input, but it does help provide some sense of texture and immediacy to the views of what's going on in the economy and i think that back on helps. i also have international

background which relatively few have and every once in awhile there is something i can contribute ahura that might not be so obvious to someone else and there are four or five of those i think to are not economists and bring that background. >> we will try to squeeze in one last question. recently the standard and poor's decreased the credit notes of japan. how close do you think the situation of the u.s. economy is to japan's case? >> the thrust of the question is how close are we to a downgrade. is that with the question is? >> that's what we are asking, yes. >> i'm not going to comment on that. that is for the rating agency to determine. what i will say is i feel we should not assume things that

have historically been viewed as unthinkable or not possible, and that means we really have to i think focus on the country's financial affairs and ensure that the treasury remains the tripoli asset that it is. [applause]

next a discussion of online privacy and internet regulations hosted by the technology policy institute to read over the next several hours panelists talked about to report on the subject. one for the federal trade commission and the other in the commerce department. this is a little less than two hours. [inaudible conversations] >> good afternoon. my name is tom leonard, president of the technology policy institute and it's my pleasure to welcome you all here today for our even gone online privacy after the department of commerce and federal trade commission reports. online privacy is once again emerging as one of the most important policy issues.

the two agencies with principal responsibilities in this area, the department of commerce and federal trade commission have recently released major reports that have been more than a year in the works, legislation has been introduced and more is on the way. privacy is a critical issue for the overall health of the internet. individuals are justifiably concerned that their information doesn't fall into the wrong hands or otherwise get misused but information is also necessary to attract the advertising dollars that pay for the content that consumers in july and have come to expect on the internet for more privacy means less information available which will translate into less

advertising dollars and less and less content on the internet. so that's the trade-off of the policy makers have to address and have to meet. and in fact president obama and his recent executive order stressed the need to evaluate both the benefits and cost of regulations of this type. unless we do that there is no way to know whether a particular action ultimately is going to be good for consumers will not. we are privileged today and pleased to have as our opening speaker of the honorable cliff stearns who represents the sixth district of florida and who is chairman of the oversight investigation subcommittee of the energy and commerce committee.

mr. stearns has been in congress since 1989. in addition to being the chairman of the oversight investigations comegys on the energy and commerce committee's subcommittee on communications and technology and the subcommittee on commerce manufacturing and trade and the most recent conagra's he was the ranking member on the communications technology and internet committee to read he has been a leading figure on technical issues generally and particular on privacy issues and give you cliff stearns. [applause] >> hello, everybody. tom, thank you very much. i'm from a congressional district that runs from jacksonville down to just above orlando and we have a lot of wonderful indian sounding names

like [inaudible] but whenever it introduced the local rotary club i always get its short introduction that goes something like this. cliff stearns was born at a very early age and hospital to be near his mother. cliff? [laughter] thank you for that nice introduction. i would say to all of you that i sincerely believe we are on the cusp of a brand new technological lead vance met in this country with the innovation we see in the ipad and the motorola and other things i think it is clear the confluence of the wireless phone together with a broadband, high-definition television the we're going to create brand new products and technologies and this is going to start creating more productivity in this country. frankly it has potential even

though in the economy is weak it has potential to create millions of new jobs and along the way of course pro-growth. this is not just my opinion. mardy cooper is the father of the cell phone and was asked about the cell phone and he talked about it. he actually said that the cell phone is in the beginning stage of its revolution and that's hard to believe because we have a fourth generation wireless just coming out. ..

>> which i think is the hypertext markup language and said how can my friends address this individually? came up with the universal resource locator and august 61991 the worldwide internet was started. that. us forward. i often think what we have seen with the internet which have not seen with the automobile industry we saw chrysler go bankrupt and the reason to believe that the three did not see the innovation of the computer of the automobile industry we would buy cars less than $3,000.200 miles per gallon

but unfortunately that has not occurred but think goodness it has with the internet industry. one thing when you think about america not many americans realize the intellectual property in this country is so important to be protected. it is the only area where the united states has a trade surplus. it is incumbent for us to realize to have the wherewithal to do the innovation as long as we protect it. one good example is the ipad and the new motorola product, shows the confluence of the internet, the tv and the computer that all of these will bring exciting new products and over a period of time we don't know where this will go. the computer becomes the tv, the tv doubles as a

computer and wireless device. of the computer and from the come together to see more of those convergence as we remade on a path of deregulation. as this occurs, a privacy is a big concern and we are very mindful of the right balance for online privacy. and leafhopper are added tipping point* coming to grips with information collected and how to find the proper balance between protecting consumers' privacy online and encouraging innovation and frankly having done this for many years there is no easy answer, at the same time a put kill your concern about privacy whether pro marketing more pro consumer.

one clear way congress can promote greater use of the internet is to ensure individuals a high degree of privacy protection. including transparency about what is being collected and sharing this information about them to give control over that collection to share the use of it. online advertising supports much of the commercial content that are available today over the internet. it is also available without charge. we do not want to disrupt her well established and a successful business model. to provide advertisers with the label information with which to market and sell products and services. to collecting information for targeted advertising is important because it allows many products and services to remain free to consumers

without this information, websites could not survive where they would have to charge. neither is good for the internet or the customer. the bottom line is only the consumer knows what he or she knows and the parties doing the collecting and of the purpose for which it is collected. we could not and should not make that decision may need to replace the control of the information with the consumer themselves. this means companies have to be transparent about what information they collect and how they use it to that way consumers will be better able to make the decisions about their privacy. of this transparency should include robust disclosure in noted outside the privacy policies notice that it

needs to be fair and conspicuous some of the consumer knows that immediately. some information is being collected and he or she should know it is collected the second we should tell which information and how it is being used and how to prevent this message message -- information from being collected if desired so by giving choice with more robust companies we can strike the proper balance between privacy protection and strong commerce for chick-fil-a in the absence could have they can and -- it impact when consumers are struggling and don't know when it if anybody is paying attention gives pause and perhaps you

know, the book by stephen baker in which mathematicians have an avalanche of information about habits on the internet what we buy in purchase if we're rego to put this together through algorithms more perhaps in we would even know ourselves. we need to examine the harm to consumers before we jump into regulation. for example, represent the university of florida high by electronic gadgets on the internet. this is not a violation of my privacy if they want to be on the gator website is that susceptible day target me with ads? and helps them and it helps me and helps the support they shared goals such as a policy maker i h