who scheduled the trip assured me he didn't plant the base there for me, but we enjoyed it nonetheless. thank you all for your time today. appreciate it. ..

what we heard yesterday was a real amazing accomplishment under your leadership, and but also struck by the fact when we had hearings in the agreement which set the path down frankly there was annexed in this committee about whether or not a military base was being set aside and whether it was, again, getting in too far into the high margin of risk, which you talk about and this probably could be one of your final appearances before the committee and i wanted to know if you wanted to share a perspective about that experience. obviously these are totally different parts of the world and conflicts, but certainly there should be sama the confidence that we can draw about your success in that drawdown and what we are contemplating here today. >> what we have a tendency to forget is how bad it was since

2007. br -- if we weren't in freefall from the point of the strategy until the surge in iraq, and there was certainly on certainty whether at the time that would work to. a lot of that was external pressure from the standpoint of outside forces but a lot of it was internal so different country in so many ways, and we certainly understand that, but the overall model certainly how we assisted them and how they enforce etc. is one we are trying to follow now. a different forces this is from scratch in afghanistan. it's a different country. i believe that there will be limited focus in afghanistan and a limited way on some of these ministries, finance, administrator interior and defense, not across the whole government, central government

of afghanistan, if you will, and in the long run this is a decentralized country. how do you make it flow and work, but that model is a very powerful model from my perspective of where we are and the question earlier is how many, we don't know. right now it's 157. how many left in afghanistan? 157 in iraq unless we reach an agreement to the contrary based on what the leadership in both countries want to do. we want a strong partnership with iraq for lots of reasons and i think there's more of it now than there were in 2006 and 2007 given the turmoil that's going on in that region. we seek that same kind of relationship, strong relationship in afghanistan long term so in that regard it's instructive. there are huge differences and we've got to take into consideration both of the similarities and differences and also acknowledged that in 2006,

2007 we were in our fourth and fifth year of war and its five years later and the president has done that. >> the deadlines are always subject to change but also they have focused on not just hour own government but other governments as well, and i hope that would also be one of the just general of the similarities that would help us get through this. >> i think that's true. one of the thing that happened with the president's speech in 2009 when he said he was going to start bringing troops out this july, which he has since made the decision on doing that and met that commitment is it did energize the afghans. isn't a very strong message that this is not open-ended. you are going to have to get up and take care of yourself which

is what every body believed any way. so there is -- i talked about the risk associated in one week, but there's another side of this book is a potential upside where they know how serious we are. they made a lot of progress. they have to continue to improve it. from the president down to the local villages that we talked about and they've made a lot of improvements. >> madam secretary, at all, if you have any questions, comments, we would be happy to hear them now and thanks for staying past your stop time. >> i would like to say thank you for hosting us today. i think the dialogue is incredibly important to continue this throughout the mission. also want to thank this committee and the members here for supporting the members of the armed forces and they're incredibly courageous work, but also supporting this motion which i believe is the violence

of the united states to concede. thank you. >> it's been incredible for years and years for the men and women and families and words don't capture. what you've done and the impact certainly somewhat in my position i just can't tell you how much we appreciate all that you do and we need that continued support in the future. >> admiral, we appreciate all of those war fighters and families and all of those who support them. especially you right now. thank you. we are adjourned.

>> she spoke about the dodd-frank financial regulations law in her role as chairman and as she leaves her current position. hull of the national press club, this is 55 minutes.

>> [inaudible] to talk to people about and i take the question and the first question was who was number one? [laughter] so tough to impress these days. it was angela merkel if you will were wondering and i did drop 15 this year behind the lady gaga dividing because they are appealing and not as much as others and am i power status. before i would like to begin the speech, i would like to thank some of the staff who are here with me and repeatedly as the chief speechwriter he has done some wonderful work and had a big hand in this speech and i do want to see freedom for this and all of the work he's done. thank you very much. >> and andrew, who many of you

know or head of public affairs out here somewhere who is just again with me the whole five years and has done such a fabulous job. thank you all of you out here. and my chief of staff who i drafted. he worked for me during my treasury days and has been at my side and an incredible experience. finally of course, my husband scot cooper who has been supportive of everything including home obligations when i wasn't as much as i wanted to be and with speechwriting on water than one occasion he is a wonderful editor as well. i'm deeply honored and st. you for inviting me here at the financial press club it will be my last speech as the fdic chairman. i cannot help reflect on the challenges we face the past years and some of the lessons we've learned in the process. our nation is mysterious financial crisis in the economic downturn since the great

depression. the after effects will be felt for many years to come. there are many causes of the crisis some of which i will address in my remarks today. but in my opinion, the overarching lesson of the crisis is the pervasive short-term thinking that helped to bring it about. short-term is a serious and growing problem with both business and government. i would like to devote my remarks to explain what i mean by this and discuss how we think it plays into the policy changes arising from the crisis. what is short term is and why does it a rise? it refers to the long observed tendency which we all share to 1 degree or another to unduly discount outcomes that occurred far into the future. my decision making is a familiar concept. the emerging field of behavioral economics goes further to patterns of inconsistency and economic decision making. investors, systematically overvalue short-term payoffs and pass up investment opportunities

that could leave them much better off in the longer term. too much short-term thinking can be costly. it's a market failure that leads to under investment and all evil projects with long pay off period. part of rubber tendency towards short termism appears to be biological. while the mathematical side of the brain makes careful calculations and risk and reward over time, the more primal emotional parts of our brain tend to focus on this year and now. which parts of the brain do you think becomes active when the research is presented with real-life decisions involving risk and reward? you guessed it is the more primitive system which understands greed and fear that is less focused on long-term consequences. short termism also grows out of the institutional rules that govern our behavior. when executive compensation varies according to the current year earnings or stock prices, it creates incentives to maximize short-term results even at the expense of longer-term

consideration. in short term incentives tend to feed on each other so the chain of accountability. if an investment fund earns on volume and the volume varies as it often does with current performance, then the path of least resistance is to compensate managers based on the current result. but ask yourself if this investment fund as part of your 401k, wouldn't you prefer that your fund manager be compensated at least in part based on long-term performance? i probably don't need to tell you that short termism also holds sway in the realm of politics. the virtue of our electoral process is the incumbents face market disciplines at regular intervals. but the drawback is facing the reelection have little incentive to take a longer view of the issues and the constituents. it is a voting public doesn't regard the runaway federal debt as their highest concern, then elected leaders probably won't either.

it's a particular challenge under the system to find leaders to commit to projects that will pay off long after they have left office and they are cautious when it comes to the ability of government to direct capital for the long-term investment with uncertain outcomes. yet, we can easily think of many examples for the farsighted government investment has large returns, the generation to come. think of this land for national that preserve the beauty and grandeur of the national landscape. government investment went the country to the interstate highway system and the internet. as a nation we have made investments that have allowed us within the peak to explore the moon come eradicate disease and decode the human genome but while we can see the wisdom of those investments and retrospect, there are many areas of the national life both public and private where short termism appears to be on the rise to the average holding period traded on the new york stock exchange fell

from seven years in 1940 to just seven months by 2007. the average tenure has declined buy nearly 30% between 1995 to 2009. not surprisingly, ceo turnover was found to be the highest among companies whose stock price performance in the industry. one powerful force behind and short term is a missile's technology. we may simply have more latitude to express our short-term preferences than we once did. forcible, a weld is a large consumer debt market provides more options for households to act on their inclination to borrow from the future to meet short-term needs. as we know, credit cards can be either extremely useful or highly destructive tools depending on how they are used. well-developed capital markets have expanded the opportunity for the financial companies to earn returns from the transaction fees and trading activities as opposed to the patient work of lending and longer-term investing.

the term patient capital is quaint in the hedge funds and high-frequency trading. finally, unless you have been updating your facebook status, you've probably already incurred the short termism is also driven by informational factors. in a 24 hour news cycle we are constantly bombarded with information that compels action, not patients. given the built in pressures faced by the corporate executives and investment managers, the constant flow of information heightens their obsession with short-term performance at the expense of the longer-term goals. at this point you may be asking what all of this has to do with the financial crisis and the answer is plenty. as has been the case of most previous crises, the central cause of this crisis with excessive debt and leverage across our financial system and the decade of leading after 2006 when u.s. home prices reached their peak total u.s. mortgage debt increased by 180% in average u.s. home prices rose by

almost 190%. rising home prices prompted mortgage lenders to focus on temporarily inflated collateral's value while they've relaxed underwriting standards that traditionally in short of the borrower could be paid the loan over time. most of the supreme loans made at the height of the boom in post a large upward adjustment in the interest rate and monthly payment after two or three years frequently making the loans unaffordable. as long as home prices kept rising the borrowers could usually refinanced. but after the crisis leveled off and then began falling, as a prime borrowers defaulted in record numbers. the reason the lenders were willing to make these risky loans and the reason that the security issuers were willing to fund them is that they knew they would be paid up front. mortgage investors and the homeowners themselves would end up bearing the long-term consequences. arrangements like this gave rise to the acronym ibg-ybg meaning i be gone, you be gone.

homeowners, too, responded to the rising home prices, flexible terms and tax advantages of mortgage debt to raise their home equity. cashing out to the tune of more than half a trillion dollars per year that the peak of the boom. meanwhile financial institutions frequently thought to maximize the balance sheet leverage. the sometimes moved to the shadow of balance sheet structures for regulation and capital requirements were less stringent. that strategy worked brilliantly until the eventual collapse of the confidence and market liquidity and back on to the balance sheet where there was not enough capital on hand to support them. leading financial companies proved that at creating new loan structures and funding strategies in the years leading up to the crisis. but all too often these innovations left participants with badly misaligned economic incentives. the compensation of loan officers, portfolio managers and bank ceos typically based on the current year loan volume earnings and stock price with

little regard to the risk we are building up in the system. most damaging of all, some of the largest and most complex financial companies were made except from the discipline of the marketplace because their size, complexity and interconnectedness' made them too big to fail under the prophecies and place at the time. the expectation of the largest financial companies enjoyed the implicit backing of the federal government allowed the managers of those companies to book short-term profits while ignoring the buildup of the risk inherent in the complex mortgage instruments they held and the financial market chaos that followed the september, 2008 bankruptcy of lehman brothers, the expectation of government support for systemically important financial institutions or sifi can really. the institutions to on a variety of loans manager deutsch total commitment almost $14 trillion by the spring of 2009. direct assistance to the largest financial and institutions ease the short term crisis of confidence in the market is the

financial system began to function again. the policy makers failed to attack the root cause of the problem which is the enormous backlog of -- backlog of unaffordable underwater mortgage loans that continue to slow the recovery over the whole key markets and our economy bailouts result in a host consequences for the financial system over the long term. the undermine market discipline and promotes risk-taking. they inhabit the restructuring of troubled financial companies and recognition of lawsuits. the keep substandard management in place at preserving suboptimal allocation on capitol they are to the well-run banks to get the bailout for 2008 to to their petition of the entire banking industry and until the competitive balance in favor of some mcginn banks. in the first quarter this year the cost of earning assets is only about half as high for the banks with more than $100 billion of assets as it was for community banks with assets

under $1 billion. in the end, why do bailouts violate the principles of limited government on which the free enterprise system is founded. that's why the fdic was determined to press for the board robust and effective resolution from work as a centerpiece of the dodd-frank financial reform legislation that was enacted last summer. titles one and ii authorize the creation of such a resolution framework that can make the sifi resolvable in a future crisis. this starts with the authority to designate large banking organizations and nonbank companies as sifi and subject them to heightened oversight and higher capital requirements in relation to the risk they pose for the financial system. these companies will also be a part of maintaining the liquidation plans were living wills as to show how they will be resolved in the crisis without a bailout and without blowing up the financial system. far from being on the slopes of the free-market, these provisions are designed to restore the discipline of the

marketplace to the mega banks to and their ability to take risk the extensive public and to eliminate the competitive that vantage they enjoy over smaller institutions. some of the rhetoric and the financial reform debate has been either short-sighted or simply inaccurate. as part of the reforms, we advocated an order of liquidation of 40 like the authority we used for years to resolve fdic insured institutions. this is expressly designed to facilitate the failure of some of these companies without a bailout which is expressly prohibited by the new law. but what is the sound but i keep hearing about in this provision? bailout this far as the eye can see. we need to spread the word as to what the sifi resolution for the work is all about. and what does it say if we don't see that the next news is the authority fully implemented before the next crisis? the resolution plans required in the sifi under dodd-frank will be critically important to of tanning the information we need to carry out an orderly

resolution that places losses on shareholders and debtholders which is where they belong. the fdic and the federal reserve are going to need to stick to their guns and insist that these companies can provide the infrastructure is necessary to ensure it can be resolved without a bailout in some future crisis. the debate will most likely take place when markets are, and the possibility of the crisis is remote. once again, people are going to ask why now? why are we making, putting such on the private-sector financial institutions? and it will be the need to explain the alternative is to risk another financial crisis that could someday through millions of people out for direct our public finances. short term is also alive and well in the ongoing debate over the bank capital the requirements. some banking industry representatives are planning to higher capital requirements will raise the cost of credit and the real the economic expansion. this is a terrific it simple of

the sort of static short-term and thinking that got us into this mess in the first place. there is a lot of recent research that shows higher capital requirements in the range we are talking about will have a very modest effect on the cost of credit. will create a large net improvement in the long-term economic growth by having more capital, less frequency and more severe in the financial crises. if your time has anything more than six months or so i think that is a pretty good trade-off. the fed does cut capital requirements u.s. banks now face are mostly the same as those that were in existence before the crisis. the reason banks aren't lending more now was the combination of the risk aversion on their part and reduced bar were demand. plenty of capacity to lend. large banks have been raising capital since the crisis started and most either already meet the new basel iii standards or do so through urning. banks that need more time will benefit from the extended safe designed to ensure seamless transition to the new standard

including in the sifi surcharge to read another dodd-frank mandate is the rule requiring issuers mortgage debt security to retain 5% of the credit risk of the pool. risk retention if necessary to give issuers the long term interest and performance of the underlying mortgages. given the controversy this round of the rule i have to say i regret the congress also carved out an exemption for the ultra safe mortgages as defined by the regulatory agencies. everyone it seems believes that the mortgage should receive disqualify eink residential mortgage or to lure them status and thus exempt from the small premium and mortgage rate that will result from the risk retention the attention they are not making is the small extra cost is the price we must pay in the short term to put equity behind the mortgages to ensure that incentives are properly aligned and to avoid a costly regional mortgage crisis in the future. we also need of long-term thinking on other important

national policy issues. too often the response that the economic growth has been another tax credit or threatened interest rate that's good for a while but does nothing to enhance the long-term performance of the economy. the political divisions that appear to have stepped the will to meet the time of long-term investments in education and public infrastructure that will pay dividends over many years, programs of national service like the civilian conservation board once provided jobs, skills to dump people in need as the work to conserve and develop natural resources. we still see the handiwork the national parks force throughout the country, the sense of pride and purpose and installed by programs like this is greater and cost the same as programs designed to put a few extra dollars into consumers' pockets much of which is used to purchase foreign made goods. we need to get serious about increment reform that would make the system of old age insurance and health care sustainable over the long run as longevity rises and the baby boomers retire.

the longer and healthier life most of us would lead compared to previous generations is a wonderful and much under appreciated historical development, but what this comes the need to make choices that involve short-term sacrifices. we have to work longer, pay more to the system and impose a means test on benefits or more likely all three. similarly the local tax system which favors debt financing over equity and home building over long-term investment is badly in need of an overhaul. closing the loophole will result in a more in its duty to efficient allocation of capital and allow us to reduce marginal tax rates while raising more revenue that can be used to paint the national debt. as some of us are going to have to give something up in the short term in order to secure those long-term advantages where will the focus be when the question is debated in congress, reported in the newspapers and ranted about in the blog? and it will with instant

gratification and lightning round the dates we are in dire need of leadership with public and private the will champion patience and sacrifice now and return for a brighter and more stable future for us and our progeny. the media plays a critical role in all of this. we report the facts so of years can make informed decisions. you know better than anyone that did a story factually correct requires going beyond the sound bite to verify the accuracy of claims. there's no shortage of rhetoric for you to investigate. your efforts to get down to the truth of the story will help the public get beyond the sound bite of the day and think about the long-term consequences of the policy choices and personal choices that all of us must make. fortunately, there are signs the mood of the public is already changing direction at least in terms of personal decision making to the household debt is now down by 5% from the pre-crisis level one of the personal savings rate has risen

to its highest level in 15 years. seeking you today in this historic venue i am reminded of some by as i received when i took the job is the fdic chairman five years ago. it came from of my predecessors who insure many of you knew well. the fdic foremost responsibility is to maintain confidence in the banking system. we are the ultimate guarantor of the people's money. today, we ensure some $6.4 trillion on deposits and thousands of banks across america. while for literally thousands of the fdic insured institutions that field over the years nobody has lost a penny and insured deposits. bill emphasized to me when of the keys to public confidence is transparency. as you expect, much of what the fdic does it and bank supervision and the closing is confidential as it pertains obviously to the individual institutions. but the fdic chairman needs to be visible to the public,

accessible to journalists and fully engaged in the policy debate of our time. so take this device to heart and as many of you know i tried my best to reach out to the media to talk with reporters and to be reliable source of the information that you need and i think it is a constructive relationship that has showed the public interest. even at the height of the crisis, easily the worst since the 1930's you didn't see the massive run on banks. working together, we averted a panic. people left their money into their insured deposits. it was a good exceed will tell americans can still be counted on to make wise choices and to benefit themselves and their country when they are armed with the facts and encouraged to consider the long view. thank you very much. [applause] >> thank you very much. we will engage in a

give-and-take with the news media. we have a lot of questions from the audience. some of them more specifically stemming from the speech, some of them were handed to me before we came in. you know, we have an interesting mix here this afternoon. we have a lot of very focused financial journalists who can really get in on the nuance of the microbes aspect of things. we have members i'm sure of the general public and international visitors here and i think one of the great things about your devotee is to speak critically in a way that is understandable but isn't always shared by the regulators of politicians. let's start with the big picture. here we are several years out of the financial crisis and you talk about the lingering effects mr. bernanke talked about the risk and some of the problems particularly persistent seem to be continuing and they raise the risk of the slowdown we seem to be experiencing at the moment.

what the anxiety level do you think is appropriate for the public and other policymakers right now as we look out to the risk we see that seem to be percolating over the horizon on any number of different fronts? >> well, i think these are risks subject to our control and influence. if we take action and make some decisions i think the housing market we still have a long level problem. the need to be restructured whether it makes economic sense, whether the distressed borrowers can make an economically viable payment, or if not, they're needs to be patient assistance or some other mechanism to clear the market because the foreclosure process is breaking down. our fiscal situation again it is a big risk for the financial system if it doesn't get resolved. the debt within our control,

congress kunkel, the administration the need to make tough decisions if they can't do it. it's the same problem in europe. you know, perhaps that it needs to be restructured, and people understand

i think the housing market looks at two things. we need to understand that housing market is a part of our economy and resources have to be reallocated. that notwithstanding is still remains a big part of our economy and it needs to clear and term before we are going to get a more solid economic footing so this requires very senior level attention. we do have a dysfunctional foreclosure market now that needs to be we need to come to grips with that and streamline the modification process and servicers need to have more staff better quality controlled and a decision to qualify for the modification and it's not come explore other alternatives,

but i think the industry, this is another problem with ms. a wide incentives because the banks don't own a lot of these they don't have to direct economic incentives to the effect of servicing so that's a problem that's why the government needs to step in more assertively because the market break down. but i feel it needs much more senior level and focus and resources and i'm not sure that's happened right now. >> why is that? [laughter] >> we think back several years ago where it seemed as if the hope was we could contain the crisis by focusing on the housing market and yet here we are and to talk to the foreclosure experts and they don't really -- they can cite a datapoint and say that is hopeful but nobody is really willing to say on a cd and anywhere in the near future. is it because there is a sense of intervention fatigue in the public and there's no political

will in the leadership to make the selling point that that needs to be done? >> yes, to some extent and goes back to the short termism fema. phyllis there's a short six we don't do anything to read during the crisis in this capital, large institutions that was easy to do, write a check, get the capitol in and it stabilized the system, but it didn't fix the longer-term problem. it's harder to go in and fix these mortgages and i think that is why we lack the political will if it is not right in scuffles and easy to do we are not going to get done. >> the new reference the greek crisis mr. bernanke was asked this week what is the risk to the banking system is indeed a sort of worst case scenario plays out and obviously this political process is yet to be resolved. what do you think the risk is to the banking system and then to the broader economy with respect to the greek situation?

>> will begin, i think that is a problem that is solvable if europe has the political will to make the hard choices to stabilize the situation i think if it gets out of control there and here there's not a lot of terrific exposure, but certainly to the great debt to there's a lot of direct exposure to the banks obviously a lot of relationships in the banking system. this is another reason might say i'm so frustrated on the debate about capital right now. we have been arguing for a long time some of the office to advance approaches which is implemented in europe in early 2000 and led to quite precipitous declines in the capitol level and allows the banks to set their own capital and risk-based on the assets for capital purposes using their own internal models. so we have been pushing hard to try to get to a leverage ratio for the constraint on the level capital being too low to get the ratio hire and follow the capital but also some objective

parameters on the use of this committee's advanced approaches to a staunch and get capital what in europe. instead, i find myself and others defending, trying to have a stable base year where i wish the u.s. political will would be to engage in your gut and say you need to leverage more and you need high your capital, and this is complicating i think their ability to resolve the debt situation is because many of the banks are too high. >> secure headed for discussions on this very subject in the near term? and is it fair to say that you are among those trying to get the highest bar for the capitol requirement? >> we are trying to set a high bar. i think we are trying to set a bar we think is achievable on the international basis because again, we can issue what we think we need to do in the u.s. the fed has the authority to set capital levels wherever they feel it needs to be for the banking organizations that i

think again the bigger challenge is to make sure we look at capital level so we have publicly said i think the basis point surcharge 10% common equity ratio for the largest financial the institutions is something we can and should do and it is achievable. >> there is a follow-up to your speech one person asked why do you use the euphemism short termism instead of greed when financial institutions act solely for profit with complete disregard for the consequences of their actions its historically been referred to as short-term, a good point? >> it goes beyond agreed. the political process is open from short termism i don't know if that's -- perhaps more concerned about the immediate reelection process and the longer-term consequences. if you're worried about keeping your job may be somehow turned into the agreed analysis.

greed is a good example short-term thinking there's other factors at play that is why i use not so much the euphemism but all encompassing. >> first quarter data from your agency should the year-over-year decline in revenue first since 1983 is the zero interest-rate policy hurting the bank's profitability and is that in keeping the lending environment by extension should interest rates be raised to help cracks >> i hear that from a lot of bankers that a gradual increase in interest rates incrementally increase in interest rates could make lending more profitable and this would provide more incentives, so i think the federal reserve board is aware of the argument and intact and

for what we were hoping for so it's something to think about. >> a variation on that question a couple weeks ago jaime dimond asked the fed chairman bernanke with the regulators and the full impact on the forthcoming regulatory environment and the criticism from some quarters people say overregulation making us less able to compete, is there any validity to that concern? that criticism? >> well, i think going back to the capitol, we've done a lot of cost-benefit analysis already come and the overwhelming weight of the literature on this shows the 10% as i've been calling for is the moderate rate of the city's justified based on a cost-benefit analysis concerning the payoff in terms of the system civility and producing the severity of the next crisis with any incremental cost an

inch so that's a very good job. some of the six dinsmoor from the interplay of the derivatives resolution, the felker rule, and i think on that score that is going to be more of a phased approach on the ground with the auspices of the devotee oversight council we could do some analysis of the relationship with these rules that's not to say we should but understanding the relationship to make sure that the rules were together will achieve the outcomes makes some sense. so i think by itself the analysis understanding the relationship is good but i wouldn't want that to be interpreted as a reason for not engaging in the reform we know and need and certainly on capitol. >> someone is asking about another downside, no one is asking about the upside, but soon as you look at the implementation of the efforts of dodd-frank where do you see the

greatest pitfall in its derailment? >> that is a really good question. i do think that this is very important and that isn't nearly what my agency has with the cftc i think it's extremely important and i hope very much that congress gives the agency the money they need to implement a very important and needed reform in the derivatives transparency and oversight. the cds market in particular continues to be too opaque for purposes of assuring assistant stability, and i -- it was a key derogatory during the crisis, and so i would hope that the funds would be available to implement the rules because they are very important. more generally again maintain the political will it is an nisha right now and a lot of pushback are obviously needed like higher capital, and one of

the things i hope to do when i leave is to try to engage more generally on these issues and explain to them in terms of everyone can understand why it's important and why the need to be engaged and be paying attention to what their elected officials are doing this for because this crisis is solved and i don't want to see it repeated to the estimate one of the responses was to take the traditional brokerage houses and mechem commercial banks, and we have situations where in the rest of these enterprises they are seeking a return on investment by taking the depositors' money and invest in a financial market, so does that mean there's increased financial risk? >> i think that is a lot of what the felker rule is trying to address. we don't want the insured deposits to be on with proprietary trading. it's supposed to be underwater. and a bank holding companies as

well and important on the fact a number of major investment banks have now become a bank holding companies that have larger depository institutions. the volker rules ensure deposits are not used for the proprietary trading and another area there is risk in the best implementation and the commercial and investment banks i don't see that getting attraction here. though i have suggested part of the resolution plan the regulators will be requiring the large financial organizations that perhaps can show greater legal and financial autonomy to the investment bank and the commercial bank to reinforce the infrastructure. >> with regard to dodd-frank someone says now there does seem to be so much political pushback and i might ask a question about that specifically in just a moment. does the debate about the lack of job creation and status of the recovery has the potential

to overtake implementation. volume before the media to drill down when people are just starting to blame the financial regulators for the broad economic problems i'm sorry but much of the rules haven't been finalized yet and this is an effort to blame the regulators for nothing to do with what we are doing and completely outside of our control and point of fact with the regulators are trying to do now was provide more stable systems. so when you get into the next downturn we won't have this severe impact on the real economy that we had in the most recent crisis. so, you know, these are -- these financial reforms provoked a healthy long-term sustainable growing economy. they help free direct financial services to words supporting the economy to the traditional function of the credit radiation

and the capitol rules, the higher capital charges are much more significant on the trading assets than on the banking where the loans are kept so the capital incentives will be landing in the trading and other market activities. so again, with the financial regulators are doing supports the healthy and vibrant sustainable economy not the answer we are around and i hope people will scratch with a service to disconnect some banks to big to fail financial schemes unraveled in cases involving wall street billionaires', sometimes seemingly difficult to prosecute how will some of the larger banks regain the confidence of the american public? and if not is that a problem? >> i think it is coming and this is why i would hope the more irresponsible members of the industry would work with the regulators to rein in their trade groups and lobbyist because i think it's in their

interest to read what kind of portable a potential damage has been done by the industry from these bailouts? it is in their interest to have a more stable system and rules that constrain the excessive risk-taking that we doubt that players in the industry. it's their interest as much as ours committee of the intensity of the cynicism and anger towards the banking sector continues to be quite problematic so i wish the industry would see it in their interest to work with regulators specter's speculation after president obama was elected he might be attacked as treasury secretary and critical of the policies of the bush and obama administration and the chris is particularly regarding housing and relief under water or worse. do you think they listened closely enough to your views and what advice would you offer your successor or other independent regulators in terms of speaking up in such a way? [laughter] >> i'm not a part of the administration. i'm the head of an independent

agency and the previous administration so i don't think it is obligation to -- i am not an adviser to the president and it's not his obligation to listen to me or give any credence to my views. i keep continuing the risk to the banking system, and hope to have some input on the broad public policy decision making, but the president has the right to choose who advises him and i'd sure he has confidence in those who are advising him and the frustrations we have had again on the intensity effort on the housing problem that i wish him well and the administration to the estimate was a very cordial statement. [laughter] keeping with the spirit of the national press club. i asked someone else recently on a subject who was in a comparable position what kind of raise the would give the current ad and attrition with regard to let's say management of the

financial crisis and now in the current situation but safer the administration as a whole what kind of letter grade would you give in the academic sector? >> you really see that going to ensure that? [laughter] >> you want us to drill down, right? >> it's a good question and i'm not going to answer it because i don't want to -- look i am trying to speak on policy and i don't want anything i say or positions i may articulate to look like they are to any particular candidate or political party. i try to avoid that impression and i am afraid if i start reading a president or the official i'm going to get into that sewing cui to get pass? >> you might consider another approach. the fcc passed rules that require your friends to invest in assets with high credit ratings but because interest rates are so low in the u.s. the money market fund managers sought investment in european bank debt which has exposure to the priesthood. are you worried the money market funds will obviously be hit if

the situation continues to unravel? >> orie worries that people understand where their money is and if the have the money in money-market funds as i said before the should do some checking and improve the disclosure rules and treasury securities don't have exposure to european banks but others do so first and foremost people should check and understand where their money is and if that is consistent with their comfort level. i think longer term unfortunately folks who think of this money has reinforced by the crisis when the government stepped in, so we think the mutual-fund will help provide an understanding in the forms about the safety at the risk of the investment and i do think this is a problem the and the fcc.

>> one of the most dramatic defense was the failure of lehman brothers. in retrospect do you think more should have been done to see fit to the extent the government bailed out aig and to take the experience to leave it with a aig decision? >> no i don't think more should have been done to save it but i feel we need better tools, and i think -- you know, i don't come even looking back at that situation, i think the original problem as bear stearns but they predicted expectations. we were -- we were far from philemon bankruptcy investment bank it had a couple of banks that actually are still solvent and operating within the bankruptcy, and so we didn't have direct involvement in that but i do think it did surprise me when i saw the market reaction because the place was

so sick for so long i thought everybody understood and they didn't come and i wonder if part of that is because of the expectation bear stearns had the assistance in the deal done for it and even the shareholders took losses they were kept alive and free but he was protected. so, you know, hindsight to 20/20 but going forward this is when we push so hard for resolution of authority. one of the other problems of the bankruptcy in general is the way that of its contracts were traded. so we can also require the dirt of the parties to continue to be forming a bankruptcy they have a right to close up the positions and pulled the collateral out. that is a lot of the disruption in the bankruptcy so perhaps the best lesson learned is how to fix that going forward which is what we try to do regarding what we call title ii fdic style authorities of the operations.

>> one question efforts among republicans now to water down some of the reforms as one who's a member of the gop yourself or you particularly disappointed about that? >> welcome you know, i've been with some republicans this morning and some democrats and i think regulators will never be glamorous people. every day people and it's easy to beat up on us and so we get pushed back and it's not coming from republicans and there's a lot of democrats pushing back as well, so i am disappointed in a lot of people, and we were harshly criticized going into the crisis and some of that was justified but now that we are trying to fix this there is a lot of amnesia sitting in so i hope the congress will but this exercise the judgment given under dodd-frank. this is what they the regulators

to do to make these decisions where they said the agency's and independent agencies will be sometimes politically unpopular and i hope the parties will of the agency do their work to respect of the national press club and earlier you mentioned not to pay too much attention to the need for sound bites which was a particularly painful thing for broadcast journalists to hear but dannel serious, as one who has run for congress in their relatively gentle shadow of kansas has now having been subjected to international scrutiny, how do you feel like you've been treated? >> i think fairly over all. there are times i had some real issues but for the most part i think we've been treated fairly, and i think the situations where

we were fairly or accurately for to the perspectives including ours. we found of the press to be responsive to that so overall we have had a good relationship. i hope you feel the same we have a high transparency. i think it's important for the public to understand better the fdic does because it affects them directly. the insurer money in the banks. i want them to understand what we do and that is one of the reasons we fare pretty well in the public opinion because they understand and appreciate what we do and if i do say so myself in going through all of our staff it's pretty well. >> so you reference public opinion and that lead into the let's say the fortunate or unfortunate aspect you were not successful in the run back in kansas depending on how you view fate. bob dole has been quoted as saying the one thing that played into that is that you were a single woman running for office. it just so happens your husband is close to the podium to become and so that is very visible that you are married now. with that mean that the

political landscape might have shifted over the years and you might be a more political viable candidate in the future? >> welcome you know, scott and i were dating during that campaign and he is a democrat. [laughter] he would come out and visit me and we would hide him actually. this shows how much loved this man has for me and i have for him. we had a big bear costume we would use in pervades and he's throwing out candy and if we had a bear sash on the kids love it. [laughter] thank you. and i don't know, i think -- i don't think i want to run for anything again. the reason is i will tell you i love campaigning. i love interacting with voters. i headed the fund-raising. i spent half the time on the phone asking people for money and that was the singularly most degrading thing i ever had to do and i think it's a shame what we put members of congress through to do this. i don't know the answer is that

money has really overcome this process and i think for the people who might otherwise on to serve. >> thank you. we are almost out of time. before we ask the last question we have a couple housekeeping matters to take care less. first of all, i would like to remind you about our upcoming speakers. on june 30, the oscar-nominated actor with a special foundation to help causes are not the military. on july 1st mr. charles bolden the administrator for nasa will discuss the future in space and plans to extend human presence beyond world war -- lower sorted and we also know that there were high retiring a restaurant bar kelly will be at the table that day and ted who made a couple of interesting draft picks for the washington wizards and the majority owner of the washington capitals will be here on july 13th. so in terms of what would be formalities the next stop on but like to present you with our highly sought after national

press club coffee mug as a token of today's event. thank you. it finally last question for the speaker you're planning to write a book after you leave office. we are wondering whether it will take us behind the scenes of the critical decision making the financial crisis will be a tell-all or is there an ankle or message that average people you would like to get across in the book? >> it will not be a tell-all. i think everybody worked jury hard with the best motives and certainly different perspectives and philosophies and i think it's important for those to be explained to the readership and that is what i'm trying to accomplish and also some of the things that happened after the crisis in some of the problems in the reforms it's really important to enact so i hope to be much i would engage the general population some of these issues that have been traditionally banking regulators because it's important for people to understand this is

relevant to them and the need to be engaged to estimate how about a round of applause for our guest speaker today? [applause] i'd like to thank the national press club staff including the library broadcast center helping organize today's event and there is a reminder you can find out more about what goes on here the national press club on our web site. you can also get a copy of today's program from www.press.org. thank you. we are adjourned. ..