an end around and a back door t.a.r.p., and a lot of that anger has generated some pretty kooky ideas about what we should do to monetary policy. and i can say that when i heard a few months back that the joint economic committee was turning to the question about, you know, how should the fed really be reformed, that i was reassured because, again, some of the ideas of reform of the monetary system in the u.s. struck me as cock maimmy, but the joint economic committee has a bipartisan staff that's littered with top economists and senior elected officials who are unusually bipartisan and academic in their approach. and the fact that the joint economic committee was taking up the idea, or a leading member of the joint economic committee was taking up the idea, meant something a little better than let's go back to just a pure gold standard would likely be forthcoming.

and so it was with great enthusiasm over the weekend when i finally got a chance to see what mr. brady's remarks would be that i could say that the joint economic committee did what it always did, it delivered. it presented something that while we can debate whether it'll work or not and whether it's a good idea, at least there's a lot of sound argument for it, and we're going to see that today. our first speaker, congressman kevin brady, is one of the most important politicians in washington for those watching on tv. in addition to serving as vice chairman and top republican on the joint economic committee, mr. brady's also the gop deputy whip and a senior member of the ways and means committee. but most importantly for me as president of the urban baseball foundation and official in the local little league, i can say that mr. brady is also a former mvp of the congressional baseball game. [laughter] he plays a mean second base and surprises every year that a person of his advanced age could be so comfortable on the ball field still. [laughter]

so we're delighted to have mr. brady here to discuss this new legislation on the role of the federal reserve, and as soon as he's done we will assemble the panel here mr. brady? thank you. [applause] >> kevin, thank you so much for hosting this forum today, for your constant willingness to engage on economic issues, tax issues, policy issues, fiscal and monetary ones both at the joint economic committee and the ways and means committee as well. thank you so much, and i appreciate the american enterprise institute hosting today's forum. they are involved in such key issues on capitol hill and abroad that it's a delight to be here today. and i also appreciate the panelists who are here, agreed to be part of the round table. each of you bring tremendous experience and fact perspective to the fed and the role it can play in the future.

so thank you so much for taking time from your busy schedules. some say that the 19th century was, belongs to the brits, the 20th century to the americans, and the 21st century perhaps to the chinese. well, not so fast. the pez mists may see that -- pessimists my see that direction, but i think while there are real challenges ahead, if we look to our economic future, washington should have one with goal which is insuring that america has the world's strongest economy throughout the 21st century. to insure the 21st century is another american century, we have to renew our commitment to what works well, which is the free enterprise system, and what doesn't always work so well which is the federal government. and in the context of building a strong economic future for the next 100 years, we have to thoughtfully and clearly define the role of the federal reserve. in my view, a sound dollar is

the surest and strongest foundation for long-term economic growth. a sound dollar creates certainty, facilitates new business investment and long-term job creation. therefore, the focus of the federal reserve should be to protect the purchasing power of the dollar by maintaining price stability. are there other fundamental, um, fundamentals that america must get right to retain our economic standing in the 21st century? absolutely. congress and the president must also make our tax system simpler and more internationally competitive by lowering marginal tax rates, by moving to modern territorial system and ending the distortions within our tax code that pick winners and losers in the free market. congressman and white house have to reform social security, medicare and medicaid to make even of them solvent. we have to transform our regulatory system to one where we can achieve our goals

including a clean environment and a safe workplace, but do it in a way that's efficient and balanced and less economically destructive as it moves forward. and we have to pursue trade agreements that open markets to allow our american companies and workers to sell throughout the world to the 95% of consumers who live outside the united states and do so in a way that we compete to win. however, these reforms by themselves will be insufficient if federal reserve fails to maintain the purchasing power of the dollar over time. that's why we must first examine what monetary policy should be going, what it should be doing going forward. economists broadly agree that the best way for a central bank to help maximize real economic growth and job creation is maintain stable prices over time. one need only look to the great depression of the 1930s and the great inflation of the 1970s to see that both price deflation and price inflation

are destructive. both reduce real output and employment below what they would have otherwise been. that's the goal of monetary policy should be long-term price stability. in 1977 congress mandated that the flag reserve pursue -- that the flag reserve pursue moderate long-term interest rates. since inflationary expectations alter long-term interest rates, the goal of moderate long-term interest rates are interrelated. this is why the federal reserve is described as having to to doa mandate for maximum employment. the employment half of the dual mandate reknechted in the employment -- reflected in the employment act of 1946 required the federal government to pursue economic policies that, quote, promote maximum employment, production and purchasing power. the price stability half of the

dual mandate reflected rising public concerns about price inflation in the 1970s. when thinking about the federal reserve's dual mandate, it's important to remember an observation made by a nobel laureate economist, robert mundehl. to achieve a policy outcome, you must use the right policy lever. in the federal open markets committee recently in a statement in january 2012, chairman ben bernanke recognized that monetary policy is the right lever to maintain the purchasing power of the dollar. they declared the inflation rate over the longer run is primarily determined by monetary policy. in contrast, fomc acknowledged economic policy is the wrong lever declaring the maximum level of employment is largely determined by nonmonetary factors. congress delegates monetary

policy to the federal reserve and should hold it accountable for its conduct of monetary policy. however, it does -- it makes no sense for congress to charge the federal reserve to control what it cannot control. except in the very short term, monetary policy can't boost real output and job creation. instead, using monetary policy as a short-term tool to speed growth may actually harm the economy. ultimately, it is the president and the congress -- not the federal reserve -- that controls the budget, tax and regulatory policies that create the business climate that drives economic growth and job creation. there is no substitute. and since congress gave a dual mandate to the federal reserve, governments in many other countries have revised the charters of their central banks. in most cases these governments gave their central bank either a single mandate for price stability as we do or a primary mandate or for price stability

with other goals clearly subordinated. among the 47 central banks in monetary authorities in major countries surveyed by the bank of international settlements, only the bank of canada and the federal reserve have organizational laws that give other goals e l call weight -- equal weight to price stability. so how should the fed pursue its mandate? according to the staff at stanford university, the choice between a discretionary regime and a rules-based regime, a discretionary regime creates uncertainty because it relies upon the subjective assessments of central bank policymakers. in contrast, a rules-based regime reduces uncertainty because it follows well established rules based on observable economic data with the clear focus on a long-term goal. inflation targeting is a rules-based regime under which a

central bank establishes a target inflation rate expressed in terms of a broad-based price index of goods and services. a central bank tightens monetary policy when the actual inflation rate rises above its target and loosens monetary policy when the actual inflation rate falls below its target. the last four decades of u.s. monetary policy demonstrates the advantages of a rules-based regime over a discretionary one. during the 1970s, the federal reserve had a go-stop policy in which monetary policy quickly swung from ease to tightness and back again. this incoherence produced a highly volatile real economy and rising inflation. a sea change occurred with the appointment of paul volcker as chairman of the board of governors of the federal reserve in 1979. under chairman volcker, the fomc tackled price inflation by controlling the growth of the money supply. this successful strategy was a

significant step toward or a rules-based monetary policy. and while the economy did suffer back-to-back recessions from january 1980 to june 1980 and july 1981 to november the next year, inflation as measured by the consumer price index, dropped dramatically from 13.3% in 1979 -- the year chairman volcker joined the federal reserve -- to 3.8% in 1982. between 1983 and 2000, the period known as the great moderation, the federal reserve pursued price stability through an increasingly rules-based monetary policy. effectively ignoring the second half of its mandate. two long economic booms resulted with very low inflation. the booms were interrupted only by a short, shallow recession related to the first persian gulf war. between 2000 and 2005, the fomc

deviated from the successful rules-based regime moving to a discretionary regime by keeping interest rates too low for too long. this loose monetary policy contributed to the inflation of the unsustainable housing bubble that eventually triggered a global financial crisis. since the height of the financial crisis during the fall of 2008, washington has increasingly relied on the federal reserve to take unusual interventionist actions such as tripling the size of its balance sheet under qe i and qe ii by purchasing the debt and the residential mortgage-backed securities issued by fannie and freddie as well as treasury. indeed, the open market committee justified these extraordinary actions by invoking for the first time since the late, over in late 2008 the employment half of the

federal reserve's dual mandate. ultimately, the open markets committee took these actions to compensate in part for president obama's failure to pursue pro-growth budget tax and regulatory policies. and they may well continue because just as low borrowing costs are masking the pain of historically high federal budget deficits, the federal reserve's monetary experimentation continues to permit the white house and the congress to shirk their responsibility for creating a competitive business climate. the federal reserve's monetary experimentation of last decade must end. congress should give of the federal reserve a single mandate for price stability. and the federal reserve should return to a rules-based system of inflation targeting to achieve that mandate. to provide the foundation for long-term economic growth in america, today i'm unveiling the sound dollar act.

it reforms the federal reserve in several important ways. specifically, the sound dollar act replaces the dual mandate with a single mandate for long-term price stability. it increases the fed's accountability and openness, it diversifies the federal open markets committee, it insures credit neutrality for future fed purchases and institutes congressional oversight of the consumer financial protection bureau. critics of a single mandate often charge that focusing on a sound dollar implies the federal reserve will now ignore the employment needs of americans. it's just the opposite. americans can only maximize our real economic output with long-term price stability, thus, protecting the purchasing power of the dollar provides the strongest foundation for lasting economic growth and job creation. a mandate for price stability

gives the federal reserve the right goal but does not alone insure the federal reserve achieves price stability. that requires the fed to move away from discretionary regime and back toward a rules-based regime. in january 2012 the fomc announced an inflation target of 2% defined in terms of the price index for personal consumption expenditures. i strongly applaud chairman bernanke and the other members of the fomc for this step toward a rules-based, inflation-targeting regime. however, this is merely a policy statement that can easily be reversed. therefore, the sound dollar act mandates that the open markets committee targets inflation, continues inflation targeting. as you know, accurately measuring inflation isn't easy. in the last decade, we clearly su -- saw that price indices of

goods and services don't always record the movements in our economy allowing asset bubbles to inflate undetected. the open markets committee's inflation target relies upon the price index for personal consumption expenditures. however, this index shouldn't be the sole indicator the federal reserve uses for measuring inflation. to identify incipient asset bubble before they inflate to dangerous levels, the sound dollar act requires that the open markets committee also monitor the prices of and the returns on broad classes of assets including equities, corporate bonds, state and local government bonds, agriculture/real estate/commercial and industrial real estate and residential real estate. it also insists that they monitor the price of gold and the foreign exchange value of the u.s. dollar. to be clear, the sound dollar act doesn't prescribe any specific action that the federal reserve must take if it detects

an asset bubble. the appropriate response is highly dependent upon the circumstances. these responses might include a tightening of monetary policy, supervisory persuasion and regular ha story actions -- regulatory actions to fund purchases of the asset. discretion with respect to the best response should be left to the open markets committee. however, identifying an asset price bubble early may help to avoid the overinvestment and the malinvestment that must eventually be liquidated as a heavy cost in terms of lower real output and lost jobs. let's turn for a moment to the federal open markets committee. as important as they are, there is more to the u.s. economy than new york and washington. to broaden input, to increase geographic diversity and reduce the overwhelming influence of new york and washington into the

open markets committee decision making, the sound dollar act grants a permanent seat on the fomc to every regional federal reserve bank president. currently, only the governors and the president of the federal reserve bank of new york have permanent seats. four of the remaining 11 presidents rotate on and off fomc each year. implementing this change restores the original intent of congress to establish the fed as representative of a broad cross-section of america's diverse economy. i'm also firmly committed to the independence of the federal reserve in conducting monetary policy. that's why i'm particularly troubled by the fomc decision september 2011 to reinvest the proceeds from maturing federal agency debt and rmbs into new federal agency rmbs instead of allowing these holdings to decline as originally intended.

this policy reverse occurred amid intense pressure for special interest groups for federal action to support the ailing housing market. when the fomc deals in securities other than treasuries, repurchase agreements and reverse repurchase agreements for the system open market account, the federal reserve's allocating credit among different sectors of our economy. credit allocation exposes the federal reserve to political interference. to maintain the independence of the federal reserve and to insure credit neutrality, the sound dollar act requires the fomc to teal only in treasure -- deal only in treasuries, repos and reverse repos for the system open market account unless the fomc finds by a two-thirds vote that unusual circumstances exist. the fomc could then purchase other securities for the system open market account so long as

they are liquidated within five years after the unusual circumstances. looking ahead to the next crisis, it's important to note that in its nearly century of existence the federal reserve has never articulated its lender of last resort policy. economist al meltzer described the problem this void creates. the absence of policy is three unfortunate consequences. first, uncertainty increases. no one can know what will be done. second, troubled firms have a stronger incentive to seek a political solution. they ask congress or the administration for support or to pressure the federal reserve or other agencies to save them from failure. and, third, repeated rescues encourage banks to take greater risks and increase leverage. this is the well known moral hazard problem. each of these problems became

manifest in 2008. to avoid these problems in the future, the sound dollar act requires the federal reserve to publish its lender of last resort policy. of course, we don't exact -- expect a precise tactical plan. as president dwight d. eisenhower observed, war plans never survive the first battle, nevertheless, war planning is essential to victory. in the same way while the federal reserve can't anticipate every nuance of the next financial crisis, publishing the lender of last resort policy will reduce future market uncertainty. next, i want to applaud chairman bernanke for his steps to increase transparency in monetary policy decision making, but there is an additional step the federal reserve should take. the sound dollar act speeds the release of transcripts of fomc meetings from five years to three years.

some critics claim this acceleration would inhibit free discussion at fomc meetings. well, if that is the case, perhaps we need different fomc members. a three-year lag will also allow congress to review these fomc transcripts before a fed chairman is reconfirmed which is absent from the deliberations today. in another reform the sound dollar act eliminates the slush fund that's been abused by secretaries of the treasury in both democrats and republican administrations. to prevent future abuses, my measure transforms the exchange stabilization fund into a special drawing rights fund, liquidates all of the nonsgr assets over three years and uses the proceeds to reduce federal debt. as you may remember, in 1934 congress placed the profits from the nationalization of privately-owned gold and the sub sequence devaluation of the u.s.

dollar into the exchange stabilization fund and authorized its use to intervene in foreign exchange markets to support fixed exchange rates. in 1968 congress placed a special drawing right issued by the international monetary fund into the exchange stabilization fund. and after the bretton woods system of fixed exchange rates collapsed in 971, the -- 1971, the treasury has used the non-gsr assets in the fund for purposes congress never intended such z walessing out mexico in -- such as bailing out mexico in 1995. the sound dollar act ends this. finally, the dodd-frank act funded the consumer financial protection bureau birdie accelerating the federal reserve's profits which would otherwise be paid to the treasury. they sent it to the consumer financial protection bureau so it could avoid congressional

scrutiny. this is a dangerous precedent. nothing other than the operating costs of the federal reserve should be paid for out of its profits. thus, the sound dollar act ends this diversion and requires that the consumer financial protection bureau seek annual appropriations from congress just as other federal agencies do. in the end, there is no justification not to. so to conclude, it's appropriate that we have this discussion and debate about the fed's role in the future of our economy. on this day in 1933, just 24 hours after he became president, franklin d. roosevelt ordered the banks closed, banned the export of gold to stop a growing panic as the depression intensified and called congress back into special session. so this is a historic day and a reminder that we ought to focus on not the reactive results and actions of the fed, but the strong proactive rules by which we want them to operate.

to insure america has thoughtfully prepared for the challenges ahead, the sound dollar act proposes the best path to help the united states retain its economic preeminence by preserving the purchasing power of the u.s. dollar. it does so by giving the federal reserve a single mandate for price stability and strengthening the fed's independence even as the act increases the fed's accountability. these reforms, i believe, are critical to insuring that the 21st century is, indeed, another american century. with that, thank you. [applause] with kevin's prodding, i will be glad to take, take questions at this time. [laughter] >> [inaudible] >> i will. >> [inaudible]

please, wait for the microphone and identify yourself. >> hi, my name is michael feinberg, i'm a student at the george washington university. >> yeah. >> i just had a question about you just mentioned the guarantee of money market funds during the 2008 financial crisis. do you think that that was an inappropriate policy to take, or do you think that the way that it was taken was what was wrong? >> you know, there's, there's debate about what were the appropriate actions to take at the time during the middle of the financial crisis. my point is that the federal reserve should not be taking those actions by themselves using those dollars reserved for other purposes. that actually ought to be a function and a discussion with congress and lawmakers. >> michael warren from the weekly standard. >> yes, sir. >> what's the political future for this bill? are you seeing this being a bipartisan, reaching bipartisan agreement on this, and what do you see, can you see this president signing this bill into

law if it gets there? >> i'd like to see a bipartisan effort. i don't see the president signing this bill. i really think this is a long-term discussion on the role we want the federal verve to play if we are -- federal reserve to play if we are to compete in the next 100 years and beyond. it has reformed included in it that, i think, not only lay the strongest foundation for job growth for america going forward, but creates that certainty and the accountability and the openness that will allow the market actually to maximize what it can do. you know, i think those are goals that could be embraced by both republicans and democrats. but our goal today in introducing the legislation is to start a thoughtful of debate on what role we want the fed to play. we're going to begin seeking sponsors as we move forward starting today, but on the way over here we got notice from scott garrett, one of the key leaders of the financial services committee, that he will

be a key sponsor of this legislation. so we will start to grow it from here. >> thank you. joe, peterson institute. >> joe? >> you talked about requiring a two-thirds vote for the federal reserve to purchase assets besides treasuries. um, currently they're limited really only to agency-guaranteed instruments. with a two-thirds vote, would you bill allow them to move into other assets such as corporate bonds or equities, or would you limit it just to agencies, and also what about the foreign exchange fund? if you close that down, do you mean they would not be allowed to buy foreign exchange? or would that require a two-thirds vote? >> we want to give the fed the flexibility to respond to unusual circumstances which may occur. so we give them that flexibility to do that, and the two-thirds

vote seems, i think, to be that fair standard where a circumstance would certainly create that type of support and reset vote standard. robert, as to the -- would it limit the ability or, basically, ban the ability of the fed to get involved in the foreign exchange rates? >> treasury's ability to -- [inaudible] it'd have no effect on what the federal reserve may or may not -- >> thank you. good question. >> karen johnson, consulting economist. you, um, mentioned or encompassed in your notion of inflation asset price bubbles along with consumer prices and referred to such things as real estate prices and equities and the price of gold and so forth. and i think rightly that if

there were a way to identify an asset price bubble early and to deal with it early, that would be a good thing. does the proposed legislation make comparable, in other words, are consumer goods prices or the prices of goods and services now in the pce just augmented by some indexed extension to asset prices, or is this difficult problem of figuring out what an asset price bubble is alluded to but, in fact, not addressed? >> it's more of a monitoring and reporting function for the fed. obviously, you'd be looking at those asset prices in the potential of a bubble and to be sharing those thoughts with congress as it goes forward, the hope being, obviously, if there's an opportunity to detect early on an asset bubble, you can make the moves necessary to deflate that before we have another serious financial crisis going forward. so it really is an effort to try to raise the profile of those potential bubbles within the fed

and, also, within congress as well. .. >> in my view it certainly made the primary focus of their actions. and i also think there were a lot of nonmonetary factors going on at the same time that affected the economy. my belief is that going forward that the experimentation we are seeing today has clearly mixed

results. out when the fed focuses on preserving, when it truly focuses on inflation and guarding against deflation really does create a very solid foundation going forward. we don't, i don't intend to downplay the role of employment in our economy. i just know the fed does its role correctly on rice stability, what could follow with the right business climate is the maximum job creation and strongest economy going forward. and i look toward what role we want them to play over the next 100 years, or whatever long-term period we are looking at, that's the strongest foundation. that sets the table for potential growth.

>> do you think about the price stability objective, do you think of it in terms of can do what i perceive the fed to be sort of a forward-looking inflation rate target? or do you see it more in terms of what economists call a pricing level target so that as errors were made in one direction they would be made up in the other overtime? >> my thought is long-term. i think rates the strongest foundation. there's lots of questions about a 2% rate, for example, is that over the long-term period is 2% inflation permissible each year, which over time, you know, quickly the value of the dollar, and so the a lot of questions remain about simply the 2% rate. but i'm thinking long-term that provides a sound foundation.

>> warren, retired from the international monetary fund. much of the sort of non-traditional activities of the fed in 2008 and nine, and so on, had to do with structural weaknesses and addition vision of liquidity. we were talking about bills only, but much of that activity was not through open market operations, but through lending, very nontraditional sort of counterparts. seems to me a lot of this flows from the primary dealer system which makes no sense whatsoever in an economy like the united states as a structural weakness in terms of how liquidity is allocated. does your, i assume you're bill does it really address that kind of thing, but it seems to me an important structural element, and why the fed went so far from its traditional approach. >> you know, not being an

economist, my thinking is that the bill addresses this in a sense in two ways. i really do believe, having a lender -- articulate helps at least to define the rules going for in the financial crisis. and as you know, you know, there's a big difference between landing to an insult institution and lending to one that is simply to liquid, but in those financial crises, those lines blur pretty quickly. so i think any work that any work in thought and gaining we can put ahead of that potential crisis puts us in a better decision, better position to make good decisions during that crisis. so we sort of look at it from that direction. >> i'm randy. i'd like to ask to some degree bailout or do you think congress is going to go through congress, what is the cost going to be? will you guys act to stop it?

>> you mean as far as the federal in swapping currency with europe? i wouldn't want to predict what the actions of congress would be in the area. i know that the interest is growing about what the u.s. role is in currency swaps and those types of actions. we also i think in congress, there's a much higher level of interest about the role of europe and their economy is tied to the u.s. obviously, you know, we have a great deal of banking financial relationships. they are buying one out of four trade dollars we are selling around the world. is our economy, unicom was flying at 50,000 feet strong and steady turbulence from europe isn't a problem. when you're flying low and slow it's a real problem. and so i think that portion of the global economy has sunk him in a major way to policymakers.

it hasn't yet moved whether we believe our fed's should click on what role the fed should play in all the. but i know we're watching it continuously. >> again, thank you very much. [applause] >> i would ask the panelists to now come forward and i have to commend mr. brick red in the courage to stand up your in front of guys like mike and all the legends of the fed, take some of the hard questions. we will begin in just about 10 seconds. [inaudible conversations] >> okay, we now turn to the nerdy part of our program. [laughter] but for those of you who follow

the fed policy over the last decade, and i guess i do mean decades now, will know the witches an all-star lineup of key and influential former fomc members and former fed staffers and key fed staffers to discuss this issue. and since we have a television audience and they don't all of ask is necessary to the bios, i shall be the bios. i think that's what we'll do. so the folks at him to know who they're listening to. our first speaker, i'll introduce the speakers one at a time and let them speak for about five to six minutes or so, and then we'll open up for general conversation. our first speaker is donald kohn. he is a senior fellow in economic studies program at the brookings institution, former vice chairman of the federal reserve, he is an expert on monetary policy, financial regulation and macroeconomics. he advise federal reserve chairman ben bernanke throughout the 2008-2009 financial crisis and also served as a key adviser

to former fed chairman alan greenspan. mr. cohen is a 40 or better -- veteran before taking office as a member of the board of governors he was an adviser to the board for monetary policy, secretary of the federal open market committee, director of the division of monetary affairs and deputy staff director for monetary and financial policy and a few more junior position. he as also written extensively and his implication by the federal reserve. >> thank you, kevin. my thanks, both cabins. thank you, congressman bernie. certainly for the opportunity to read your proposed legislation and for the opportunity to comment on. this is a very welcome effort. in my opinion, this constructive way to respond to concerns about past and potentially future performance of the federal reserve, open up, open up the debate, open up the debate on

objectives. the optimal central banking is often thought of as the elected representatives, giving the central bank the objectives, and the central bank having considerable independence to move their instruments around to achieve those objectives, and then be held accountable for achieving them. i'm going to concentrate on the monetary policy aspects of the legislation, get into some of the other aspects would. and a lot of what i will say is on title i, the objective. i certainly agree that long-term price stability is the appropriate long-term goal of a central bank and its the goal that is under control of the central bank. over the long run, for maximum employment is an estimate given by market structures, not something that is under the control of central bank, and over the long run price stability is the way the central bank can contribute to maximum employment to high employment.

chairman bernanke, in fact, has talked about price stability both as an end and as some means to the end. the means to an end being into high employment. so you would complete the the. i also agree that asset, credit fueled asset levels have undermined economic and i stability. it was true in the late '80s to early 90s but with a banking crisis and certainly a few years ago. and the federal reserve would agree with both of those characterizations. they have been reflected in chairman speeches, testimonies. and as you noted, congressman, and most recent statement of principles. now, reflecting that recognition by the federal reserve, inflation comes to united states has not been distinguishable between outcomes and targeting over the last five, 10, 15 years, both in the level and in the ability of inflation. the federal reserve has been focusing on inflation forecast.

it's been engaging in in place of flexible inflation targeting. over the last five years and inflation, cpi inflation has been two-pointer%, less than the united kingdom, less than new zealand, to inflation targeting countries and a few tents more than sweden and canada. and the last 15 years the u.s. cpi has been 2.4, the same as new zealand, only 23 more than uk and can. and standard deviation of the ability of inflation in the u.s. has been roughly the same as in these other, most of these other countries. and some countries with inflation targeting, low and stable inflation have experienced considerable credit driven asset booms. the united kingdom, parts of eurozone and one reason about concerns in canada right now. most inflation targeting countries have explicit in a mandate or on the website

explaining their mandate that the central bank, while pursuing price stability first and foremost, will also within that context and subject to that will also minimize fluctuations of income around and employment around full employment as they pursue that goal. there is no long run conflict. fluctuations in output hurt business planning, make it hard to make capital investments. if you don't know what the demand for output is going to be. and so there's really no reason why a central bank can't pursue full implement, or try to minimize fluctuations around estimates of full employment, the same time it pursues price stability at the rule of asset prices and capital allocation emphasized in your bill is very tricky and very difficult. people care about having certainty about the purchasing power, their incomes in terms of

goods and services, including the cost of imports and the cost of housing services. every inflation target at least that i'm aware of as in terms of the cbi and doesn't add in asset prices per se. the bill recognize the federal reserve should not be involved and credit allocation except if absolutely necessary, but a number of the metrics for ford and bill have a similar flavor, difficult judgments overriding private markets about asset prices and capital allocation. at the same time, its circuitry that asset price distortions, capital allocation distortions can get in the way of long-term price and economic stability as we've seen, in my view, the first line of defense against those kind of distortions should be regulations, both macro and macroprudential regulation. so my bottom line on title i on the objective is it's fine, it's okay to conform the legislative mandate to the common

understanding of the hierarchy of goals, but that's already been done by the fed in words and actions that it wouldn't have made any difference, in my view, about monetary policy in the past 30 years, including the past few years, or in the future as well. subject to the long-term price stability mandate, the federal reserve should be instructed to attempt to stabilize output around full employment and promote growth, and pursuing both price stability and minimizing fluctuations around output, the federal reserve should pay attention to implications of perceived distortions and capital allocation asset prices for financial stability but the federal reserve should include its assessment of these in its semiannual reports to congress, and it should tell congress what distortions it sees and what problems it sees and what the regulators or whomever, or the congress, or the federal reserve, should do about it.

so i think all those aliment should be there, but i'm not sure, well, those elements should be in there. let me comment a bit on some of the other titles touching on monetary policy. the federal reserve presidents on the fomc, the presidents do bring very valuable perspective to the policy process. i think it's wonderful that they each have their own research department. they are not dependent on the board staff or their views. we can see in their public speeches, and i can assure you inside the fomc is quite a diversity of views expressed by the presidents as well as by the governors. by the open market committee is already an anomaly in the u.s. system in that it has evil sitting on it, sitting, making important public policy decisions that don't go through the constitutional process of appointment by the president in confirmation by the senate. and i am concerned about the

democratic legitimacy and support for the institution, over time, if all the open market, all the presidents were given the vote. we are putting privately appointed officials outside the constitutional structure to be a majority of a critical policymaking body, diminishing the authority the president and the senate, reserve bank presidents are not accountable to congress, and i'm concerned that putting them on the committee could undermine support for federal reserve independence over time. you may like the current policy inclinations of the president, but that could change over time. and if the concern is on the board of governors, we might concentrate a little more on ways to attack us, to encourage can't get a better arrive at people on the board, et cetera. title iv was on transcripts. in my view, and shortening the years from five to three, my

view, transcripts of our had a bad effect on that i would be interested in al's view on this. there's less give-and-take, less testing of ideas, more prepared statements that don't compare to before 1994 that don't really respond very well to other people's views. i think the federal reserve should first and foremost be held accountable for the results, for the actions and how they are explained to relate to the results for the rationale in large part because of the lags in policy. so the federal reserve needs to explain why it's doing what it's doing and how that's expected to affect results in the future. and if results and explanations are not up to four, congress had every rights to examine the processes. why did things go wrong, to the processes need to change? holding people accountable for the way they argued, for the

words they use and leading up to decision, in my mind, will only dampen the debate resulting in more posturing and less optimal decisions over time. and, finally, so results rather than words leading to results. and, finally, on the agency purchases, i completely agree with the sentiment behind that particular title, agencies, purchases of agencies, securities are usually undesirable. we should return to the treasury only focus as soon as consistent with achieving congressional goals for the federal reserve. the open market committee agrees with that also. it's made it's clear in its minutes and grace announcements, and chairman and member speeches have two points of concern about the current wording. i wouldn't use the unusual words, seems to tie at the discount window decisions. why those particular choice of words, but i would type back to title i.

so i would say we want you, we the congress want you getting only in treasury securities, unless you think it's actually necessary to achieve the objectives of this piece of legislation, title i. asking for a report about why you think it's necessary is perfectly appropriate to me as well. tie it back to the objectives of the legislation. and i wouldn't dictate the timing of the unwind. once again i would type back to title i that should be unwound as soon as possible, consistent with achieving the objectives of title i, you're violating the instrument independence with five years. and you could ask for special sessions semiannual report as long as those agencies were outstanding same why do with it and what the plans were. and you. >> thanks a lot, don. next speaker is alfred broaddus, retired from the bank of richmond. he served as president in

1993-2004, initially serve as an of of the federal open market committee and the federal reserve system. before his term as president held a variety of decisions in his 34 year career with the bank including director of research. is a member of the economic advisory panel of the federal reserve bank of new york from 2004-2000. is currently director of the corporation, face on, owens and minor incorporated and t. rowe price group it is also member of the board of visitors of virginia commonwealth university and a bunch of other boards, keep going. so he's now going to tell us whether monetary policy would've been a lot better if he got to vote more. >> i'm not sure i'm going to exactly that. thank you very much. it's a pleasure to be here and to participate in this program. as you suggested, for most of my current even working at the fed or since then over the last eight years or so on turning it reasonably close range but richmond is only about 100 miles

south of d.c. so i've seen a lot of proposed legislation, and this, congress and, i applaud you for this proposal. i have some very -- fairly strong reservations but i think what i'd like people to take away is i think by and large it's a very, very important proposal, and i salute you for making it your i thought what i might do, the best way to go about it, sort of the way don, just go to the titles pretty. most movie reviews that i see, gives you some sort of star rating system. the number of stars together get five stars, that's outstanding, a great movie. one star on the other hand means a much weaker, lousy movie. so i thought i would share my starbury for each title, and i hope it doesn't show erika, puffed up. it just by way of time to give you a reasonable bottom line about how, from my perspective as a performer reserve bank

president, look at each of these elements. on title i, have many of the same thoughts that don did. of course, to begin with, replace the current dual mandate with a single objective price stability. i would give this title unequivocally i've stars. i think it would be great if we could go there. i certainly recognize the political imperative over the years where dual mandate, never really made sense to me for central bank, for the federal in the other central bank for that matter. the economics seem clear to me, and we've already heard this here today that the fed and other central banks can't directly influence control over time, the price level but they cannot control output, jobs, operationally in any meaningful way though i think many of us are persuaded him and was suggested, i think many of us believe that a period of persistent, price stability will

allow you to maximize growth and output over time. so single mandate, focus on high stability seems to me to be optimal for monetary policy. and i didn't salute you, congressman brady, for proposing a. i have to confess some discomfort with what the write up that was sent on this title refers to as mentored evaluation. which would require the fed in seeking price stability to monitor the various, the word is monitor i think very as asset prices of foreign exchange value in of the dollar and the dollar price of gold. monitoring, for example, foreign exchange rates would be okay, as long as it is true for marching. may be some sort of supplement to evaluating the behavior of the conventional rice indices but i think karen's point, question is relevant here. what would worry me is this monitoring might dwarf into something, that might eventually be focused on if not actively

targeting, something like that, something like exchange rates. i think if that were to occur that would undermine some of the value of the price stability mandate. so nonetheless, but nonetheless i give five stars to the overall time because i think that the current dual mandate intentionally or not undermines the ability of the fed to conduct what i would think of as optimal monitoring policy. title ii regarding the fed articulating a lender of last resort policy gets three stars from me. obviously, understand the motive here and the differential treatment of bear stearns on the one hand and lehman on the others. but i give it only three stars because, frankly, i don't think the problem is an uncleared lender of last resort policy. that's just not the way i see. i think the fed, i'm not sure the legislation now says exactly what i think it has a policy

that is reasonably clear, is to buy temporary liquidity to solvent banks against good collateral. the problem is how to attain credibility that the fed will actually follow that policy and be allowed by the rest of the government to follow that policy if crisis solution here seems to me to be congress can and end know this is your said than done, but i would say from congress to establish some kind of fiscal process so that if the government decides that it's in the public interest to bail out some institution, somebody other than the fed will do the bailing. is obvious a big topic and i would just leave at that for now. we can talk about it. title iii is the one that don has discussed this, would make all fed bank president permanent voting members of the fomc, and as a former bank president, there's some emotional appeal to me as a look back on my years at the table with the fomc.

so it makes me feel a little uneasy it may be even a little disloyal to the banks, congressman, to give this title only two stars. the basic issue i think at some level there is the fomc's legitimacy, you said, don. and i would say, repeat that for the fomc to be fully legitimate in the political science sense of that term, it as a practical matter i think a majority of the voting members as you said must be appointed. rather than resin and confirmed by the senate. so i think that title as it is now written would require all reserve banks are reserve bank president of the way things work in this town though, that would probably mean as many as two possibly three reserve bank said in one time would not have the president. and vacancies might come if governors, governor appointments

are any indication here, you might have extended vacancies at reserve banks. these are big institutions that have to be run day-to-day and that's just not healthy from the standpoint of those institutions. i guess the way i see it from my perspective, you guys have enough gridlock of you and i don't want to create an opportunity for anymore that would involve the reserve bank presidents. but more fundamentally, and this goes to something don said, i don't think you need to do this to achieve diverse views on the fomc. that was not my experience when i was there. i don't think really getting meaningful non-vc, non-new york input into fomc discussions is really too much of a problem. keep in mind here that all of the nonvoting president, still can all of the meetings, participate fully in the discussion exit if the reserve bank president does his or her homework i would argue they could be influential even if they don't have the vote i can

remember many meetings where i wasn't sure who have the vote and who didn't have the vote. to nonvoters these days with the disclosure procedures now which were not always there when i was there, but then i'll get to public dissent but there's so much media attention now on nonvoting presidents as well as voting presents. they have ample opportunity to put their views forward. so that's my view on that. title iv would require the release from transcripts in three years rather than five. i think i take issue with you all a bit on this, don. i would go to three but i guess i think five may be better but maybe not for exactly the same reason you do. what worries me is if you go to three, a lot of the focus is going to be what somebody said in the recent past and that can fess up i think discussion, looking forward in discussion within the fomc. so that's why guess i come out as i'm sort of -- i'd be fine

with three. it really seems to be essential that you need to go there to have enough transparency to ensure fed credibility, but i'm not sure it's optimal. i will give you four stars on this title, for at least pushing for more transparency. the motive is great and more transparency is a good thing. and title v addresses the relationship of the fed monetary policy, there's two parts. second part, put a fence around exchange stabilization upon which is currently vulnerable and has been for longtime vulnerable to vulnerable to misuse and abuse. and to the extent the fund can be used to facilitate the rescue packages the fed may get drawn into, and i think as the potential for being harmful to the independence of the fed and fed credibility. so i would give this second part of title v i guess it is, five stars.

the first part of the title would require the fed to report to congress on how its monetary policy is influencing the value of the dollar. that sounds innocent enough, but for many of us who live through the long arduous process of establishing credibility for low inflation, price stability as the goal of you as much or post, something like this does to me like another mandate sneaking in through the backdoor, which could undercut the credibility that your single mandate for price stability is trying to achieve. for this reason, and i confess to some possible paranoia here, i give this particular element of that title only one start. in my view if the congress than once to know how the fed feels monetary policies affecting the foreign exchange value of the u.s. dollar, ask the chairman when he goes up on the hill to testify. don't make it a formal requirement. title vi, don't want to take

u.s.-china but title vi addresses what my long-term colleague and good friend calls fed credit policy. that is, fed actions that affect macro credit allocation, inherent fiscal policy but as i read a title vi would still permit such actions by the fed in unusual an extension circumstance but what i would think of as a monumentally nebulous term. not a new term that is. as i understand i guess whether that's the case or not would be determined by two-thirds vote of the fomc. so at the end of the day, even with this legislation, the committee can take actions. it might seem constructive and even urgent at the time like buying foreign backed securities right now, which over time could undermine its independence. so at a minimum i would hope that if the fed is going to continue to be engaged in these kind of operations, they should

require an explicit concern, concurrence for some fiscal authority. so i give this, i give this title three and a half stars for at least addressing this issue, and actually for recognizing especially and very clear. finally, title vii would require congress to fund the operation of the new consumer financial protection bureau rather than the fed, five stars, no question. enough said. so summing up, i thin think thed dollar act would be constructi constructive, legislation with a few tweets along the lines of a look forward here but i would give it a composite weighted average of four overall. maybe four and a half. any because of the very considerable way i give to the main feature of title i being single price stability mandate. bottom line, i would love to see at least some of these and many of these elements as you propose here to become law. thanks very much. >> i will give that presentation five stars. and we're supposed to go that

our next gig will be nathan sheets who joined citigroup as global head of economics. he is helping lead a firms worldwide team of economists with a special focus on courting the international forecast. his own research focus on global themes with a particular emphasis on the position of venus states and the world economy. previously mr. sheets work of the federal reserve board for 18 years and a variety of positions. from september 2007 until august last year he served as the director of the board's division of international finance. he also served as one of the three economists on the federal open market committee. mr. sheets represent the federal reserve at many international meetings of was a member of the navy on the -- sponsor for -- from 2000s-2007 while on lease, mr. sheets work as a seniosenior advisor to the is executive director at the imf. during his tenure at the fed, he works on a range of issues including the adjustment a u.s. account gaza, approaches to resolving emerging market financial crisis.

and he's got lots of academic research as all doctors do. nathan. >> well, i'm very happy indeed to be here today to discuss these important proposals to reform the federal reserve. i will focus my remarks on four key features of the act, and i think it's fair to say going in that i am a little less enthusiastic about some of this than al is. but even so i see this proposal as being very constructive, very helpful, and very serious proposals that deserve to be carefully considered and debated. first, given the balance of the academic evidence, i agree that if we were establishing an entirely new central bank for some country or currency union, there would be a good case for at least considering a single price stability mandate. indeed, the euro area countries went through exactly this exercise during the 1990s, and

adopted a price to the mandate to their central bank, the ecb. of course, the united states is not establishing a central bank from the ground up and we must consider whether a quantum change in the federal reserve's dual mandate actually passes the cost-benefit test. i have several concerns in this respect. first is as i will discuss in a moment i think the federal reserve's record achieving price stability over the past decade has been quite strong. second, as a practical matter central banks, whatever their exquisite mandates, must respond to the evolution of economic activity implement. so actual differences in central bank policies has been less stark than those in mandate. for example, the bank of england with a single mandate for price stability has been particularly aggressive in its quantitative easing program, not withstanding the fact that inflation has run well above target. i also doubt that circumstances with millions of u.s. workers,

unemployed or underemployed, are an opportune time to shift the fed's focus away from the objective of full employment. indeed, the dual mandate strikes me as particularly powerful and appropriate. i very much agree that the central bank cannot directly influence the long run levels of employment in the economy, but when there's slack anytime this stands to have a significant effect on how quickly the economy returns to full employment. and i think that consideration looms quite large at present. another part of the bill proposes to shift the composition of the fomc to include all 12 of the reserve bank presidents as voters at each meeting. this again would be closely aligned with the european model, where all national central bank governors representing individual countries and constituencies vote at each ecb meeting. i see the important underlying question here as being how to

balance the public versus private aspects of federal reserve governed, and i believe both of these are desirable and important. on the one hand, i share the view that reserve bank presidents to bring valuable geographical diversity to the fomc deliberations. on the other hand, as don pointed out, the board members who now vote at every meeting have strong political standing and they are now made by the president and confirmed by the senate. another observation, i think which leaps out from the published transcript is that the voting and nonvoting fomc participants are treated an entirely symmetric way during fomc meetings, each having identical opportunity to report on involvement in the district, ask questions and to stay their views on a range of policy.

as such i see this proposed reform as unlikely to change. the underlying dynamics discussion at fomc meetings, and, frankly, unlikely to change the fomc policy decisions. although with a larger voting committee that would inevitably be more dissent, we can talk of whether they'll be a good thing or a bad thing. 30, i very much agree that the art of central banking is ultimately about striking an appropriate balance between rules and discretion to much of the academic literature on this topic has concluded that the political process should establish the goals and objective from monetary policy, namely, set the central bank's mandate. the central bankers should have a fair amount of flexibility to choose the instruments and approaches that they were used to achieve those objectives. more generally, my observation after watching the central banks around the world formulate

policy during the crisis and overmuch longer for arise and is no central banks with operational flexibility, including the capacity to use a broad set of tools and instruments to influence policy have been most effective. as such, while i'm very much in favor of working and preplanning, i'm uneasy about the proposal that would tend to further limit the range of assets in which the veterans ask, or what potential it locked the fed into a formal prespecified lender of last resort policy. finally, and i think this is the key point, by my reckoning the dollar's performance over the past decade has been quite sound. in terms of the dollar's value against goods we've seen average headline pc inflation of up to .25% over the past decade, just a bit above the fed recently announced inflation target. but this deviation largely reflecting a secular rise in oil and other commodity prices has

been beyond the fed control. core pc inflation to average one point not% over the past decade which is below the 2% threshold. the value of the dollar against major currencies has been on a deeper shooting trend over the past decade, but much of this just reverse an unsustainable rise recorded in the late 1990s. more broadly, i see the foreign exchange value of the dollar as well in line with deeper considerations regarding the sustainability of u.s. trade and current account balances. to be specific, the u.s. current account deficit is narrowing 6% to 3% of gdp in recent years. which means the u.s. economy much closer to position of external balance. and notably during the height of the financial crisis we saw massive inflows into u.s. treasuries, and a sharp appreciation of the dollar, clearly indicating that the dollar retains its status.

by related point, my experience suggests the treasury and the federal reserve have a very effective relationship in managing the dollar, including the drafting of public statements and decisions regarding possible intervention in foreign exchange markets, which happened very, very rarely. the treasury brings enormous expertise to bear on such issues, including a deep understanding of political, geopolitical and diplomatic landscape. as such, i believe that there are distinct benefits in having the treasury deeply involved, and, indeed, taking the lead on such issues. all told, i see these proposals contained in the bill as important and very substantive. in my view the burden of proof rests on the opponents of this legislation here to make the case that these reforms will actually lead to better monetary policy, and stronger economic outcomes in the united states.

>> thanks very much, nathan to our next speaker will be steve oliner who is the resident scholar out here at aei. is just joined us. we been talking diversity of opinion at the fed but in the interest of diversity at aei we decided to recruit an economist who is reasonable. and so steve, welcome. [laughter] >> steve at the resident scholar who joins aei after crude of the federal reserve board that span more than 25 just a case held a number of high level positions but most recently serving as a senior advisor at the division of research and statistics. he was involved in the fed's analysis of u.s. economy and financial markets and his research and a wide range of topics including monetary policy, business capital spending, productivity growth and commercial real estate. contrary to his position, he is accusing scott at the siemens center for real estate, he also maintained an economic consulting practice as does every former fed economist apparently.

steve. >> thank you, kevin. i'm really pleased to have the opportunity to participate in this panel, and like the other panelists, i'd like to congratulate congress than brady for starting what is an important discussion about the status of the fed and the monetary policy that will extend far beyond today's discussion. i didn't come in preparing my remorse, come up with a star rating but i think my overall assessment of the bill is probably more in line with nations and with trend once. i'm probably more in the three-star range in things that i think are definitely ones that should receive serious consideration, and there's some that give me pause. so i will try as the others have to go through the various titles in an expeditious way, but to hit the high points on each. so on the single mandate, i actually think the more

important thing is whether there's an explicit inflation target, and then with the specific mandate is. and the fed now has an explicit inflation target. and even before that was an explicit inflation target, the fed was implicitly an inflation target or. so the behavior of the fed has really not been i think seriously constrained in terms of establishing low and stable inflation by the dual mandate. and so i don't think changing the dual mandate will actually have a material effect on the inflation performance of this economy. nathan made the point that the actual behavior of central banks is a lot more similar around the world. inflation targeting central banks than their mandates are. and that is certainly true. i would just like to mention that there is recent research that has compared the behavior of the fed and ecb, and the

behavior of the edge of the bank of england. those other two banks have hierarchical mandates in the sense that their first goal is price stability, and then subject to meeting that goal they are instructed to pay attention to other economic conditions. the research that i've seen really suggest the actual responsiveness of the fed and those other banks through fluctuations in output and inflation is very similar. suggesting that it's not really the mandate language or say that's driving behavior. it's the notion that stable, low inflation for the long run is an important goal, but there are other goals in the short run that needs to be pursued as well. so i would say it is really a desire to change the dual mandate, i wouldn't change it to single mandates that's in the bill now, veteran makes no mention of what the fed's short run object it is supposed to be.

i think something more like the hierarchical mandates, a number of other central banks have, would be a more informative mandate for the fed. on the second title about the length of last resort policy, i actually found this section to be very confusing. and it's very confusing because it's written as if the dodd-frank act didn't exist. it wasn't at all clear to me what this part of the act is trying to achieve, in light of the restrictions imposed by dodd-frank on fed's emergency lending programs that are authorized under section 13-3 of the federal reserve act. specifically, the dodd-frank act in section 1101 already requires that any 13-3 lending program be for the specific purpose of providing liquidity in a broad-based program and not to aid a specific and single company. so a bail out of aig, for example, it would already be prevented by this provision of dodd-frank. second, dodd-frank requires the clatter for any such loans to

provide taxpayers, i'm sure, to protect taxpayers from losses. it explicitly prohibits the fed's from borrowing. it requires the fed to terminate any such lending programs anytime an orderly fashion. and, finally, it requires the fed to established policies and procedures in consultation with the treasury department that would conform with these requirements. so the fed has been working on these policies and procedures. they are not finished. i spoke to a few people at the fed over the past couple days. there in the works. there in the drafting stage. they're well a long but they are not finished it so the only uncertainty really is whether the fed intends to release these new lending regulations to the public. the dodd-frank regulation is not completely clear on this point, and i suspect they would be made public but i don't know that for sure. so to me the first step would be for the congress to make sure

that these policies and procedures that are going to be governing in the programs going forward are going to be made public. that's the most important thing. and then the question is that they're going to be made public, what more is necessary and what more is envisioned by this legislation that would be needed to provide a full lender of last resort statement? i really just could not tell from the act the way it is currently worded. the next title about giving reserve bank presidents a permanent vote on the fomc, i think this sounds reasonable but i really do agree with al and with don that it would make the fomc less accountable and subject to concerns about decisions being made by a majority. i would really suggest not going in this direction. now, if the desire is to shift

the balance of power away from washington to new york, towards the other representatives on the fomc, one way this could be done, i'm not throwing this out as something other than just speaking through an issue, would be to change the voting rotation rules for the fomc. so currently, five reserve bank presidents get to vote at every fomc, under voting rotation rules that were devised in 1942. these rules are anomalous. they allow the new york fed to vote every meeting. chicago and cleveland to vote every other year, and all the other banks to vote every three years. it's not at all clear why those rules are still relevant rules in the modern economy as we have today. and in particular, if one wants to make sure that there's broad representation of the american electorate in the fomc, it's not clear why the district like san

francisco that has 20% of u.s. population votes as often as the president of minneapolis fed which has six times less u.s. population. so there's definitely anomalies that could be dealt with, and so one possibility would be to include new york as part of a voting rotation group so it does not vote every meeting. and to try to rationalize the whole voting rotation scheme, which i think is due for another look. on the release of the transcripts, i would not move this to every three years. i think the basic premise behind the change is actually just wrong. and that is that the early release would enhance decisions and fomc's outlook for the economy. i just think that's not true. the fomc article finds a great deal of time information about monetary policy come and let's just go to these quickly. there's an statement after each meeting.

there are detailed minutes of each meeting that are released only three weeks after the meeting. there are quarterly fomc forecast of gdp growth, unemployment, inflation, and that fomc's outlook for the target federal funds rate. the chairman gives no quarterly press conference at which he takes close to an hours worth of questions. the chairman give semiannual congressional testimonies and there's an accompany monetary policy report, and there are very frequent speeches by fomc members that give their views on the economic outlook. participants already understand very well the fomc's rationale for decisions long before the transcript were released, and removing that release date from five years to three assist not going to change the fact that almost everything that was really new to be known about what mode -- motivate fomc decisions were already known. on the exchange rate issues, this is not really an area in which i am an expert on going to defer to the others who have offered views on this.

on the credit allocation, i really am somewhat uncomfortable with the specific constraints that would be place on the fed asset purchases under this part of the act. i would agree with don that the fomc certainly is uncomfortable holding significant non-treasury assets on its balance sheet and would like to go back to it all treasury portfolio as soon as possible. but i wouldn't write that into law in the way that it is here, and especially not with the unusual and exigent bar for conducting these. because i think that's an extremely high bar that the fed has really used characterizes situations when markets were disrupted and they were not working properly. but there could be significant circumstances in which asset purchases could be appropriate, and they would not necessarily

be ones just when markets are disrupted but rather when there's chronic weakness in the economy, which is what we have now. but i'm not at all sure that the fomc would feel comfortable declaring that circumstances are exigent and unusual on the basis of chronic weakness compete in the an asset purchase program could be the right thing in that sort of you. and, finally, on the consumer financial protection funding act, i fully agree with what is in this bill. the protection bureau should be funded through explicit congressional appropriations. it was each region is that it was ever funded out of the federal budget, and that should be changed. thanks. >> thanks very much. before you open up for questions to the floor and see if anyone in the front might want to respond, if they don't want to do it afterwards, that's fine, too. i kind of don't buy the argument

that oh, well, if congress passes this law that lets the regional fed's presidents vote, then that would undermine congress' support for the better. and, or that it could. and i just wonder, there's lots of ways to pursue that thought, but let me just try this one. suppose that in addition some other, i guess not in the duration of congressional approval for fed presidents accompany this so that there may be, maybe fed presidents have to be confirmed, and suppose also, just because i want to explore the value of diversity, that we were comfortable the confirmation would happen expeditiously. but it seems to me that in that case there's not really an argument against having a regional presidents vote. and i wonder if you agree with that, that assertion. if anyone wants to speak up. >> i guess my answer would be yes. but the problem is the counterfactual that you alluded

as a practical matter, it would be typical for me to see how this couldn't, this wouldn't involve, you know, and intrusion of political considerations into this process. it would be problematic. but in theory, sure. if there were some way for congress to do this without the kind of issues, you know, that i see, then fine. my position on this mainly a practical one of how it would function, the kind of difficulties that would lead to -- >> so, i agree with al. i think if you wanted to put the presidents through appointment by the president confirmation by the senate, that would be one thing. in that case i think i would restructure the federal reserve system and go down to about five

presidents, but give them sort of like the external members of the monetary policy committee on the bank of england, but make sure they had their own regional research staffs. but boy, just appointments process is so broken, i would hesitate. >> fine, but still, so congress all of a sudden, congress can change the law, right? so the fact that congress can change the law in the future is relevant to deciding what the other law is today. irreversible loss. so congress watches and sees something bad happened and they can change the rules again. >> things are already happening. >> look, there are two vacancies on the board of governors for years. >> so that it seems like there's a hypothesis that the fed has all the congressional support right now we better not mess with it. what i think is i don't do that we. i think that so if congress decides, if this is an act that restores its confidence in the fed, then arguing against it

because congress is going to undermine congress is -- that seems odd to me. that's what i'm saying. >> i think i'm worried about the longer-term. this congress can make a decision, but we need people to be supportive of the federal reserve over decades, and to the extent that the people see the private interests represented on the boards of directors of the federal reserve, of reserve board, having more influence and the people they vote for, the congress and the president having less influence, it strikes me as not a good idea. >> kevin, let me make, when you've been out of the fed for eight years, you have -- might have caused trouble earlier. one thought that occurs to me, one of the byproducts of the greater transparency has been increased media attention, partly the result of all of the traditional news outlets pick so the reserve bank presidents i think it's fair to say are much more visible now, not only in their own districts, we've

always made speeches and reached out to various groups, lots of different kinds of groups, but to a national audience, these guys are being interviewed on bloomberg and cnbc. so one thing that could be done is for congressional committees in one way or another to bring these people before a committee, if you've got something want to ask a group of reserve bank presidents, i think that happen only once in all the years i was on -- good luck to you, sir. [inaudible] >> i wish you heard -- i think that might be a sort of halfway measure at least that could help, if congress is concerned about not being able to be comfortable with it reserve bank presidents. >> and the other thing was it seem like the argument, the longer argument you guys are kind of as a group using it both ways, and a way that is inconsistent, and the privilege

everybody said oh, well, the singer mandy, we really don't need to do that because we're doing it already. but that's not been universally true in the history of the fed. and so i think that, you know, i guess i agree with al that mandate in that direction is probably a solid idea because it will make policy more predictable in the long run. .. >> and so i would focus more on

the accountability than i would on the mandate. >> if i could just make one comment here, you know, often i think it sends a little flavor of this here today. one one talks about a single price stability mandate, what's on many people's minds even today, even afterral we've gone -- after all we've gone through in recent years is the risk of inflation. there's maybe not be as much focus on deflation. one of the things that's bothered me the most from the standpoint of watching monetary policy in recent years has been, you know, there's been so much criticism of what are sometimes called the fed's unusual, and i think the congressman might have used a term like this, actions that people immediately think are aimed at job promotion and shoring up growth. to me, i support most of these actions, maybe not all of them, because i believe there was a deflation risk in the early

2000s, and i think there was another one later. and i think my sense is that the chairman, in his mind, has been motivated in taking many of these actions by an effort to do that. in some sense it seems to me that a price stability hand kate that's single -- mandate that's single and focused helps get rid of that problem to some degree, so that underlies my thinking a little bit heemplet. >> yeah. and i very much concur with the point that steve's making, that the science of central banking so to speak, the emphasis on accountability, the underlying analytics that drive monetary policy and so on and so forth, i really see there being broad convergence as to the way the various central banks reacting to various kinds of shocks across the world. and i guess my, my deepest concern about this proposal particularly with respect to the price stability mandate is we are in a place right now where

the economy is far from equilibrium, and i'm really worried that it could be a while until we get back to anything approximating full employment. and i think in this environment tinkering with the fed's mandate just will increase the level of uncertainty about what policy is and where it's going. i see the fed very much on a trajectory already toward greater transparency, greater clarity, the establishment of an inflation target, forecasts, so on and so forth. and i just don't see what's to be gained at this juncture in opening the federal reserve act and trying to reengineer what the federal reserve is trying to do. now, maybe at some point in the distant future when this crisis is behind us, maybe such a discussion would be, would be constructive. but in this, in this environment

i think it would be very risky. >> i think there's considerable evidence that monetary policy does effect output and employment in the short run even if it can't effect the long run equilibrium values of this. and there's nothing wrong with seeking putting people back to work as quickly as possible consistent with maintaining price stability over the long run. and i would hate, like nathan, to take the view away from that. it's not clear what's broken in this system right now, right? the u.s. inflation's been broadly somewhat or other to inflation-targeting countries. i know there's worry about the future, but this is, um, the fact that we've had this thing since really about three years after the dual mandate's been in, the fed has been an implicit inflation targetter since 1979, um, and has kept with it successfully suggests that the

cost benefit analysis nathan was giving is at least -- >> so are you suggesting then that the fed is ignoring the second part of the mandate? >> no, not at all. nor are others -- no, nor are other inflation-targeting countries. i think the fed is trying to minimize the deviations of employment and output from estimates of potential while keeping inflation close to 2%. so i don't think it's ignoring the second part at all, but the two aren't in conflict most of the time. >> we now open up, we'll start with over here and former fed economist roe. [laughter] >> i will make two short observations that i hope you might respond to. one is this notion of evaluating performance based on results. i think that's a dubious

approach. monetary policy is made in a very uncertain environment. things happen that one couldn't have expected, and so the logic upon which a decision was made at the time would seem to me to be a very important consideration in evaluating how a central bank is functioning. second observation, perhaps this is because it doesn't show up clearly in the bill, but i heard representative brady talk a great deal about rules-based policy, and he implied that somehow this system that he would legislate would move the fed in that direction. what i heard him describe in the history sounded very much like john taye hour's create -- taylor's critique of fed behavior over the past few decades, departure from his particular rule at one point.

i'm wondering whether anyone has anything they would like to say about how this bill might relate to the question of -- [inaudible] versus discretionary. >> um, just one thought on the rules-based. i don't think, actually, that the language of the bill as it currently stands really specifies the fed has to take a rules-based approach. i think the congressman's remarks were really more that there should be an inflation goal that really is the rule that's driving the fed's behavior. but i don't think there's actually anything in the bill that would specify that there should be some specific rule that the fed is using. i think it gives the fed still considerable discretion about how to achieve the objective. >> so i agree with steve. i agree with mike's first point actually. i think you have to be judged on

results to some extent. but if results aren't what you expected, you ought to be able to explain why it came out and whether your policies and how your policies were moving things back towards, back towards your objective. so i agree, the logic and the explaining the results are very important. we can't expect inflation to be at 2% or employment to be at full employment all the time. it's not going to be that way because of all these shocks hitting the economy. and i think the shocks hitting the economy, the unexpected stuff makes the rules-based policy difficult. it's hard to specify the rule. there are many rules. john taylor's rule is not the only rule. i think the central bank should and it did -- does or it did while i was there look at how its policy lines up with a whole variety of different rules. and as a policymaker looking at what rules-based policy would be

and thinking about where we were and why we might be deviating, i found, to be a valuable exercise in helping me justify and think about my decisions. but i wouldn't be driven by a particular rule. i don't think you can be. >> on the outcomes versus logical decisions, i also very much agree with mike's point, and i think that is why transparency in monetary policy making is so very important. and, you know, i think the fed over the last five to ten years has come a long way in that direction. and i think the federal reserve should continue to think about ways to increase the transparency of its decision making process and its capacity to be able to explain the logic behind these decisions. on the rules versus discretion point, the one place where i saw rules being quite prominent in

the discussion was the establishment of some sort of a lender of last resort policy. and it wasn't quite clear to me based on the remarks and also on the, on the proposed legislation exactly how biting or how constraining that that would be. but i think that is one place where there is quite an emphasis and potentially quite an emphasis on rules versus discretion. >> mike, i don't have anything to add on the rules versus discretion. we've been around on that many, many times. but i agree with you very strongly on your idea that we need to, the public and the fed itself needs to understand how decisions were made and how those processes can be improved. and for me that's the reason for having release of transcripts whether it's three years or five years, and in some sense maybe getting a little more distance, that's kind of the part of thinking that makes me think five years might be better than something shorter than that. let me just, if i could, give a

good example of this. some of you may have seen there's an article in the current journal of the national association of business economists, it's called business economics. but there's an article about two st. louis fed economists. it's very long, but it's very good, and it uses extensive quotes from the transcripts in the period between, i guess, like '92 through the early 2000s, and it's all about the, what the increase in the trend rate of productivity growth, how that was dealt with in the fed and how decisions were reached. and, you know, it's really worthwhile, and to me, that's exhibit a in understanding how these, you know, transcripts can really be used productively to understand and improve monetary policy function. >> the transcript question, though, does kind of raise -- like, i sensed from all the fed guys up here this kind of bureaucratic intransigence a little bit. on the one hand we're saying, okay, we already know everything. like, steve listed automatic things they do to be -- listed

all the things they do to be transparent. but if they really do, they should be discussing their genuine views, so it should be uninformative. in the state of the world or where it is informative, then i want to be informed, right? so if guys are out there saying one thing in the public sufficient but then in the meetings they're saying something different, then that's something that i think congress should recognize -- you know, be informed about when they're voting, say, on the reconfirmation of the federal reserve chairman. so i think it's true that, absolutely, the fed should be commended for all the improved transparency, but i like the three years. and i think the arguments against it -- >> three okay, or do you want two? >> yeah, i could do really fast. >> okay. [laughter] >> just invite the tvs into the meeting, then we'll see how exciting -- >> i don't want them to have to put makeup on. [laughter] >> supreme court deliberations when the justices get together and decide how they're going to

vote and have arguments back and forth, would you have transcripts on that too? >> no. >> why not? >> because i don't know their views. this is a different thing. this is completely different. joe? >> [inaudible] >> no, no. >> a comment and a question. the comment is you all mentioned how modern, um, inflation targeting central banks have some flexibility, but historical development in new zealand was first this in a bout of reforming that was pro-market-oriented reforms included a central bank that was given inflation, a single inflation mandate and a target of around 1% inflation. rightly or wrongly, over the next ten years it was viewed that this was way too restrictive, and it actually gave rise to a political backlash against the original reformers. and the mandate got changed to explicitly allow more flexibility and a rise in the inflation target to two, and that's a lesson i think we

should keep in mind. but my question is, sorry, now i just forgot what my question was, just went out of my head. it's about it seems to me that this is driven, this bill is driven at least to a large extent by the idea of we have one policy, we should have one target. there are and that is -- and that is understandable. what do you think about making that target nominal gdp? i mean, it seems to me there's economic arguments for that and what monetary policy does, ultimately, it effects prices through spending. normal gdp is spending. it is one thing you could look at. it is one thing you could stabilize. it's one thing that you can effect in the long run. there's a growing band -- small, but growing band of conservative economists who are pushing or for this. seems to me if you really want a

single target and a single monetary policy, that would be something. i think the only drawback would be how do you explain nominal gdp to the public, but if you say it's the size of the economy, it might be understandable. >> a lot of time on that one just because it's far away from the content of the bill, but does anyone want to talk about nominal gdp targeting? >> well, it is complicated, and i think it's hard to explain, and it would result in potentially variable inflation rates and be difficult for people to form inflation expectations. but, you know, i think doing more work on whether this would be a good idea and how it would go over is something, there's nothing wrong with that. right now i think it's, it'd be difficult to implement. >> and one wise thing about inflation is we think that at 2% inflation target is likely to be fairly stable over time. whereas when you get into the

business of defining trends and trying to determine a level of nominal consumption or nominal gdp that you're trying to hit, it's or very hard. and you have to take a pretty strong view on what you think the level potential is in the economy. so i think it's a more complicated beast to try to define that kind of a target than it is an inflation target. >> i would just say this and i guess, kevin, i don't think this is unremitted to this bill -- unrelated to this bill. once this thing gets in the legislative process, there are a lot of people out there pushing for a nominal gdp product, and it's conceivable this could be seen as a substitute. but, you know, i understand and agree with a lot of the positions on whether you want to have a single mandate or not. this is not an easy question in a lot of ways. but the reason that i favor the mandate is credibility. it gives the fed credibility and all of the expectation august

minuting, formation-augmenting power of that. and that's what, you know, is nice about it. nominal gdp's a whole different kind of variable, you know, for the public to grasp. it doesn't have that kind of relevance. so that would be one problem. the other thing i guess aye always thought of nominal gdp if you're concerned about and really want to put the focus on price levels -- price stability, you can view nominal gdp as a cover for allowing inflation to be over target. so that's an operational issue i've always been concerned about. >> with well, we have one last question in the far back corner. and could you possibly walk forward so that you can be on camera? [laughter] the camera's right here. [laughter] >> hi. um, i'm joe mcclintock, i'm an intern here at aei, also,

hopefully, a future fed economist. [laughter] i think a lot of you talked about, and i think the general consensus is the fact that, um, monetary policy in the long term is best to have, um, steady inflation or steady prices, um, to insure good output. but the question is, um, in the short term if not monetary policy, um, who or what would be the best, um, action to deal with short-term low unemployment or or high unemployment? >> yeah. i mean, that's -- yeah, congressman brady's not here to answer the question, and, you know, i would's guess that they would say that's congress' job. and, you know, i'd like to say that just to conclude this session that when congressman brady and his staff began discussions with steven and me to set this session up, that they asked us to assemble people

who we really thought would be, you know, harsh critics that would give us food for thought. and i want to say that. that's why i think the joint economic committee and congressman brady and his leadership of that committee are so special. there are very few politicians in town that would ask us to do that, and i'd like to thank the joint economic committee for helping us stage this event, for getting congressman brady to come, and i know that we've provided you with hot of food for -- lots of food for thought as the legislative process begins, and i look forward to seeing what happens to the bill next, but i think it's probably going to be something we talk about a lot for the next couple of years. so thank you very much for coming and hope to see you again soon. [applause] knox. [inaudible conversations]

>> later today you can see a forum with two of the republican presidential candidates, former house speaker newt gingrich and former senator rick san tore lumbar. they'll be speaking at the historic alabama theater in downtown birmingham. alabama and mississippi hold primaries tomorrow. the live forum begins at 6:30 p.m. eastern, and it's going to be on our companion network, c-span. c-span's 2012 local content vehicle cities tour takes our booktv and american history tv programming on the road the first weekend of each month. march featured shreveport, louisiana. >> mr. noel was a local man who was born here, lived here most of his life, and he started accumulating books when he was a teenager and continued until he was in his 80s. over his lifetime he accumulated over 200,000 volumes.

if we have a gem in the collection, it is probably going to be this one. it's one of the books we're most proud of. it's in the original binding from 1699, and it was once owned by a very famous scientist. you can see he's written his name, i. newton. and we're not pulling it out so much anymore because it is starting to flake away on the title page. >> and american history tv looked at civil war era medical practices at the pioneer medical museum. >> pioneer medicine is a long stretch from what it is today. you consider that the things we take for granted today when we go to the doctor, things like the instruments being as germ-free as possible or, um, the doctor has washed his hands before he decides to work on us. and we use the term loosely for doctors when we're talking early medicine. a lot of these doctors in our region were self-taught, or they had worked under somebody else

who had been self-taught, and they were getting ready to retire. so, um, they would just learn as they went. >> our lcv cities tour continues the weekend of march 31st and april 1st from little rock, arkansas, on c-span2 and 3. now, virgin group chairman richard branson and a former swiss president testify before the british home affairs committee on changes to international drug policy. they're recommending that drug abuse be treated as a health issue and not as a crime which they say would reduce drug addiction levels. their comments run about 50 minutes. >> could i call the committee to order and invite our two witnesses to come to the dais? could i ask members of the committee to declare any additional interests which are over and above what is in the register of members' interests.

>> i'm vice chair of the parliamentary group, policy report. thank you. >> nicole blackwood? >> [inaudible] >> thank you. sir richard, federal counselor dreyfuss, thank you for coming today. this is the committee's first evidence session in our major inquiry into drugs. the last time the committee considered this question was ten years ago. in fact, i think only mr. winnic is a survivor of the last report, and we made a number of recommendations, not all of which were accepted by the government then or, indeed, have been accepted now. but we will be looking again at those recommendations, but also looking at the development of drug policy over the last ten years. as we all know, the number of people who use drugs has increased enormously, therefore,

the work of the commission is of great interest to us. could i start with this question? sir richard, in your article in the daily telegraph yesterday, you said that the war on drugs had been lost and, basically, that policymakers all over the world have spent a trillion dollars on fighting this war to no effect. why did you say that? >> we wondered whether we'd just have 30 seconds, literally a 30-second statement to open up if that's possible. >> yes. >> first, we'd like to thank you and members of the select committee for inviting myself to give evidence on the findings of the global commission on drug policy. we understand this is the first hearing for ten years, we welcome the opportunity to give evidence and to answer questions. the global commission investigated in depth working over 50 years the existing drug control system, and we found that it has totally failed to

stop the growth of the drug trade. the commission proposed a few simple principles to change how governments deal with drugs. first, drug policy should be based on evidence and empirical data. drug policy should focus on the rights of citizens and on protecting public health to stop unnecessary suffering. third, government should take a flexible approach to drug policy coordination, and governments around the world have started to recognize the waste of the human toll of our existing approach. there are models to look at such as switzerland, germany, the netherlands and portugal where decriminalization ten years ago has led to a large reduction in karen -- heroin use. and i hope this hearing can start a new debate around drugs policy, and we look forward to discussing this with you today. we need, obviously, to reduce the crime, health and social problems associated with drug markets in whatever way is most

effective. and, also, if i may, just ask -- [inaudible] to say a few -- >> federal counselor, if you could be very brief because we have a lot of questions. >> sure. >> you were for ten years the head of your own committee in switzerland, so you know that members are keen to ask questions. >> exactly. so i just want to say on which point i can give some evidence, and from my experience and as a member of the global commission as you say, mr. president, i was for ten years minister of health and in as such responsible for the drug policy in switzerland. and during the time of my responsibility we introduced change in the law and introduced new kind of harm reduction measures and treatments. >> indeed. >> so on this field i think i can give you some evidence you want to hear. >> that's why you're here, both you and sir richard, to answer questions on the commission, and members will have questions to put to you.

going back to my initial question, um, why was it lost? um, bearing in mind the commission consists of five ex-presidents, former secretary general of the united nations, a former u.s. treasury secretary. all these people, your fellow commissioners, including federal counselor dreyfuss were in charge of this policy. you're saying it failed. why did it fail? >> i think that most of these presidents who are now on the commission feel that they made the wrong decisions when they were actually in power and in a position to do something about it. and that's why they decided to become members of the commission. i think ruth, actually, is one of the few exceptions to that because she actually did do a lot in switzerland which made a big difference in switzerland. but most of the commissioners feel they made the wrong choices in trying to effectively do to

drugs what was done to alcohol for 20 years in the america, try to deal with it as a criminal problem rather than a health problem. and, you know, what the commission did was it looked at countries like portugal, switzerland and other countries and realized that there were better ways. i mean, portugal -- >> on to portugal -- >> sorry. >> and thank you for raising portugal. it's different from the united kingdom though. consumption of drugs in europe, the three biggest countries -- the united kingdom, france and italy -- portugal and switzerland are very small countries. when you congratulated the portuguese for decriminalization, didn't you see an increase in drug use? you saw an increase or decrease in drug use? >> a decrease. you know, first of all, yes, portugal is a smaller country than britain, um, but if you break britain up into smaller units and tackle it, you know, city by city, i think there's no

reason why you shouldn't get the same results as in portugal. what portugal did was ten years ago they had a massive drug problem. heroin was rampant. and they decided to move drugs from the department of -- from the home office to the health department. and they said to the health department it is, you are now in charge. nobody will be sent to prison in portugal, and not one person has been sent to prison for taking drugs in the last ten years. and they then, you know, have taken heroin, they've set up places where people can go to get clean needles throughout portugal, and they have helped people who have heroin problems get off, you know, get off heroin, and the amount of people taking heroin has dropped by 50%. >> counselor, you're a politician. the message that goes out if you decriminalize even to a country like switzerland is pretty stark. um, doesn't it send the wrong

message to the public, that if you decriminalize, it actually says you can use these drugs? >> no. if country, if you say it is a public health problem, you have to cure people who are ill, who are dependent on the drug, and i think it's a stronger message than if you criminalize them. and i am sure, also, that young people -- and they are those we want, we need to avoid them entering in a drug consumption -- they don't want to be considered as ill people. they want to have a kick, they want to experiment something perhaps at the margin of what is allowed. when you medicalize it, it is exactly the thing that can avoid them to enter in that. so we had no, no increase in the consumption in switzerland during the 15 years of

experimenting and introducing the new policy, and i think our, the main problem is that we are confronted with criminal organization changing the substance, bringing new things, new kicks, if i may use that word -- >> which we will -- >> -- and this is the problem. >> -- come up to. and finally from me, i don't know whether you've seen the papers this morning. new sentencing guidelines have been proposed where there is going to be more leniency to those who are regarded as mules who carry drugs even unwittingly. and, in effect, tougher sentences on those who deal in drugs. is that something that you would support, that those who are caught in the middle of this whole issue, um, trade, retail trade which is worth 332 billion pounds in the united states, that they should be treated more leniently than those who are organized criminals involved in this? sir richard?

>> yeah. i mean, the commission has asked countries to experiment with different, you know, different scenarios than what they've done in the past, and they have -- the commission has said that they feel that mules should be treated more lean gently -- leniently than the people behind, you know, behind the mules who often, you know, resort to violence and major criminal activities. and they should be, and people -- they should be, they should come down hard on those people. so, you know, i think for the courts to decide that fines are more appropriate than prison sentences, i suspect other members of the commission would -- [inaudible] >> federal counselor? >> yes. i think you have to have punishment being proportional and being efficient, and i think you have to have different kind of different relief, i would say, for different type of crime. >> thank you. >> and mules and street deals

are not the aim we have really to put all our means on, but to criminalize the organization the aim we have to pursue. >> thank you. alun michael has something. >> you refer today that aspect of policy as did the sentencing council. sentencing council seems to have said nothing about what works in terms of reducing supply. do you have any comments on that? >> i didn't exactly catch your question. >> the question that i believe is very important in dealing with what level of sentence should be is what works. >> yes. >> in terms of releasing whatever the nuisance is that you're seeking to address. >> yes. >> do you have anything to say on the effectiveness of sentencing? >> yes. i think we have really to look which kind of sentence, what are the harms of such sentences. for instance -- >> that's a different issue, with respect.

>> uh-huh. >> i was just asking specifically about what works in terms of reducing supply. be you don't have any -- [inaudible conversations] >> i would say, i mean, the question of the supply is from our experience a terrible thing. you take somebody from the street, a street dealer x the day after you have another man standing at the same place. >> okay. um, the other thing is that, um, sir richard, in what was a very succinct summary of position at the beginning -- and i congratulate you on that, they're usually much longer -- you ran over a number of countries where you said decriminalization has been tried and, you said, been effective. within those you referred to holland which is very often cited as an example. i looked at the situation of holland some years ago and, in fact, they didn't decriminalize drug use. what they did was introduce a policy on policing and enforcement which was a policy of tolerance as long as things

weren't getting out of hand. and they moved away from that approach as the result of the impact of drug tourism on their cities. so why do you cite that as an example of success? >> yeah. the decriminalization was referring to portugal which is -- and portugal is the one country that's decriminalized all drugs and not one person has gone to prison in the last ten years. and that has saved the country a lot of money in prison costs -- >> so you weren't drawing a similar parallel in relation to holland. >> no. that was simply portugal. >> may i add something? >> [inaudible] >> just, i mean, holland was just reduced in order not to have a conflict with neighbor countries, but for their own population netherland continues to have the same policy because they think that this policy is

really using the deal and the harm of having open deal industry. so, i mean, i know from switzerland we had really to look with our neighbor countries how to have a known policy without jeopardizing their rules. and this is very important, i think. >> thank you. lorraine fullbrook. >> some of the comments you made about portugal. you said that heroin use had reduced by 50%. so, therefore, there are still 50% of people who were previously using heroin still using heroin. and they're given clean needles which presumably are supplied by the health department in portugal. who supplies the heroin to those 50% of users? >> um, presumably -- [inaudible] >> yeah. so that really doesn't take out -- >> but, i think, a 50% reduction

is a great step in the right direction. and, um, and it's not just a reduction in heroin. it's actually also been a reduction in other drugs as well. you haven't, you also haven't had the situation that, of, you know, i mean, the amount of death related to heroin has dropped by 50% as well. so the amount of hiv infections has dropped by over 50% -- >> but that's presumably because clean needles have been -- >> exactly. i mean, it's a combination. i mean, in england, you know, i mean, you know, by not regulating drugs at all and checking on drugs, um, i mean, you know, three people died in a hospital recently from taking ecstasy tablets, but they weren't actually ecstasy tablets, they were laced with pmma, so the kids didn't know what they were taking. and, you know, so at the moment it's a completely unregulated market with nobody the checking

up on what our kids are taking. >> but there is still, surely, a criminal element within portugal where people are buying heroin. >> yeah. i mean, you know, portugal -- i mean, what the commission has said is they would love, they want countries to experiment with new systems. portugal's particular system is to say nobody who takes drugs will be put in prison, but we are not regulating and taxing drugs because they haven't gone that far and, therefore, you still do have an underground world selling drugs. but much less so because if they can get methadone treatment from clinics set up by the government, they don't have the need to go into the underworld to get heroin, to get drugs. and most people now go to the clinics, and then when they're ready to wean themselves off drugs, you know, instead of them being frightened about being, you know, put in prison there is

somebody there to advise them on, you know, how to get help and -- [inaudible conversations] >> may i just add that switzerland -- >> we'll come on to switzerland a little bit later. >> it is legal, haven, -- heroi, also. >> nicola blackwood. >> drugs ruin lives, they need to be regulated. we have full criminalization, but we still allow the police full discretion as to whether they charge or refer diversion programs into treatment. can i ask what specific improvements of the u.k. regulation you would recommend? >> well, at the moment in the u.k. 100,000 young people are arrested every years, and figures are growing for taking drugs. 75,000 of those young are given criminal records which will mean, you know, it might be difficult for them to, you know,

travel or get passports to certain countries. and, um, and, you know, what i would, what the commission, i think, would urge is that by, by actually, you know, moving drugs into the health department and not into the home office that, you know, if people have problems just like with portugal, that they should go in front of the panel of health experts to try to help them. i mean, if my brother or sister had a drug problem or my children have a drug problem, i do not want the law to get involved, and i don't think most people i know would want the law to get involved. we want them to get help -- >> how do you, um, have you studied the drug strategy? >> i haven't myself personally. i'm sure the commission, you know, as a whole -- >> [inaudible] does include early intervention for young people, a number of policies which do include the department of education, the

department of health and all of the different d.s which are intended to provide diversion programs and avoid exactly, um, the criminal route which you're proposing. but i'm asking you are there specific regulatory policy changes, um, which would, um, you think change the processes which you are criticizing? >> you know, that may be the case in the writing, um, but there are still 100,000 -- >> well, it is a new strategy. it's just been published. >> okay. well, then if next year those 100,000 people are not prosecuted for taking drugs, um, but they are helped and particularly those people who have got serious drug problems, they're helped, i think the commission would welcome britain doing that. but, i mean, what the commission is doing is we're not saying, you know, this is how each individual country should behave, we're just suggesting that the current way does not work, let's come up with new ways. >> thank you. >> thanks very much, both of you, for coming to speak.

um, following on from lorraine full brook's question, i think we clearly haven't achieved that. a 50% reduction would actually be quite a good step. are you familiar with the recent report on drugs and drug addiction that came out earlier which says that the u.k. spends more of its gdp on drug strategy -- i think .48% dub and yet is in the top few for use of -- [inaudible] top for ecstasy but highest by use for young people in the last year? begin that we're spending more than any other country and having the worst outcomes, does that suggest we ought to have a different strategy? >> yes. [laughter] my brief answer. >> and if i could also just follow up on that, as i understand it, you may know more than i do, um, the u.k. and

ireland are, i think, the only two countries in europe where the lead agency to deal with drugs, actually, is the home office or equivalent. everywhere else it's a health lead. how important do you think it is what the lead agency is, whether we start to think of this as a public health problem or a criminal justice problem? >> extremely important. i think if it comes under health, then it will be treated as a health issue, and everything will be, every single bit of concern will be about the individual and making sure that they, you know, they get better. and, you know, especially those people who have, you know, had too much alcohol or too much drugs. and they should be helped. and, um, you know, the commission urges governments to treat, treat drugs as a health issue, not a criminal issue. >> yes. i think in switzerland my experience is really that we begin to change our policy

because it was a urgency with the combination of aids, but also because the police force were despaired about their job that was an endless job. beginning always with the same people, the same uneffective activity. so, i mean, i think they were very happy to have the leadership of the health ministry, but it was also our duty to have a good collaboration between all people working at the front with drug problems. and this is, i think, the most important thing that they learned to cooperate. they learned to understand also the different practice and to help each other because just to take one example, at the beginning the police took syringes as evidence for the crime, and you could have place where you received clean

syringes, and policemen taking them just after the distribution. so we have to learn to work together, and i think this was a important process in switzerland. but under the lead of the health authority. >> won't that build a relationship with the involvement of the police agencies for dealing with organized crime and the groups that actually fight over huge amounts of the money? >> well, i think the police had to consider rate of the organized crime. they have to consider also on money laundry, on the global issue of drug, of drug trafficking. the fight in the streets, i mean, with the street deal and with the people is just a hopeless fight. >> yes, we will focus on criminality. >> okay. >> sir richard, you did mention the fact that it was a health issue, but you were on record that you have, yourself, smoked cannabis? is that right? >> i would say 50% of my

generation has smoked cannabis, i would say 75% of my children's generation smoked cannabis. there's between three and five million cannabis smokers in the u.k -- >> and that's not, it has not been detrimental to your health or the health of -- [laughter] >> i mean, if i was smoking cigarettes, i'd be extremely worried. >> david winnick. >> sir richard, i must confess, i've never taken a drug in my life apart from prescriptions. >> i think that's generally wise. [laughter] no need to further confession. [laughter] >> sir richard, when you advocate decriminalization or the other questions on that, can we get it absolutely clear what you're, in fact, recommending is the sort of policy practice in switzer and other countries --

switzerland and other countries, portugal and holland? am i right? >> what we're, what the commission is suggesting is that policies like portugal or switzerland are ones the government should consider experimenting with. if governments wish to go further with, say, cannabis and deregulate and tax cannabis, you know, that's something which we think government should, you know, in some countries they should experiment with that as well because, you know, at least you can then make sure that the policy of the cannabis is good quality and not, i mean, skunk is something which is too strong, and it's -- where it's almost normal marijuana. it's, you know, it's found by lance et and other magazines, other studies to be less harmful

than alcohol. all the commission is saying is, you know, let's experiment with different approaches than have happened up until now. >> sir richard, there's no question, therefore, of advocating that it should, that drugs -- the sorts we're talking about -- should be sold at, say, supermarkets like cigarettes and alcohol, buy some heroin and you'll go cannabis-free, no question of that being your policy? >> the drug commission has not advocated policies as such. it's asking governments to and organizations like your own to look at what is right for particular countries. and, obviously, you know, we would not advocate heroin or cocaine to be sold in supermarkets. >> would i be right to take the view that amongst the strongest upholders of the status quo in britain would be the drug criminals, the drug barons, sometimes as we know such criminals acting on the international scene, wouldn't

they have a very, very strong interest that the status quo, um, success accessive governments should be maintained? >> yes. >> absolutely. >> federal counselor? >> it's clear. i mean, there is now the possibility to make a big money with the traffic on drugs, and regulating this market by the state would just take away this possibility for making the big, the big money. we have figures how a gram of cocaine is gaining value between the producer and the end consumer and the state. so, i mean, it's clear. yes, i would say the biggest interest to maintain the status quo in the field of repression and law enforcement is the criminal organization. >> thank you. >> thank you. >> 300 billion, $300 billion a year it is estimated go into the underworld from drugs.

>> thank you. nicola blackwood. >> thank you, chair. we've had a little bit from you already, um, about the shift in switzerland from focusing drug policy from, essentially, what we would have at the home office, department of health and considering it as a disease issue, an addiction issue rather. can you tell us, first, how did you manage that pretty -- politically? in the u.k. there is a real difficulty with focusing that level of resource on drugs policy and a public health issue rather than -- [inaudible] >> well, first of all, we have still law enforcement, and it is still one of the four pillars who takes most money. >> which okay. >> more than treatment prevention and harm reduction. but how -- the process was a very interesting one. it began with, um, multiparties and research of solution, and i hope -- and i think your committee will do, also, a big

step in this direction. several parties were looking for a change in the policy in the situation of emergency. we had a large demand from cities, from neighborhoods, from families of drug addicts coming to the central government so that we had just to look how to accompany new ways to monitor them on the scientific way, to publish the scientific evidence. and we have the chance and the difficulty to vote very often on public issues in switzerland so that we have something like 15 votes on local or federal level on the drug policy. and each of these campaign, each of these votes was preceded by a political campaign and discussion, and i would say switzerland became the people

being well informed on the drug issue, and they accepted the change of our police -- [inaudible] >> thank you. >> treatment is a lot cheaper than prison. >> yes. >> and much more effective. >> yes. >> 70, between 60 and 80% of all break-ins are drug-related, so if you can treat people and get them off drugs, they won't have the need to get their pick, and they won't need to break in. so enormous benefit to individuals in society if we get, if you can treat, you know, treat people. >> yeah. um, also could you discuss, um, the specific forms of harm reduction and treatment that you've pursued in switzerland, in particular whether this was maintenance or abstinence-based? >> well, we had always abstinence-oriented treatments, and they are still at the same level, the same number of persons are entering in that. we have a huge experience in

methadone and generally substitution treatments over 30 years, and this is the largest number of treatment we offer, and we have the people ready to enter it. we have for the same number more or less than the treatment aimed to do abstinence in heroin-based treatment. these people were taken off the street. >> yes. and you did say earlier that this was provided legally. >> yes, sure. >> so the authorities provide heroin legally -- >> absolutely. >> -- to people with -- >> we have heroin as a medicine recognized by our medical authority, but i think it's the same thing in u.k. the difference between u.k. and swiss witherland is that we didn't -- switzerland is that we didn't allow general practitioner to enter in this treatment. we have specialized clinics. only in specialized clinics to

control really, to have absolute control on the stuff, on the substance in clinics linked with social programs, social integration programs. >> question, nicola blackwood? >> so, this is the treatment. now, in harm reduction i think we we were quite pioneer in not only needle exchange -- i mean, every country is now doing that -- but in consumption rooms, safe consumption rooms and legal exchange and treatment in prisons also. >> thank you. thank you very much. nicola blackwood for a final question. >> could you tell me which percentage from the abstinence programs and out into normal life and contributing back, sort of being off drug dependence? >> you mean from the -- [inaudible] >> no, how many people move back into society from going to -- >> what was the success rate of the program?

>> yeah. >> [inaudible] >> yeah. well -- >> you could write -- >> well, to give the numbers i can just give you -- [inaudible conversations] >> coming to switzerland. >> we will send you the complete -- >> thank you. thanks very much. >> mark reckless. >> sir richard, you referred to getting people off drugs, are you emphasizing abstinence-based treatment or referring to much of the treatment we have now in the way of methadone maintenance? >> whatever treatment works. again, that's -- it needs research to see what is the latest, you know, most effective treatments. so i'm not advocating any specific treatment. >> but most effective in the what sense? what are the criteria you would use -- >> i'm not an expert on treatment, but, you know, i'm sure, you know, i would end are that the commission look -- recommend that the commission looks at the various treatments

that are going on around the world and just choose, you know, recommend the absolute best treatment. >> we will be doing that. >> thank you. >> thank you. not going around the world, but looking into -- [laughter] >> lorraine fullbrook. >> two questions. one just going back to some comments you made about moving the drugs policy from the home office to the department of health. don't you think it would be best across both departments? the health department would help the individuals you're talking about, but a home office still has to be involved to catch p the criminals who are moving this stuff. and, of course, along with drug barons comes money laundering, firearms, people smuggling, people trafficking -- >> the home office can concentrate on organized crime, um, and the health department can concentrate on the individuals who have drug problems.

and the, you know, of the 100,000 people who have minor offenses and who are arrested every year for minor arrests, as i said, 70,000 given criminal sentences, the, you know, 20% of police time is spent dealing with those minor offenses, and those -- that 20% of police time can now be spent on going after the criminal gangs. and they, and they actually spend over 200 million pounds just on sort of paperwork in dealing with those minor, minor offenses. so, again, that 200 million pounds will be spent on going after the criminal gangs. so i really do think it's a win/win all around. >> across both departments. sir richard, as you heard earlier, the government's drug strategy which has just been launched is an intervention and diversion route. and, basically, to reintegrate people into society. as a major employer, what would

you think business can bring to this? what help do you think may business bring? >> sir richard. >> well, i can only use virgin as an immediate example. we are proactively trying to take people on in the virgin group who have left prison and find jobs for them because we think if people can get back on their feet again -- >> and were they specifically jailed for drug offenses? >> i'm sure there are a mixture. some people with drug problems and some people without. but i think employers generally need to try to do their best to, you know, help people get back on their feet again. >> thank you. >> [inaudible] organizations taking drugs, you would dismiss them, wouldn't you? >> not necessarily. i mean, you know, we would -- hopefully, we would try to help them if they're taking drugs and find out, you know, what the problem is. so they certainly wouldn't

automatically be dismissed. they've got a problem -- >> i would hope not. >> i would presume it would depend on what they were doing in certain instances. >> yeah, i mean, look, people in every country who have got drink problems, people who are addicted to smoking, and there are people who may be, may, you know, maybe take too much marijuana. or your even more serious drugs. and they need to be helped. and i just think that should be the approach as society as a whole. >> highly commendable. alun michael. >> the global commission report looks at west africa and suggests it's a place where a development could stifle the emergence of a new market. could you say a little bit about this? what are the practicalityies of that? >> the problem is that western africa is now new becoming hub in the international roads between latin america and

europe. >> sure. >> and being that it has also to, to see explosion in the consumption. so, i mean, what -- >> no, i understand that. but you refer specifically to aid and development and being, offering the opportunity to stifle the emergence of that market. >> yes. >> how do you see that working? >> we are now under the leadership of kofi annan looking to bring together different leaders in the region to have a better approach of this problem, mainly of the health problem linked with that and to enforce, also, the police in these countries to fight against the corruption, to have better governments, and this is, i think, what we intend in development aid. i mean, it is in the field of government's fight against corruption and health issue and police enforcement. ..

>> are you proposing to stifle their markets? >> yes. i mean, we have to see what are the needs. and i see that they need and they need cooperation in the field of public health, police forces and good government. that is the priority. to think that just having a

better economic development to avoid the people to enter into drug deals is in a certain sense and television. >> i'm sorry. let me just try once more. you refer to the governments. you referred to that policy. but in the report you make a specific suggestion that international aid can't effectively stifle the emergence of the markets and provide incentives for reducing drug supply. how do you see that working? >> we will send you a note on that. >> okay, thank you. >> the 1990s drug policy was very different from neighboring countries. what impact did that have on your relationships, how does the swiss government deal with that? >> the only problem we had is

really that any certain time that is no longer the case, switzerland -- farmers were producing,. [inaudible] this kind of production. and our neighbors were afraid that as the netherlands might be the place where the people are coming to buy. so we had to discuss with them how to have control of the border, how to avoid the activity. and we are very good discussion with our neighbor, and they did well and we found out, we found solutions. now, on the other side, our neighbors and other european countries were admitting what we're doing. and because we had an open,

policy of open books i mean about what we're doing, it wasn't just which olympic we had less serious problem, looking at our policies. i received, i don't know how many civil servants, to explain what we're doing, and they were very interested and as you know, germany, netherlands, belgium has followed what we are doing, and adapted it in their country. now, your question is also what our relationship with the international body, you embody. this was the more difficult relationship because we were obliged, very eager to present our conclusions and what we were doing. we announce where critical

remarks, to discuss about the compliance of switzerland at the convention. i think nobody could really say that switzerland was not complying and implementing within the convention, with one difference. we are sure that we are in the frame of the convention with the convention rules, and they are denying us. this is the only measure we took what we are still in discussion, how far it fits inside the frame. >> thank you. >> the operation of international criminal gangs, and from the list of people on your commission as i mentioned earlier, the former presidents have come up from mexico, brazil, and a number of other

countries that were, the place with the drugs come from. the committee will be going to visit colombia later in the year, 15% of the drugs become in our country a rich and a from colombia. what has commission propose as to what should happen at source, the former president to admit that the war has failed, presumably with the commission report. what was the recommendations to what should be done to these people? because if the drugs don't come from colombia then they don't enter the united kingdom. >> take heroin as an example. if you have clinics where people go to get their methadone our heroine fix, which is supplied by government, and let's say that that methadone is bought by governments from, i don't know, afghanistan or wherever, then you have practically pulled the rug out underneath the drug

barons who would otherwise have been supplying to the people on the streets when you of what the people on the street, breaking entering to get there, to get their money, and you know, and these people hopefully when they're ready you can send them to clinics. >> you want the illegal purchase of drugs from countries like columbia? >> we are saying, i don't know where switch and specifically got their heroin from, but in order to have a program to help wean people off drugs, initially you're going to have to supply them, going to have to give them their methadone fix or whatever, until they're ready to get off the drug. and by the state administering it, you know, that immediately pulls the rug underneath cartels. they therefore don't have the market anymore. >> it's an international approach, isn't it?

one country can't do it alone actual report indicates. >> yes. >> from someone who deals with these issues in switzerland, do you think the mood is changing internationally? it's not just former leaders who signed up to the fact that the may have made mistakes, but do you see a cultural shift amongst the present leadership of these countries? >> yes, i think when you listen to the president now of colombia, santos, if you listen what the president of mexico is saying, they are all, they all agree that the debate should take place. they do not agree with the change at this moment, but they know that they cannot just continue as they see without putting in question what they did. because, i mean, one of the members of our commission and a former president of colombia

said i worked with, i was a chief of the war on drugs in my country, and we did very well but we didn't solve the problem. the fight was hard. we could fight, but we have a harsher road now in the country him and mexico is just not in a situation of civil war. so i mean, they know that this is not the solution. they don't know exactly how to change, but they want this change. they would change if it is existing. now, in the political discussion at the u.n., we are looking for more countries. because any of these specialist organizations has another constituency. you will find -- in geneva the people for public health, in new

york the people for development and it's not consistent their policies. >> of course. >> i think the general secretary of the u.n. is really a where about that and tries to bring together the different approaches of the drug problem. >> finally sir richard, as for uk's policies, this is a quote a young member of the home a select committee in 2002 who said this after the publication of our report, drugs policy in this country has been fitting for decades. drug use has increased massively. the number of drug-related deaths has risen substantially, and drug related crime accounts up to half of all crime. he's now the prime minister. so you must be heartened that government policy is moving in that direction. >> yeah, i mean, i think that what it demonstrates is that if you talk to any individual in

position of power or responsibility, they know that the current system is not right, and they know that health-based system is right, and they are just would whether politically, you know, they can be brave enough to push it through. so david cameron then we'll who was not primacy, now i missed it, and we hope we can get them, we hope he can get the facts to make him brave in actually changing current policy for the benefit of society as a whole. since you gave me one quote, the head of interpol, 18 years ago, western governments will lose the war against dealers unless efforts are switched prevention and therapy. all penalties of drug use should be dropped, making drug abuse or crime is useless and even

dangers. every year we seize more and more drugs and arrest more and more dealers, but at the same time the availability in the country increases. we are losing the drug battle worldwide. that was 1994. also i think was a very well-respected policeman in the uk. >> i have no clothes to match that i'm afraid. the battle of the coaches over. >> your quote was -- [inaudible] >> we will be troubling urging women go to colombia. >> thank you. >> that is not because of your interest in the commission. >> i'd like to save you on our place but we don't just fly high. [laughter] >> when people went to mars at your suggestion. >> we will see whether we are allowed to. >> anyway, sir richard, federal council, thank you very much.

i kept you longer than anticipated. we are most grateful. >> good luck on your research. >> thank you. order. call the next witness is. thank you. >> [inaudible conversations] >> some live events coming up today on c-span2. legislative work is underway at four with a transportation bill's project bill. no votes are scheduled. you can watch the senate live at

2:00 right here on c-span2. >> our ancestors came across the ocean in sailing ships you wouldn't go across a lake in. [laughter] when they arrived there was nothing here. they built their tiny little cabins and they did it with neighbors helping one another, not federal grants. as candidates campaign for president this year, we look back at 14 men who ran for the office and lost. .org website c-span.org/thecontenders to see video of the contenders what a lasting impact on american politics. >> this is also the time to turn away from excessive preoccupation overseas, to the rebuilding of our own nation. america must be restored to her proper role in the world. but we can do that only through the recovery of confidence in ourselves. >> c-span.org/thecontenders.

>> on friday, attorney general eric holder spoke at a summit on consumer fraud hosted by the justice department. federal and state law enforcement officials discuss different types of scams targeting the elderly, people's tax returns and fake business opportunities. the event took place during national consumer protection week. this is about two hours. >> all right, well thank you ladies and gentlemen, the production and thank you all for being here today. my name is mike bresnick, the executive director of the financial fraud enforcement task

force, and i'd like to start a by thinking georgetown university law center for hosting this very special event that we've had and are having here today. and for allowing so many influential leaders throughout the department of justice, and, in fact, are more than 20 different federal, state and local law enforcement agencies and offices, as well as nine different consumer protection groups. to gather together under one roof to talk about critical issues that affect millions of americans all across the country every day. for weeks ago today, united states attorney general eric holder announced the creation of the consumer protection group, punctuating his deep commitment to preventing and prosecuting fraud against some of our most vulnerable citizens. during his time as attorney general, he has charged several attorneys and criminal prosecutors to use all the

resources in their arsenal to enhance their enforcement of consumer fraud. these efforts have been met with tremendous success. under a attorney general holder's leadership and fierce resolve to protect consumers, we have forged strong partnership with consumer advocates here today and will continue to do so through the consumer protection working group and events like this one. so ladies and gentlemen, it is with great pleasure and an honor for me now to introduce this afternoon's first speaker, the united states attorney general, eric holder. [applause] >> will good afternoon. good afternoon. >> good afternoon. >> there we go. thank you, mike, for that kind introduction and for your leadership as the executive director of the presidents financial fraud enforcement task force. you're doing really a superb job. it's a pleasure to join with you

and with so many dedicated colleagues and essential partners as we begin today's really important conversations. i want to thank you all a special artist in which panelists for being a part of what i think is truly a historic summit. i can think of no better way to commemorate and to raise awareness of consumer protection week than for this group of stakeholders, this group of experts and advocates who joined forces in examining the challenges that we face in identifying solutions that the american people deserve. in this conversation, i'm especially grateful for the commitment and engagement of the members of the consumer protection working group, which is a newly formed initiative that is opening as part of the financial fraud enforcement task force, and in particular i would like to recognize director and a limp from the consumer protection branch and all of the group's coaches assistant attorney general tony west who ascended our associate attorney general the assistant attorney general lanny breuer of the criminal division of the justice department, u.s. attorney andre

birotte of the central desert of california. in case you don't know that's los angeles. director david vladeck of the ftc's burea bureau of consumer protection, and kent markus, consumer financial protection bureau. today is the working group gathers for the second time since its inaugural meeting in february, i want to express my gratitude for your leadership of this effort and for your dedication to protecting the health, safety and economic city of consumers across the country. these are goals and these are responsibilities that we all share, and each one of us has a role in fulfilling them. for me, and for today's department of justice, protecting american consumers is a top priority. and as we agree dedicated ourselves to this work in recent years, we've also learned some essential lessons. primarily, that fully understand the threats that consumers face, and protecting their interest in a comprehensive way, is not something that the justice department can achieve on its

own. we cannot simply prosecute our way out of this problem. so we need your help. we need your perspectives. we need your expertise. we need your talents and we need your determination. and that's precisely what this day is all about. earlier this afternoon we kicked off an important, and i think in some ways unprecedented, conversation would win this working group's leaders and key consumer advocates. we talked about strategies for enhancing our civil, criminal enforcement of consumer fraud crimes, increasing public awareness about common schemes and ways to report them, so that ordinary citizens have the knowledge that they need to fight back. and building on the momentum that we established in the fight against consumer fraud. as a result of discussions like this one, and thanks to the strong partnerships that we've forged with the federal law enforcement officials, regulatory agencies, as with key state and local authorities, we have been able to gain access to the wide array of tools and the extraordinary depth of

experience that we will need, not just a venue the work is underway, but to bring this fight to the next level. especially in these times of great economic challenge, i recognize that they need to move aggressively to combat these crimes has never been more important. and that's what i'm proud to report that our nation's department of justice, and so many of the consumer groups represented here, have responded to these threats not with despair, but with resolve and with decisive action. during the last fiscal year, the department's consumer protection branch achieved an astounding 95% conviction rate. they recovered over $900 million and criminal and civil fines. and they obtain sentences totaling over 125 years of imprisonment against more than 30 individuals. these achievements build on remarkable success of the financial fraud enforcement task force, which has helped secure convictions against those responsible for a wide variety

of consumer scams, including telemarketing schemes, fraudulent job training and referral services, and even an enterprise that generated over $75 million in loss, victimized 350,000 small businesses by placing unauthorized charges on people's phone bills. since last april when i established a new part of the task force known as the oil and gas price fraud working group, we have also been focus on identifying civil or criminal violations in the oil and gasoline markets, and ensuring that american consumers are not harmed by unlawful conduct. this working group's latest meeting was held at the justice department just this morning, and its members discussed a variety of topics, including the role of speculators in the market, recent reports and enforcement matters by various working group members, such as the ftc and in your state attorney general's office, as well as ways to improve information sharing between working group members and

partners, and weirdly go from here. i can also report the one of the working groups, the federal trade commission, his curly conducting an investigation with assistance from other working group members into whether gas prices have been affected by any antitrust violation or market manipulation by refiners, oil producers, transporters, marketers, physical or financial traders, or others. working group members stand ready to act if the ftc learned anything that implicates the laws that they enforce. the task force has also been at the forefront of the administration's efforts to seek justice for those who were devastated by the recent financial crisis. since 2009, we have helped to bring charges, to secure convictions and to obtain prison since his of up to 60 years in a variety of cases charging securities fraud, bring fraud -- bank fraud and investment fund. using criminal enforcement tools where possible, and civil

penalties and sanctions were necessary, i think we've made great strides in knowing individuals and institutions accountable for the reckless, inappropriate, and oftentimes unlawful conduct that helped contribute to the financial crisis. and by employing a similar collaborative approach, we have even been able to make history. in january, the department of justice and department of justice and housing and urban development, other agencies, and 49 state attorneys general came together to achieve a landmark $25 billion agreement with the nation's top five mortgage servicers, the largest joint federal state settlement on record. this will provide significant assistance to struggling homeowners and communities. and it will serve as a model for what we can accomplish when we worked together. across federal agencies, state boundaries, and even across party lines, and through under the new task force component known as the residential mortgage-backed securities working group. now, we can all be encouraged by

the achievements that have characterized the past few years. but there's perhaps no better illustration of the progress we've made in our groundbreaking work to combat health care fraud. over the last fiscal year alone, the department and its partners were able to recover nearly $4.1 billion in funds that were stolen or taken improperly from federal health care programs. the highest amount ever recorded in a single year. and over the last three years, for every dollar that we've spent fighting against health care fraud, we've returned an average of $7 to the united states treasury, the medicare trust fund, and others. now, these numbers are stunning. there's no question that we should all be proud of the results that we have already achieved. and although the health care fraud won't be a focal point of this working group, this ongoing work will continue to augment our latest consumer protection efforts. but i also know that this is no time to be satisfied, and we cannot afford to become

complacent. and that's why we must, and we will, continue to seek new avenues for communicate she and collaboration with partners like you. with the assistance and expertise of the friends and allies that have gathered here today, and discussions like those that will take place this afternoon, on issues ranging from fraud targeting the elderly, the common tax schemes, to business opportunity fraud, we will develop comprehensive strategies and implement innovative new solutions to preventing and combating consumer fraud in the years ahead. and to put it simply, my colleagues and i are counting on each and every one of you. american consumers are depending on you. and i look forward to all that we will be able to publish together. so thank you all very much for the great work that you're doing and that you will do. thank you. [applause]

>> thank you, general holder, and thank all of you for joining us here today. abby national consumer protection week. you know, we are, this week is really an opportunity for us to do a number of things, to raise the awareness about consumer protection issues with consumers around the country, to begin to think about our own efforts, enforcement efforts, education efforts, when it comes to protecting consumers from fraud and scams. but i think the most important thing that this week is proving to be is an opportunity for us to come together and to share ideas, thoughts, to achieve some synergies, talk about deficiencies that we can achieve by working together. and we've are restarted do that this way. we have a very productive meeting with consumer advocates have been in this fight for a long time, and with federal

partners and state partners to talk about how we can work better as a team, tackling some of these issues. as the attorney general mentioned, protecting the health, safety a financial well being of consumers has really been a centerpiece of this administrations and a front efforts. and over the last three years, we in the civil division of the department of justice, we've refocused and redoubled and really organize our efforts to protect consumers by creating a new branch, the consumer protection branch. and the work of that branch which the attorney general mentioned in his remarks, it's really been going on for the last 40 years. but what we have done is, and have been enforcing federal consumer protection statutes for a long time. but what we have done over the last three years is we have provided additional resources.

we have given that branch an expanded focus, and we renewed partnerships with key players and consumer protection space so that our efforts are even more effected today. we enjoy great partnerships with the ftc and the fda, the consumer product safety commission, our new friends, consumer financial protection bureau, states attorney general, great strong partnership with u.s. attorneys around the country, and several others. and we have really, through these partnerships, stepped up our efforts to enforce consumer protection laws in a number of areas, including mortgage fraud, food and product safety, counterfeit pharmaceuticals, investor ripoff schemes which are better known as better business opportunity fraud. there'll be a panel on that a little bit later on today. criminal off-label marketing health care fraud, our interest grows in for-profit colleges, and another area of growing

interest type of fraud that really preys on immigrant communities. and as the attorney general mentioned, those redoubled efforts every lead to some record-breaking results. and again, that's really a testament to the partnerships that we been able to establish. he told you about last years numbers but when you look at the numbers from january 2009, you will see that consumer protection branch and its efforts have recovered a record-breaking $3.72 billion in criminal fines, civil penalties, restitution to victims. ..group?

whoopie, right? one of the things we've seen time and again with the task force and the working groups that have been formed whether it's the mortgage fraud working group which i have had the great privilege to work on or the rnbs working group or some of the other working groups that lanny has participated in and those of us in this room have participated on -- the reason we form these working groups is because they work. they have really led to very significant results in people are coming together, people who have -- are focusing on similar enforcement challenges. and we are bringing together the full panoply of federal and civil and criminal and state authorities to bear on this

common problems. and when you add to this in this texas bringing together so many consumer advocates, i think we have a recipe for success again. i'm very, very pleased that all of you were here. it's a privilege to be able to be engaged in this effort with you and with that let me introduce the assistant attorney general of the criminal division, my friend and colleague. lanny? [applause] >> thank you, tony. i want too echo what tony was just saying. the working groups are only as good as the people who are involved. not only good with our willingness to deal with the issues at hand and try to find this comprehensive approach as we can. my view of all of these issues is to say that to some degree we have different topic areas but on some level all different levels of fraud and criminality morph -- they morph both

nationally and internationally and they morph candidly by the subject matter. so right now what the working group does is exactly what tony says. it gives us an opportunity to have real discussions with real life experts. you started hearing from people today and i think -- at least my criminal division will be better as a result because we're going to start focusing and i'll give you a very real example. i grabbed one of my deputy chiefs in my department and said i wanted us to deal with the issue. in the very same way that a few weeks ago in the residential mortgage-backed security group in exchanging ideas with others we were able to come up with a holistic approach in a new area. what we need to do is we need to raise awareness and we have to understand that fraud, particularly, at a time of financial distress, when people are feeling more vulnerable is a time when people are at their most vulnerable and at greatest

risk of fraud. we also have to be realistic that crime today is global. and we also have to be realistic that more and more today organized groups will sometimes perpetuate fraud. so one of our goals, one of our goals in the criminal division and with our partners are try to find out who are committing these crimes and how are they committing them? well, one thing we know -- a fair bit of consumer-related crime is internationally based. it's not always here. sometimes fraudsters realize they can better escape law enforcement if they do it abroad and so we're trying to deal with our international partners. in that vein, i've been to west africa to talk to our partners in west africa by what we need to do. it's why we're fighting harder to extradite people when we identify them. it's why i was recently in romania to talk with our partners there where romania has been an incredibly strong partner with us in dealing with

identity theft and identity fraud and many of the kinds of scams that we're all here to talk about. jonathan rusch, someone from my office is here and one of the areas that we, of course, identify a lot is with disaster relief fraud. since katrina, we learned unfortunately americans and others have huge hearts and when people say look, i'm raising money because of this calamity, could you just donate money? people do and so we created at lsu a comprehensive approach where we have agents from all different law enforcement entities and prosecutors and hot lines, and it's worked. we haven't eradicated disaster relief fraud but we have prosecuted many, many people. we've received very high sentences. we've educated people. and just this week, and last week with the tornadoes that ravaged part of the united states, we immediately started a new educational campaign. as tony said, that's what we're

going to do today. we're going to keep learning and try to do more and more. we're going to try to educate those who are most vulnerable. sometimes in these kinds of crimes we know people are embarrassed that they were scammed. maybe they were embarrassed because they donated money or gave money because they thought that their life's partner, who they never met, but who they thought was their kindred spirit needed money. or maybe it's an elderly person who was defrauded in thinking a relative or a grand kid had asked for money and so gave money and, of course, it was the furthest from that. so we have to together figure out how we can help our most vulnerable. we in the criminal division have identified these boiler rooms in costa rica where criminals from the united states and other places go and literally 24 hours a day they man phones with one kind of consumer fraud after another. you've won the lottery, just send us this much money. a relative of yours has suffered a disaster.

just send us this much money. we extradited those people. one of them was just recently sentenced to 30 years in jail. a whole group of others were sentenced to between 4 and 10 years in jail. and as the attorney general said, prison has to be a component. and then lastly in our partnership with the attorney andre brought we brought down a group called armenian power. it's an organized crime group. it's an organized gang. they are a violent gang but they also engage in identity theft and consumer fraud. and through their schemes we went after them and we -- we're prosecuting them and have prosecuted their leadership. so like tony i and my team are glad to listen to folks today. we're going to keep working forward and holding those who perpetuate these frauds responsible. thank you. mra[applause]

>> good afternoon, my name is content marcus, i'm the head of the enforcement division at the consumer financial protection bureau. we're the new kids on the block. i was thinking today as we were meeting with some of the consumer advocates that we probably -- less than 1-year-old we have probably been doing this for about as many days as the collective group of people have been doing it for years. so we're gratified to be invited to join in these efforts. we come to the table in these efforts with a wonderful array of tools. and part of our objective is to try and think creatively about how we will use that set of tools that we've been provided by the congress. we have the ability to engage in supervision, enforcement, rule-making, consumer engagement, consumer response. and all of these tools together, i think, help us be more effective in the way we do the work that we're all engaged in.

the -- the references that several of us have made about the earlier session with the consumer advocates, i thought yielded a good example of where that kind of collaborative activity is both necessary and justified. it was, i thought, striking in those discussions that the single topic raised most frequently in that group as to what was an area of concern was illegal and fraudulent conduct associated with debt collection. and it was a topic over and over as we were talking earlier today. well, earlier this week, our director, rich cordray indicated in a speech to the state attorneys general that he thought this posed an opportunity and a challenge that we should all collectively take on together. that there has been outstanding work that has been done with respect to efforts to undermine illegal and fraudulent conduct with respect to debt collection. the ftc has brought more cases

in the last year than in any recent time in anybody's memory, maybe ever. they have done that in substantial collaboration with the justice department and with the united states attorneys. the attorneys general across the country have been working on bringing debt collection cases consistently and regularly over the years. and yet, in a meeting with consumer advocates today it was the single topic that drew the most attention. what that says to us is we need to collect together collectively look for ways to do things in new ways, in different ways to utilize new tools, new concepts, new ideas about how we can try to bring about the kinds of changes that we would all like to see. and not only in this area, for i use the debt collection example as simply an example of the many areas in which we need to do the kind of collaborative work that others have referred to. so i want to indicate that we're both humbled and thankful about

joining with all of these colleagues who have been for substantial time on these difficult issues and the -- we have generally appreciated the welcoming and generous way that we have been invited to the table to help fight against consumer fraud and violations of consumer laws along with all of them and so with that and with our commitment to bring our new tools, our new energy, and our new resources to the table, joining everyone, let me then introduce my friend david valid vladic from the federal trade commission. [applause] >> so i'm david, the director of the bureau of consumer protection. kent markuk may be the new kid on the block we're the old kids on the block. the ftc is the oldest protection agency with both consumer protection and competition mandate. over the last three years we focused our resources on what we call last hour frauds.

these are frauds aimed at taking the last dollar out of the wallets of people rendered vulnerable by the economic downturn. now we do all sorts of things other than enforcement we do consumer ed work which is available at our website www.ftc.gov but i want to talk about our enforcement cases because the commitment that tony spoke about earlier and attorney general holder spoke about earlier i think really deserves a moment of reflection. i've been doing consumer protection work for the last 35 years. never before have the federal agencies involved in consumer protection met with consumer advocates, heard them and made the commitments that the government is making today. tony's forces have grown largely. we have kent and the new cfpbi

on the block. we finally have the resources to play-offs, not just defense. so i want to talk briefly about the ftc's enforcement mission. when we bring enforcement case we have three goals. stop the fraud, get whatever money we can find and return it to consumers, and then refer it to lanny, tony and andre and hope that the justice department puts these guys in jail. so let me talk briefly about the breadth of our enforcement work. as long as we're gripped with this economic downturn, people, homeowners are going to be in default or facing foreclosure. that's a breeding ground for abuse by fraudsters. earlier this week, we filed our 35th case against hundreds of defendants engaged in loan mod scams. and we will continue to do this work at a high volume until we root this problem out. mortgage servicing, yes, there's a tremendously good settlement

against the top five. there are more mortgage servers out there who need to see the federal government. we're working, i know -- i know the cfpd and the department of justice are also working on these issues. a debt -- a debt, in terms of resources, the largest issue we confront and we confront it in multiple ways. one is, there are a lot of debt settlement scams. if you listen to the tv at night, here's the come-on. if you owe more than $10,000 worth of debt, call us. we'll renegotiate your interest. we'll pay down your principal. most of those are scams. we just finished a huge trial in dallas against two of the largest ones. we're now up to more than 20 cases in this area but this is an issue that will not go away. phantom debt, increasingly, people are complaining that they are being called by debt collectors and they owe no debt.

often these are people who have served for payday loans online. all of a sudden they're getting calls from call centers in india. we know where they are, trying to force people to pay debts they don't owe with threats of arrest and imprisonment. we've shut down 10 of them in one case. we filed two weeks ago, there's more of this litigation to go. debt collection, we filed eight cases in the last year and we've got more to come. debt collection abuse remains the largest single complaint we get at the federal trade commission. you know, kent is right, we've been fighting this and -- with the cooperation of the justice department, but the complaints still go up. we will be doing more enforcement in this. we're also going after debt buyers. there's a new industry out there. stale debt used to just sort of be written off. now it's -- we call it zombie

debt because we can't kill it. and debt collectors are collecting stale debt with the great assistance of the justice department, we just settled a case against the largest debt by our asset acceptance requiring it to let consumers know that the debt is past the statute of limitations before they try to collect on the debt and we're very grateful for the department of justice's help in this case. payday lending, payday lending abuse is on the rise. and payday lenders are now hiding offshore or residing on indian tribes and claiming tribal immunity. we filed a big case against one of these tribal payday loan operations last week. there's more to come. job scams and business opportunities. with the unemployment rate still stubbornly high, people out of

work or working or who want to find extra pay, job scams and business scams that proliferated. there's going to be a panel on that later this afternoon that we'll talk about our work. fake government scams -- fake government grant scams, still ongoing even though the stimulus program is over. we've talked about this before. but wire fraud scams, fake check, grandparent scams, lottery, sweepstakes, contest scams, they're proliferating. we're going after them, not only by going to the scammers and then turning them over to lanny's folks for prosecution, but also going to the wire transfer companies that enable this. we have an order against money gram. we've been working closely with western union to combat those frauds. precious metal scams, wobo scams, telemarketing scams, cramming, i could go on and on but our mission -- until the

economy brightens is going to be going after these last dollar scammers, shutting them down, taking whatever assets we can and then turning over to the justice department so they become guests of state. thank you so much. [applause] >> i'll introduce my colleague, andre birotte who's the u.s. attorney in l.a. and is a very good partner of the ftc. we're very grateful for andre's work. [applause] >> well, good afternoon, everyone. i bring greetings from sunny and extremely warmer los angeles. [laughter] >> so it is a privilege to be able to spend some time with you this afternoon. i look forward to engaging and learning a lot from you here this afternoon. as mentioned i'm the united states attorney in the central district of los angeles. it is the most populace district in the country. representing almost 18 million people. and with a district with so many

consumers, it is unfortunately home to a variety of targets and crimes and scams that you have heard about today. some examples include your foreclosure or loan modification, scams that prey on homeowners who have fallen on hard times. your advanced loan schemes that target small businesses in our district. importers of counterfeit goods who skirt safety regulations to sell to low income neighborhoods, your abusive tax preparers who target low increased taxpayers and practitioners who target fraud as tony west mentioned and i could go on and on and on about the different scams that go on in our district but i want to tell you that we have been very proactive not only in the central district of california but throughout the nation and our colleagues throughout the u.s. attorney's offices have been working very diligently on this effort. our objective is relatively simple. it's to investigate these crimes, to educate the public about these scams and to hold

those responsible, those individuals, accountable. so let me give you some concrete examples of what these scam artists or what i call the scum artists really do on a day-to-day basis. just last weekend the central district of california we charged an identity theft case in which a defendant was alleged to have stolen credit cards and bank account numbers from more than 600,000 victims by sending out phisching emails that looked like legitimate banks asking for updated personal information. in january of this year, a father and son were each sentenced to more than 150 months in federal prison and ordered to pay $39 million in restitution for running a scam that defrauded more than 1,000 victims with the promises of large returns on investment and companies that were developing films in los angeles. last month, a corporation in los angeles was ordered to pay a fine of a million dollars because they were mislabeling vietnamese catfish and pawning

it off as grouper and selling it throughout the country and then last year a santa barbara man was sentenced to six years in federal prison for conducting a phony secret shopper business, an opportunity scam that included offerings to make people bartenders in our district with defrauding 87,000 victims in the district to the tune of $6 million. now, those are just some examples that we've had in the courtroom but our victories in the courtroom are not all that we need to do as it relates to combating consumer fraud. in the coming weeks and months you'll see u.s. attorneys offices throughout the country working with our partners, both on the civil side, the regulatory side and consumer groups to deal with these issues. in many cases, quite frankly, an ounce of prevention is a pound of cure and we want to provide the consumers the tools that they need and katy them as to the scams that are going on throughout the country. and the only way i think we can do that is working with good people like you here today, to exchange information, to educate

each other and then hopefully develop some strategies to go out and target this type of conduct that's gone on throughout our nation. as i often say we are only as good as the information that we receive and as mentioned earlier the information we received in the earlier session was quite productive and informative and i know i have a lot to bring back to my district and start thinking of different game plans and i will share that with my colleagues throughout the country. so i look forward to hearing from all of you today and i look forward to the great work that we will continue to do to ultimately achieve the goal of protecting our consumers so thank you. [applause] >> thank you, andre. david, kent, tony, lanny and now other than david, if you don't mind, allow our panelists to come up to the stage and we can begin with the next portion of our summit. ladies and gentlemen, the next portion of the settlement will be a panel on fraud on the

elderly. the moderator will be michael blume, the director of the consumer branch of the civil division. the panelist will be david vladeck, elizabeth costle, naomy karp, jonathan j. rusch, deputy chief of strategy and strategy at the criminal justice, jeffery steger, the senior litigation council from the consumer production branch department of justice and abby kuzma the director of consumer protection in the office of the indiana attorney general. and with that, i give you michael blume, our moderator. thank you. [applause] >> well, thanks, folks. and good afternoon. this panel, i suspect, will be

very being and informative and let's just get right to it. we're going to talk about fraud directed at the elderly. it seems to me a natural question is, why do we have a special panel on fraud on the elderly. there is research that concerns particular vulnerabilities, that older folks may have that make them more susceptible than others to certain kinds of frauds and i'd like to start then with betsy about some of the research at the aarp may have done concerning those kinds of vulnerabilities. and if you could give us some of those factors that make older folks even more vulnerable than what you've talked about here today. >> listen, it's on. okay. i want to first put it in perspective, there are not a great many statistics about how many elderly are victimized, but

we know that elderly financial abuse is dramatically underreported, maybe, 24 people are victimized for every one that's reported to any kind of criminal or social service agency. and it's probably the most pervasive form of elderly abuse and mistreatment among new york due to a survey of people who were 60 and older and 41 out of 1,000 had suffered this type of abuse and this didn't include people who were impaired. and the survey found the people and their children and found 20% of those over 65 had been taken advantage of financially through an inappropriate investment unreasonably high fees or outright fraud. the lawyers community for civil rights shows 45% of scam victims

were over 50. and they included -- incurred 41% of the losses with these foreclosure rescue scams. one thing we'd like to -- which we have not been able to research it. it just hasn't been out there is better statistics on this. metlife had a report where they estimated at least almost $3 million had been -- billion, excuse me, had been lost. and that 51% of it was embezzled by strangers, and 34% by family, friends, people in the same church or neighbors, people they knew. and i'm looking forward to the business opportunity fraud because a lot of older people have lost their jobs and they've been unemployed longer than they've ever been before. so we have done research, and i'm -- my friend, naomi karp, is going to talk about one of the reports because although the

cfpb did steal her she did work at aarp and she basically wrote the report and it's called "protecting older debtors and a short version of it that's also there. and it surveyed and summarized some of the -- some of the data and tried to find out what financial advisors those dealing with clients directly and the compliance officers and how they tried to handle the problem on the investment side. i know that naomi will carry this further. i don't always have good news to bring you. we had a very well designed project that came out of the west virginia office where they bought these sucker lists. these are the same -- i don't know where they come from. that's certainly something that should be invested. i know they used to be the new

widows list but i think they're much broader now. and so these aarp volunteers were given these sucker lists. they called the people and one-to-one and spent time trying to train them to resist fraud and they found the one that worked the best was giving them a strategy to respond at each step of the fraud. and they did try -- this is a very -- it took a lot of people to do this. this is an expensive thing to do even though we were using volunteers. and they wanted to see if they could teach those on the phone to resist scammers. they did find that compared to a control group, more -- two weeks later when there was a pretend scammer calling them up, they were more resistant,

unfortunately, six months later they weren't. so there was no longer a difference between these groups. we clearly have to keep educating people. we have to educate the families and the communities in addition. but we also have to try as all these people are doing to stop the frauds before they get there because many of these people just do not know how to resist it. and i think that, you know -- and, you know, one of the issues that we've had is that it's not only that people -- when they have diminished capacity, the first thing that tends to go is their ability to handle their financial affairs, at least people with -- sort of pre-alzheimer's disease. there also seems to be something -- and there hasn't been much research on this about