country. >> i'll leave it, thank you, gentlemen. >> i detect there's a tendency to believe that the british armed forces are significantly closer, and in terms of any other in the coalition. in my experience, which included commanding, for lack of better description, the nay -- nato construct, and there's hundreds of thousand of recruits, possibly presenting a a -- the overriding view across mtna, across nations, was the weight to get alongside these afghans, and we saw -- i was in kabul when the two u.s. officers

were shot in the national military police coordination center in the moi. there was an absolute bizarre for those who were present on the day to -- doug touched on this as proximity with the afghans, and it's very often the best form of defending against this form of attack. >> [inaudible] >> general, will you be able to achieve a successful withdrawal of u.k. combat troops by the end of 2014. >> i absolutely understand the

investments, and there's a lot of material. my headquarters absolutely understand how much we have got to move over the time? >> the overall general plan of withdrawal, will you be able to be successful do you think? >> yes, i will. noting, of course, that the national operation is inside a wider nato operation, and a great deal of work is being done in nato to deliver that coordination. >> thanks. >> i want the to ask along the table, are we seriously led to believe that on the january the 1st, 2015, that the afghan national security forces will be sustainable? >> yes, i think that is the assumption that we have. it's been described here, and

the training operators has been described by james in terms of the way we want to make them viable in their term, and i'm confident the transition process to deliver them, that what separates us will have occured by then. >> can i ask you the latest on u.k. troops withdrawn earlier than 2014? >> i'm not aware of any thinking on that. i think that's something you really need to ask somebody other than me. i'm focused on the nato plans, and now -- >> so any suggestions prior to that have not come across your table? >> i mean, i'm sure the committee has, what the defense secretary said that transition is going as planned, and there's opportunity next year to make withdraws, the government already announced that some 500

will have been withdrawn by the end of this year. next year to take further decisions which the government has not yet taken, and you have to ask the defense secretary, you know, when he thinks that's possible. >> we are talking a time line of slightly more than two years, so i think things can change. i recognize that. >> yeah. i think the prime minister said what they're looking for is a glide past the end of 2014. the government will take those decisions when it's ready. >> what events will clearly dictate political decisions, not asking you to comment on political decisions, but dictate what happens -- >> i can give you confidence the figures announced by the prime minister out by december, that will be delivered. we'll be done. >> thank you very much.

my last question, chairman, is is there any -- anybody heard anything about possibility of nato or the united states in particular? withdrawing significant troops earlier than the end of 2014? >> i think the united states also will want to take some provisions next year, and in light of the way the transition goes, particularly at that mid-2013 points i was talking about when the last transitions started, and so i don't speak for the u.s. government, but i'm sure they're taking further decisions next year. >> thank you. >> close to 2014, and i just. to know how would you know what nato' role is in that stage? what's the remaining function of it? >> yep. i think, and it goes back to sort of the question -- i think

the nasf will be sustainable, but not on their own. nato already said it will have a training advisory assistance mission, which will be a new one, doing just that, not in combat, but that won't be the only thing that will be there. there will be the international community's overall support for governance, economic development, human development, and so on in afghanistan, and that will be a very important part to what nato will be doing, and then there's other bilateral programs as well. the nato process, which i think i was speaking to, that the north atlantic council launched the process by a initiative directed and associated with that six of the current partners who are particularly key and already said they want to take part in the future. nato missions, so that's

australia, new zealand, georgia, and ukraine. they will be involved in the planning from now on, and other nations may choose to do so in the north atlantic council to decide case-by-case what programming to bring them in on. the next stage is military authority to draw up con cement of operations, i expect that to be decided next year, and then from that, and operating plan, and then we get down to the detailed process of the north atlantic coup -- council to decide directly at which point the commanders can start applying their resources. it will be a long-term process with a lot of conceptual work and operations taking place next year, but i think the final disposition, the numbers, who is going to do what, where, and to what end probably will be decided later in the process because it will be decided in

the light of where we are 2014. >> by the end of 2014, you feel we'll have a broad outline -- >> a concept of operations. >> first of 2014, the u.k.'s role after that, and probably the general naval want to comment on that, is that clear by the end of 2013? >> i think ministers have yet to take decisions. if they have taken decision and announced we're making a contribution of 70 million pounds towards the future, and stainability, they have announced that we will be believed for the afghan national army officers, academies, that they have been talking about, but they have not yet decided in detail, and i think they need to decide quite yet the nature of the contribution in 2015 which they will decide later in the light of event and circumstances at the time.

>> in terms of specific u.k. capabilities, or specific u.k. forces to remain there, personnel, no decision has been made? >> no. >> would you expect that to be made at the end of 2013? >> i think this -- forgive me -- might be something to ask the mid officials who you'll see a little later. i think those decisions are not made. >> general, of those, of any u.k. personnel there post 2014, you're confident their security is safe in afghan hands? >> yeah, and remember, of course, this is the security conditions that are not yet clear of what i'm sure we would not commit any support forces to the training operators unless we were assure of that. >> a few questions about the physical withdrawal of british troops, and it may well be that

you will have to say that plans have not yet been made, and to the extent that you do, please feel free to do so. .. >> of course, it's not just about what is delivered in theater in terms of redeployment, it's how it's managed once it gets back to the u.k. base. so there's a whole approach to this. there are a number of government operators to manage and oversee this. but insofar as my contribution to redeployment is concerned, calibrating how much equipment,

how much material we need to extract from theater over the next two years or so is clear to me. i know what the physics of that look like. i also know how i'm going to get it back in terms of permutations on routes whether it's through pakistan or through the northern stans, and i also know what that material in terms of its movement looks like in terms of whether i'm going to put it by road or air. so the coordination of this, um, is through my headquarters in the pjhq, forward to the joint force support headquarters, that's the headquarters that fits in bastion. so what's going on at the moment? well, there is quite a lot of aggressive battlefield clearance of equipments and material that we do not need. that is being properly moved back. and, of course, the nao have an interest in this, proof of good order and making sure that we do

this properly in terms of biometric checks to get this equipment back. and so the whole apparatus of this is well understood in u.k. terms. but of and in itself it is not just about the u.k. deployment because if you envisage the theater requirement, nato also has a role to play here in terms of coordinating and synchronizing the route access, how we get this out, the air space management required to get this out, the border control management that we need to apply to get this out. so this is not simply just me having a good plan, it it's me having a good plan that can nest inside a broader nato plan, and in that plan it must connect through the coupling bridge which is, um, the routes that we use by air or sea back to the u.k. base to deliver a considerable amount of equipment necessary for future regeneration and contingency

back in the u.k. base. >> okay. so what's the time schedule of this? who's due to -- you're due to start the detailed planning this month, is it? or next month? >> we've been planning for a long, long time. the major redeployment effort started on the 1st of october because you do not, of course, in transition do not get any redeployment dividend until certain aspects of transition are complete. so that process will now continue. it will build speed, and its speed is directly related to the progress we make on the ground in transition terms, and the bandwidth, the attitude we need to use to get this equipment out. so there's quite a lot of physics in this, and we are making a big effort to apply science to this redeployment. um, when will you have completed the agreements with the stans, the central asian republics?

>> there are some treaty sensitivities there, clearly, but i am confident that by the end of this year or early next year that will be delivered. >> right. um, and do you think norton will be able to cope with the withdrawal? >> yes, i do. there's work going on in prize norton, but it's also about ports of entry as well as airports of entry. so this is a national effort in terms of the site of this. what i do is make sure that the redeployment of equipment will not in any way hinder the military operation that equipment is supposed to support. so there's an equilibrium here about supporting transition right through to 2013 and the end which you've heard us describe and how much equipment we can take out. and that's a fine balance which we address and scrutinize on a regular basis. >> so if norton is not itself

going to be i pose one would call it -- i suppose one would call it a pinch point or something, are there any other blockages you've identified at this stage? >> there are a number of things that could change the calculus. we know how frustrating some of this route management question has been over time, pakistan. but i think when i look at the number of permutations available to me in terms of redeployment, i'm confident i can meet that requirement and that the u.k. strategic base is appropriately configured to receive the massive redeployment. >> dame mariot, will nato be coordinating all this? >> nato has been increasingly focusing on this, obviously shape and the nato command and the people in theater, the international joint command, isaf joint command have already been giving this some thought.

there's some blocks in the place already, the nato training mission in afghanistan, for instance, has a document that sets up principle for what the forces might need, what they don't need and so on. but there is a lot more work that needs to be done in the nato, um, particularly in the military structures. united kingdom has been, has been very active in encouraging nato to get on with it and coordinate, and the nato defense ministers' meeting earlier this month we asked and i think the secretary general has agreed that there should be a report at the next defense ministers' meeting in february so that ministers collectively across the whole of isaf can get a grip on the way nato is doing this. because national plans are relatively mature, national plans need to be fitted in with the nato ones if the whole of the theater is to be emptied by 2014 in good order. so we are very keen that nato,

um -- >> so that february meeting will be a key meeting. >> it will, i mean, it may not be the decisive one, but it will be an important forcing point for the mate toe planning, yes. >> thank you. general, how is all of this going to be funded? >> insofar as the nato funding is concerned? >> no, insofar as the united kingdom. >> i'm confident that the money is in place to do this. >> right. will you need more people to help produce this fantastic logistical feat? >> a little bit more detail for you on that. it won't necessarily be 500 people, it could be as low as 20 people. it depends what the specific requirement is. for instance, if you've got a certain fleet of vehicles that need preparing for redeployment, that is a certain --

[inaudible] of specialists. it's focused on the immediate problem, so it's episodic in the sense that we search people out to deal with these technical challenges as they come along. >> has planning advanced sufficiently far for you to be able to say how much of the equipment you intend to bring back to the u.k., what proportion of the equipment? >> yeah. the majority of equipment. there are, there are things that we would want to either sell or gift to the afghans, and that calculus is not yet fully defined on the ground, but it is certainly work in progress because it requires a deal of negotiation on the ground, this transition takes place and the afghan requirements take place. but i absolutely understand how much equipment we've got to get back. and it's the majority of equipment, because this equipment is required for future proofing the army and the other services for their future force

2020 design, it is equipment that we've spent a lot of money on in terms of urs over this campaign, and so i am sure that we are not leaving behind vital combat equipment necessary for future operations. >> so these urs rather urgent bits of equipment will become part of the core -- >> yes. >> and who will pay for that? >> the minister of defense, i'm sure. >> although they have in the past because they were -- [inaudible] paid for by the treasury? >> yeah. and it moves into core over time, and i can give you further advice of that, if you want. >> yes, we would like that, please. and can we avoid in leaving equipment behind in afghanistan and perhaps giving it to the afghan national security forces, can we avoid leaving them with an enormous logistical problem of having to deal with a hodgepodge of different fleets

of -- >> absolutely. if we leave anything, if we leave anything behind, it will be equipment that will not cause the afghans more of a problem than they've got already. we are making efforts to improve that, but that's not going to be a huge amount of equipment. >> and i think that's the logic behind the nato training mission in afghanistan, setting out a kind of specification for the kinds of things that it would be good to leave behind for the afghans and the kind of -- >> but they would have a say as to what they accept.

>> after we leave -- [inaudible] is obviously one that is on the tips of everybody's tongue. what do you think we need to do to insure that it doesn't descend into civil war after we leave. >> first of all, this is a question that i think you would best pursue with the people dealing with the overall afghan strategy. >> we'll do that too. >> i'm sure you will. i think the very important thing to say is afghanistan's long-term future does not be depend entirely on the military instrument, it depends on the

very much wider support that the international community is going to give to that country which will remain a poor country with real developmental needs, human resources needs, human capital needs, economic needs and needs for support in its environment, its region for a very long time. that has been the point of some of the things that are not to do with nato and not to do with me that have been going on over this year. so there has been an istanbul process in which regional countries got together, it was followed up be a kabul conference this summer, a series of regional confidence-building measures. those are now going with support from the international community. foreign secretary, for instance, was in kabul in the summer for the second of those conferences and promised support to that process where we can. there is the international aid

picture, 4.1 billion promised to the ansf or pledged to the ansf up to 2017. there is also a further 16 billion, roughly the same amount per year, on civil development aid up til then. so there are a lot of other actors. i'm not going to speak on their behalf. it's not my job, and i could mislead you, but what i will say is that what is done by isaf and what is done by our armed forces are a smaller part of that longer-term picture. turning to the bit that is my job, what is nato doing now and for the future, i think we need to continue to look very, very closely with full engagement at what is nato's main effort which is making the transition work according to the plan and fine tuning it consistently as we go along and doing so persistently with the afghan government, listening to them, working with them, making it work, holding them to the accountability that we have all agreed on but also

listening to them when we have good reason to make changes. and i won't speak for the general, he can speak for himself, but they need to do their part within it. and then we need to make sure that that post-2014 nato mission similarly is part of a broader international effort that makes sense, that has consistency in it, that works with the grain of afghan society but gives them the wherewithal to do the things we want which is what the international community said at the chicago conference which is afghanistan no longer to be and never to be again a safe haven for terrorism. that doesn't mean we confidently anticipate we will reach 2014 and there will be no more incitings in afghanistan, that it will be a thoroughly safe environment with high levels of development, but it does mean that we are pretty confident that the plan we put in place is working in the way we envisaged, and those capabilities for the

afghan forces to go on tackling their residual security problems with the support of the international community is getting our best shot and is going pretty well according to that plan. >> i'll come back to in a second, general, the implication of what you've said is that there's only so much that armed forces and security forces can do and that it depends rather heavily on the quality of governance in afghanistan and the implication is that if that goes wrong, there's nothing much that armed forces can do to put that back onto the right track. because you've spoken in terms of inputs, in terms of international aid after 2015 rather than in terms of the fundamental quality of the governance of afghanistan. is that right?

>> what i'm saying is that the governance of afghanistan -- the government of afghanistan will be getting a lot of other support with issues like governance alongside the military support, the security support that we're giving or offering to it via our own armed forces in this country and nato and isaf elsewhere. so afghanistan now and after 2014 will not be standing on its own on any of these issues. but equally, the respondent for getting them right -- respond for getting them right fundamentally lies with people in the afghan government. but they will have support from us in other areas. >> general capewell. >> and that's why we have made such a profound investment in the afghan security apparatus. because unless there is a secure environment across afghanistan, the space for that to occur is simply not delivered. and so when i view this security effort, not only is it in the

terms of what we've done so far which we can see the results of on the ground today, but taking a longer-term view about the momentum we are delivering to those afghan security agencies to allow this policy to settle, to allow this development to occur, to keep this moving in the right direction through funding, through other support and to give it the oxygen it needs to allow accommodation to occur. >> and after we leave to whom will the security force that we have created be loyal? >> well, i rather hope it will be loyal to the afghan government. >> thank you. um, well, that was a fascinating evidence session, and we are extremely grateful to all of you for giving such clear evidence as you have given the state of decision making on some of this,

much clearer than i was expecting. that doesn't mean you need to look worried, i think, by the way. [laughter] so we are most grateful to you for a very good evidence session. order, order. >> be sure to join us later this afternoon for more from road to the white house. republican presidential nominee mitt romney will be in virginia at the farm bureau center in doswell. you can see that live at 2:15 eastern on our companion network, c-span. a little bit later the focus shifts to state races with the debate between candidates to represent rhode island's 1st

district. you can see live coverage at 7:30 eastern also on c-span. and finally, president obama is back on the campaign trail. we'll have him live from the university of colorado in boulder, and that's at 9 p.m. on c-span. you're watching c-span2, with politics and public affairs. weekdays featuring live coverage of the u.s. senate. on weeknights watch key public policy events and every weekend the latest nonfiction authors and books on booktv. you can see past programs and get our schedules at our web site, and you can join in the conversation on social media sites. up next, part of a recent conference from detroit focusing on manufacturing technology and entrepreneurial activity in u.s. urban areas, techonomy detroit was a one-day conference in mid september at wayne state university. this portion of the conference includes a panel on do-it-yourself manufacturing and remarks by ben kaufman, the

25-year-old founder and ceo of quirky, a consumer product company that lets consumers decide what they produce. this portion of the conference is just under an hour.ciat >> so the next full segment ofe this program is going to be devoted to the topic of manufacturing and the future of manufacturing in the united states. so i'd like to bring out my longtime colleague when i was at fortune magazine, erick schonfeld, many years the editor of tech crunch. erick schonfeld, please, come out to lead your session on the diy economy. so thank you, erick. [applause] >> thank you. it's great to be here. h let me just quickly introduce our panelists. please have a seat. to my immediate left is grady burnett who's vice president of global marketing at facebook and lived in ann arbor for many years, so he's a local.

mark hatch is the ceo of tech shop which has a recent facilita that opened up here not too far from the airport, we'll be talking about what we do there. danae ringelmann is the co-founder and coo of indiegogo, and david ten have is the ceo of ponoko which is a very interesting platform for manufacturing. what we're going to talk about today is the do-it-yourselfy, economy and how, how different h tools have become available to entrepreneurs beyond just whatav we've become accustomed to in the internet world. so the cost of producing a start-up, you know, has declined dramatically in the past decade, and we've seen this flowering of

internet and mobile start-ups. but we're also starting to see many of those same tactics and techniques being used by start-ups in the other industries and particularly in manufacturing. and and i think it dose all along -- goes all along the chain from, you know, ways to fund your product with indiegogo, ways to prototype your product with tech shop, ways to manufacture it, and ways to market it and to reach out to your customers, you know, after the fact with social, you know,c facebook and other social streams. so let's talk a little bit about sort of where we are today. you know, obviously, a lot of people talking about, you know,e detroit in this election season andbr bringing back manufacturi. jobs, but i almost think that misses the point. yes, we want to shore up the

manufacturing base, but in mybas mind what's more interesting is what's the new form of manufacturing, um, that is bein opened up. and what are we seeing here in terms of the types of people who can now consider themselves manufacturers? is it possible to create gm in your garage now? mark? >> absolutely.utel so some things that people don't necessarily realize today, thea. cost of a computer numerically-controlled milling machine has come down somethinge on the order of 95% primarily because of moore's law. companies are making the software so much easier to use. we are training people how to use these tools in two or threeg class sessions. now, they're not world class mill rights at the end of two oe three sessions, but if you're patrick buckley and you want to do an ipad case and you come in and take three classes, 90

days later you could have, just like he did, a million dollar company. they did $10 million this year. square did the original threeuae prototypes at tech shop on the benches, so they're doing just fine. so the chasm has just gotten much smaller. typically when you do a software start-up, now you need 25, 50, $75,000. well, now you can do a hardware start-up for the same kind ofsa money.me. we've had dozens and dozens andd dozens of crowd-funded projects come through from $10,000 to $100,000 that actually got them all the way through the prototyping stage, their first run in manufacturing. thatne is new to the world.ee you've never been able to do that for those kind of pricepoi points. >> danae, all kinds of amazing products on indiegogo o, everything from infrastructures to even my favorite one is building the tesla museum. building -- what is the --

[inaudible] yeah. tell us about what the products and companies that i have merged on inkey go go and how do you see it opening the opportunities that would have been maybe been hobbyist in the past. >> a few young europes who were passionate about keeping bugs away. we've had that problem before? flies, that's right. so what they did is put the creative minds to work and came up with the awesome contraption to the benign fashion shoo away flies. and what they ended up doing is they used this which leveraged facebook and the social media. they ended up raising almost $600 ,000 by offering their product as a way to raise money to built the product.

so what was fascinating about that as well as other we've had campaigns raise money for 3-d printers. we had campaigns raise money to make the next film, we even had campaigns that are doing charity or cause-related stuff so people funded their baby. we had a couple who couldn't afford ivf inveto for thelyization. they got the rate of $10,000 to have a baby. so what is so incredible about this, and what we were talking about . >> the crowd goat pick the name? >> yeah. what's so powerful ease specially from products and services, we had a campaign who two young women wanted to create a solar powered environmentally friendly inflatable light they could giveaway in a model to the developing world. a lot of women and children die

every day get injured from the car -- lamps. they came up with a cheap and affordable solar powered system to light peoples' homes across the world. they ended up raising $60 ,000. the bug people $600. what was true for both of the cases because was product, because in a way preselling the item, because people who contribute to the idea and the project actually gate perk in return. oftentimes for a product-base the actually product is the perk that you deliver. they end up mitigating the risk of overfunding or overfunding their production. they raise just enough money to produce just enough product that was actually purchased in the campaign. so that makes any sense -- >> right, the preselling. >> the social aspect to this. which gets to, i mean, maybe you

can address this, because you sort of see the marketing start before the product even exists, right? the marketing starts with the core group of maybe what you call early adopters. can can be the most loyal customers. they cheer you on. once you have the product, a lot of people are find fact social that the facebook, that, you know, is a great distribution mechanism for connecting with new customers and getting people to recommend those products down the line. >> yay i think the distribution is incredibly important. if you think about how we make decisions. we make them by our friends, family, and coworkers do and what the platform of facebook is allowses you to engage the community in a word of mouth in a way that never existed before. you can act elevate those friendships, those people most

passion passionate and have them tell your story. i think it's powerful. if you think about a ground funding idea i saw recently, idea, the university of michigan, there's a football player who played? a couple of years ago who graduated and like most college athletes is going in to the work force. he jumped back in to the community in florida. as a new business that is about the sustainable farming and eating healthy in the community that has not done it, and he's doing it through. he funded this. and distributed it through facebook. and as a result, i contributed to that. i'm excited. that's how increasingly the things are happening. >> what kind of businesses are you seeing on facebook? i think you mentioned to me a woman who started making toys or pickup pickup pickup puppets.

>> it's a such a range. it's great. when you think about -- it always starts from a personal set of interest. almost business story on facebook starts with a person connecting with their friends on the page, talking about a set of interest, realizing maybe i have a business opportunity here. creating a page, ingoing from that. the woman we talked about is a name in north carolina business. and it is a kids clothing business. and it's based in north carolina. they basically distribute economic platform on facebook. they do it through the southwest, southeast, and midwest. she was selling as a hobby at first. her husband lost his job. he made it a career. she started doing more project. realized she could build a business. funded that through the community and a bunch of different stunts and she found her entire customer base that way subpoena she found the entire work force which is 80

people. she built a business of 80 people. >> she didn't have a website. >> she sells through facebook. she found a community of people that care and pace -- passionate about the product. and the networking bilged and she shipping product all over the country. >> right. tell us about some of the products that you're seeing on the platform and how would you sort of compare and contrast to where in the cycle would you as a entrepreneur take advantage of your platform versus some of the facilities that are available. >> sure. the way we fit in to the ecosystem is distribute manufacturing. we enable people to reach out no to out only the local community which is it is strong. but also in a global market, and so, you know, we allow people to, you know, produce product,

next to the customer. and what we are starting to see is that people are kind of falling through, you know, they're using the crowd funding knowledge determine the appropriateness of the product is someone going to buy it. are they interested in if. they'll do prototypes at techshop and then if they are, you know, thinking on a global basis, they'll use a platform like ours to push their product out in the globe. that definitely what we're seeing shape up. and that ecosystem didn't exist five years ago. i mean, it really didn't. it's a emerged over the past three years this idea that you can come up with an idea, you can reach out to your market, determine whether or not they want it and fall through the prototyping and manufacturing side of things like that.

you know, and that's exciting. >> we talk a lot about jobs at this event, and everything you're talking about, you know, it's very positive and encouraging because now, you know, anyone can come up with the product idea that needs to be manufactured. they don't need a million dollar facility that is available to them them. but the flip side that okay, once they prototype it and found their early customers, and they're scaling up, you know, past 500 or 1,000 items, don't they then just go back in to the that traditional scale manufacturing. does that create jobs here or abroad? >> is it a solution for the job . >> yeah. and it is because this is like the -- [inaudible]

when you start using the internet. when you started getting e-mail, it was like why can't i use it with everything else. what we've done is encourage people to think about doing this in a new way. where we have kind of -- is that we removed the complexity of talking to people overseas. there is [inaudible] where people as they go to volume need to do that still, but what we are finding sz that people are starting to think critically about everything in their supply chain. and that includes whether or not they can use local resources to do what want to do. so what we are starting to see is that people are bringing jobs back locally because it just kind of makes sense to them. in many cases it's less complex than sending stuff overseas. [inaudible] important things going on with supply and demand curves as well. specifically because the robotic

tools are cheap relative to where they were twenty years ago. you are able to manufacture things in short moderate runs at price competitive places that we have never been able to do before. so the demand curve is literally being shifted because of the ability to manufacture. an so question short runs better made what the customer wants and move a lot of the jobs back to the u.s. the job isn't the labor i just eliminated from the chinese worker on the line. and have a robot do it here. the job is on the design side imagining what it is that somebody wants and being able to deliver it for a cost effective manner. i believe it's a huge opportunity for manufacturing in the united states. >> we have seen the world's fastest electric motorcycle built on site. they're never going to sell a million of these. their objective is to get it to 400/500.

those could produce thousands of those and probably be manufacturing in a distributed manner. it is another example you can get the cheap ipad cover from a chinese manufacturer for $5 or $10. for $60 you can have a beautiful ipad case that the president of the united states carries. patrick is never going to do a million of these. >> is he manufacturing them? >> in san francisco, yeah. >> it's an important thing. people are starting to build out the narrative around the product, you know, knowing the person who makes the product is an important part of the removal -- [inaudible] [inaudible] of information around product. that's what we suffered from for thirty years. that's what allowed us push stuff overseas. it's still in my shop, it's made local, right? it's not. what people starting to question is what -- is the story. you know, they know the guy who

-- mark tells that story with real pride because he knows the guy. you know, and that's what we find our customers as well. their customers know them, and have a personal relationship to them. and that's vitally important. because it's about reinvigorating a social contract. >> i think i would attribute that to facebook as helping raise the bar with the expectations that you should know what your money is going to and what you're funding or what you're buying. because now it's easy to know the story behind the story if you adopt know the story behind the story, it's -- the words. and right, i mean, we're talking about products, we have a great example it's a food product that is a young woman who -- we're talking about jobs with she started a gluten free bakery

because she had celiac and there were no products on the market for her to eat. she got a bank and got a $10,000 to get the business started. they literally made gluten free macaroons out of the back of the truck or the garage, and they started, you know, getting a little bit of attraction and they had the opportunity expand the production. hire people, and get the product in to regional grocery store. the only thing, they needed to upcandidate the packages which was going to cost $15 ,000. for a small business, where every single dollar you earn goes back in to working capital to help grow. they department have $15 ,000 sitting on the site. side they went back to the bank and said we have a huge opportunity grow our business and take the next step. the bank said congratulation there's no way we're giving you a loan. you're less than a year old. you're too high-risk. how do we know you're going to be successful. it's not they didn't want to. the risk return model didn't

work. what did they do? they went on here and racessed a $15 ,000 by preselling macaroons building their customer base. using it and building it beyond that. in three weeks, and within three months, they were shipping their product across 40 states in america. and now they're hiring people and now they're growing. and it's . >> we talk a lot of social proof in investing. ron conway invested, that's safe for me to invest. right? what you're describing makes me think about social proof for consumers. right. you know, 600 people put up some money and help the woman raise $15 ,000 there must be something there. and i think that, you know, facebook, you know, is part of that. like you can see how many people

like something or, you know, give it their stamp of approval, and this is kind of, you know, the next step in economic. >> and we're all social beings. it's interesting if you think preindustrial revolution. it lead us to do so many different things. engage in dirl different culture and travel to new places, learn about new interest. what it didn't allow is the personal connection. what i feel facebook for the social world around it has done is brought the personal relationship back to the center. businesses can be personal and they can actually have a voice. as a consumer, you can feel like you matter. and you actually count and have a voice in a way you haven't in a long time. and that creates opportunities for the business and creates opportunities there's businesses that will use facebook to understand how they product they want to build. there's a little stuffed animal

called squishble that's in new york, now, started in d.c. they literally do all the product design through facebook. they'll say, should we create this next? should it be red or blue? and ha that's will actually happen there. people will feel a connection to the product they helped make it. >> i imagine you see some of that as well. >> in businesses like that, that is a business that started without a flash sales, it's connected to a particular designer who night be putting a few hundred things together. or a few thousand thingsed at most and having that ability to have the connection go back and look for that person's design. that the personal connection matters a lot. i think it drives job growth and business growth. >> something you mentioned, mark, how you see a lot of businesses being able to produce things in short runs. right, i think there's a bigger issue here when you talk about manufacturing. the manufacturing base right for

-- about scale manufacturing and you get the economy. >> sails are relative thing. >> it's changing. >> yeah. let's talk about scale. how much boeing aircraft did they sell last year? a million? 500,000? 10,000. 5,000. hundreds? that's not mass manufacturing. that's actually hard core one at the time. build it. they have 250,000 employees. the aircraft engine division how many train engines did they sell last year? 500? there are hundred of thousands of jobs, billions of dollars being manufactured in the united states with the high paying jobs, use these fancy kinds of tools. again, ha is cool they come down and more assessable and easy to use. here's another front example. david lang came down about year ago, and said i've never made anything in my life. i'm going write a blog about it, and i'm going take a bunch of

classes, i want to see if i can figure out how to make things. nine months later he's running an underwater remote control rov company that has been crowd funded and using this to help do the manufacturing. he's already sold hundreds of them. it's not a million, but do we need million remote control underwater vehicles in i don't know. maybe we do. for $200 or $300 you can own something that will go around the at beach. t a new toy. it's not a toy. nasa is interested. noah is interested. have orders from all over the place. this is from a guy who didn't know how to make anything from this time last year. we are living in a different space than we were five, ten, fifteen years ago. he leveraged social media. he used the blog, facebook, his friends, he used crowd funding

and use it's an interesting space. it's not just about are you going sell a million units? yes, you're going to do some of the stuff. i think square probably gets it made in china. but there are plenty of products and plenty of spaces to be able to create products locally that people want locally. >> the point is also that a lot of barriers entrepreneurship as we've been hearing is getting started. and even if you can't, you know, keep using the tools, if you do have to make a million, that's fibro. we know how to make a million widgets, right? and what's fascinating about this, the barriers to entrepreneurship, you know, not just in the digital realm, but in the physical realm are going away. all right. what would you say to, you know, a lot of manufacturing jobs have gone away and a lot of skilled labor, you know, people are out

of job talk about retraining. but it seems to me, if you have an idea, you can -- . >> we talk about this in music how the democratization of the music industry is actually enabled kind of a rising tide of the middle class musician. no, you're not britney spears. you can make a living selling music online. maybe make a few $100,000 a year and live the music. those people fifty years ago working in coffee shops by day and playing in coffee shops by night to make a living. i was in a cab talking to taxi driver, i was like how is life. it's good. i wish i could make more money. blay, he's working hard. and we talked about idea. would you start a business if you could. he's like, now that you ask there's an incredible place

where taxi drivers it's never easy to find bedroom. i have a great dwrod to create a boardble bathroom. and he went crazy to give me details. why don't you do it? i need little bit of money. there's a thing called inkey go go. i need to help design. there's a thing called tech shop. and he's like holy crap. it's possible. we're in the world where like there's all these ideas and just been repressed every never seen the light of day. the mechanism to raise the money to design the product, to distribute the product, to market the product were never there. now they are. what i think we're going to see is less about a lot of the jobs of people who work employees before are going become entrepreneur and we see the rising middle class of entrepreneurs. >> i think this -- demystification is just going.

it's happening. , you know, and people, they kind of sit on the edge of the rabbit hole, right, you can make something and they flip down the rabbit hole and it's the casings and mel reason all the sudden it's everything. and so it's not only, you know, the manufacturing of big things, at some point time they go, why can't i make this microprocessors and, you know, we're seeing that. people are tumbling down the rabbit hole and saying i can make that and that and that. they understand what's going on. what happened over the past thirty years has been that mystification. we needed that mystification to keep the system working. the system hasn't supported people. the macaroon story deep inside of it has an important point. the bank wouldn't give them the loan.

>> is it mystification. i find people that call it specialization. should techshop making the . >> i think it is mystification. thing is the thing of, you know, that's too hard to do. that's, you know, we would -- . >> it used to be. the education system in many respects encouraged that. you would go and get a postgraduate degree to work out how to make something an mba, maybe. you don't need anymore. the way of -- the tools are there for you to engage automatically. now, you just need to plug them together. there are these stories that are emerging that are allow you to wrap around the existing system. they don't support us. and they haven't supported these sorts of entrepreneurs but our tools do. that's the really vital thing. >> i think the best thing

michigan can do or the city of detroit is literally a marketing campaign like knick key, you can do. everybody has ideas. and, i mean, i was in berlin, actually, there's a panel in berlin v detroit which is interesting. you can feel the energy building. there's a come plaintiff's exhibit over there of germans v the u.s. they feel like we are faster and innovative. what you're starting to sense is build the confidence they can do it as well. we're seeing more entrepreneurship come out of here. i feel that's detroit and began needs is the big campaign saying you do it. here's all your tools, it's a matter of you deciding yes, yes, i'm going to go and try. >> to put it in context, right. it comes from new zealand. they are literally on the edge of the world. we go on the airplane and flew over here and started the company, you know. michigan and detroit is embedded

inside the united states, you know, those resources are literally on your doorstep. there's no excuse not do it. it might not like look a million dollar company. it will turn in to something like that. >> if anybody has any questions. we have microphones here. lineup and i'll call on you. so, you know, one thing that we you touched upon here is the custom runs, right, and people have been talking about a lot about mas customerrization for a long time. it's something that corporations have mastered to one degree or another. but in a way, it kind of fit in with what you were talking about everything having a story or the consumer feeling they have a connection to, you know, to the product, and when products are, you know, i don't want to say they are hand crafted.

they are custom made, right, they can be custom designed, you know, for your specific needs, it's also like we're going to back to some of the connection we had, you know, almost preindustrial. >> there's a clear research in craftmanship. et sy.com is a great website of handmade goods people are producing things in the baifm or tech shop or selling job line. again, these tools enable you to, you know, the machine doesn't compare how complicated it is. you do your design and hit print. it starts to cut and if you own the machine yourself. you walk away at the tech shop you have to stay there. the acted to customize that so it fits. i have a little app i can show you.

i can design a small coffee table. it doesn't look great. i can sign a cough tee table in thirty-second. spin it around. give me the form. it's cool i'm a little bit tall it would be nice if it was economized to my leg. ikea do do that for me. it seems like it comes out of the same height. twont be nice if my furniture fits my height. you use the type of machine. i don't know, yes there's a craft component and that particularly works well when you're talking about social media and so forth. the toos are agnostic. if building a robot and going to do 1,000 of them and charge $20,000 a pop, that's a nice business. it's not really craft, you can bruce them in short run and make a great living. >> i had the opportunity to visit techshop yesterday on the

way from the airport, there was guy working on the laser cutter and had a piece of wood. he was making a game board, you know, and he could economize the game board making a side business off of it. there was another guy he had the two robot legs, he was trying to figure out how to make a robot to balance. he hant got ton the other part. nobody figured out this part. he's a guy here in detroit, he might figure it out. >> one of the first members here was -- italian moved to detroit lost access to the tools when he got married and moved here. discovered us and he gone back to the making beautiful string bases. >> we have the picture question put it up there. keep telling the story. >> there he is. you're not going to make a l many of those. right. but at $20 ,000 a pop, and eight

or ten of them a year. he can make a decent living. >> the customize and the craftman story. is that it provides competitive advantage. if i was a furniture maker, i would make tables that facility him. they would give an advantage over the mass manufacturers because they don't care about max. he sits outside of the db that's the other important thing going on here. >> and the other element to customization. we see it happening in the crowd funding with the perk model, he a two inventedders coming up with the mobile accessory device. it was cool you put the mobile

phone in the to base they created. you put a marker on the shirted and walk around and your mobile device follows. you. they were able -- they got rejected to prototype the thing, so they went to raise money to do it and got them going. they offered different custom build of the base. and through it, they maximized people's willing tons pay. they're willing to pay for the customization. they got more money. they left less money on the table and validated their idea and because their campaign they got the venture capitalist, the one that originally rejected them. it showed there was a serious amount of interest. it gets back to the microeconomic, with you offer suchization you can actually optimize people's willing tons pay and not leave any money on the table whether it's loss or consumer surplice.

>> start -- i encourage people go on that website and not log in through facebook and log in the next time. you can see what they do and play around and get the various interest. they'll learn over time. they'll start to see that these products are related interest you care about. it's a personal store to you. that you're more likely to engage and buy things from. >> yeah. >> have you ever played around with dynamic pricing one of the first ten to donate, you get, you know, the product for $5 and then it goes up by $5 for every . >> our customers do it all the time. >> it's exciting. >> we have a question over here. introdisuse yourself and ask the question. >> i'm chris, the founder of [inaudible] we're a platform for local community. and we had a campaign at inkey go go. thank you. my question we would be remiss to have a discussion with

do-it-yourself with entrepreneurship without mentioning the jobs act. i get asked all the time personally i'm skeptical of it. i'm skeptical because i think that the unhappy of investors for quickly in the cases of unsuccessful companies. a lot of legal battle and unfulfilled promise. all the benefits you are talking about being able to have presale your items, that personal connection with your project creators and dot nors and the community you kind of miss out on all of that with equity-based crowd funding. i'd be interested to hear the panelist's opinions. >> it going ruin it all. >> i have strong opinions. you can read my "washington post" opinion from last friday. look, we have managed to all but destroy the ipo market in the united states in the last two decades.

we had the 92% drop in $50 million and below ipo in the last twenty years. 90%. that is absolutely ludicrous. the fcc and the discussion said, look, it gets technical. the 5060 has raisedded $800 million last year. we don't see why it's out of balance. this is the peak of the pyramid. this is the bottom of the per med and you're saying it's not at problem. it should be five times the size. you apt robust economy that creates jobs. you have to unleash the entrepreneur. it's ludicrous. [applause] let's get personal. right. let's say that you're a kid from downtown doit, you have the great idea for modifying your skateboard, and you have to go to friends and family to raise $10,000?

really? yeah, that's the reality right now. you have to go to friends and family. there's no way for them to legally reach out to a community and tap in to engine and put a blush out. it's against the law. he can go to jail. thank god thank changing. >> for equity. the ground crowd funding you do that. times it takes more than $100,000 to get something done. there will be fraud and problems. i am concerned about the, you know, the or fin or oregon fan -- we have swung the pendulum so far. we have destroyed the entrepreneur society. >> not because of the lack of funding on the -- other issues on the exit stake. there's, i mean, look, facebook, you guys, you pushed off the ipo, you know, for a long time longer than you probably could

have ten years ago because it allows you the freedom to sister dc a different world. a lot of companies are seeing that. all the, you know, challenges that facebook is having issues with going public, what, you know, that -- i think that's a bigger deterrent than not being able to get -- [inaudible] >> i disagree with the first comment. the reason, you know, the, you know, the reason you believe that issue because we have been living on to the regime for eighty years that allow you to find people get you ebbing fip if we had that, and took it away, you would see the incredible reduction in entrepreneurship like we have seen in the last twenty years. i actually think we can use

transparency and other technology. i love the fact that fake game guy that caught, you know, inside of $25 00. i think there's some tools we can use today . >> we were talking about this backstage. it gets back to the whole discussion of, you know, social proof a lot of times people use these craft funding platforms and it's not so much that yes we're going to get return. we're going to get a product but they're doing because they want to see this product or this company sort of come in to existence. it's almost like altruistic motivation. i think there's a danger if it becomes a pure financial transaction, that a. you attract more people looking at it purely as a financial transaction, and they want that return. and that, you know, that might there might be tension between that and motivations from the

social motivations that we have seen create the amazing things. >> so we -- to address your question. equity funding going ruin crowd funding. we think no. we see there are five reasons in the world universally why people fund anything. five. and we call them five p. the first is passion. they want to see the thing idea come to life. the person succeed. they want to do good. the second is participation. they tonight part ever something bigger than themselves. they are working 2k09 5:00. they have kids at home. they would love to do their own dream project thaw i they don't have the time. the third is the perk. they want the e maker the printer, they want the rover under water thing. the fourth is pride. they want to be reck recognized for being the funder. people were talking about how they were like funder number 25621,000. they were there first.

and then the fifth reason is profit. that's only one of five. and currently the profit is illegal right now. currently the first four are dynamicically at play. people aren't just choosing unmoted elevation. there's a mix happening at the same time. there's no reason to believe why it won't happen if we added the fifth p.d. we think fundamentally that crowd funding is a social experience. and anyone who has not funded something that way or raised money that way, does not understand that until they actually do it. because you're funding people. you're not funding idea but people. that said, with the equity crowd funding with fraud we have been at it almost five years. we've been, you know, worried about fraud since day one. the reason we are worried we want to be in business and empower people across the world. we don't want some stupid fraudster ruining it for everybody. given that, we have been committed to that. we have develop machine learn

and the stuff on the back tend not just provide a completely platform where campaign with the most activity get promoted base order the own action not base what we think. it's what protecting and catching stuff and pulling stuff off the platform. >> we have two minutes left. let's get one more question. you have a question? >> my name is [inaudible] you can call me [inaudible] i'm from oakland university. my question is more of a clarification. basically what you're saying is that a person starting out a business or [inaudible] in order to become a successful entrepreneur not so much the kill -- skill they have but the tools they are possess that they use are in possession of. >> i think it's a combination.

>> a combination. >> the tools are ever an amplifier of the skills. you might be really skillful if you don't have access to the tool. it's hard work. if you have access to the tool you may kick ass. you may have access to the tool the end result may not be so great. what's different is that literally from the first time since the begins of the industrial revolution. you can have access to the tools from the cost equivalent of a daily cough foe. that has never happened before. you can raise money on platforms through a computer you owe and tap in distribute manufacturing that will help you dislifer. this is a new day. >> you can make more mistake and not be completely destroyed by them. for the price of a cop of coffee. you try again. >> i think we're out of time. we'll land it on that note. thank you for the panelist and

the great discussion. [applause] >> thank you. [applause] that was great. i don't think you could have a better discussion on the topic anywhere in the world. we're here in detroit. it was a world class discussion. i mean it. fantastic. by the way, the same set was built at techshop detroit. so enjoy that. and there's a couple of things that are going come up in the next few minutes here that are all sort of a theme and the next speaker is one of the parts of the theme. we -- i really -- and we at tech economy wanted to create an awareness here and everywhere. i think it's maybe even more neated in detroit. there are weird and incredibly promising unexpected developments occurring in business preaccept dated by technology and this company about to come out and talk to you is an interesting example.

company only been around since 2009. they are -- i'll let him describe what they are. they just last week raised $68 million from the world most famous venture capitalist firms. anyway, ben, come out and shake us up a little bit, i hope. [applause] >> hello, david told me i have ten minutes to change your entire perception of everything you see in the world. i'm going do that. see if it works. the empire state building, i live in new york. i'm guilty that have. the empire state building was built in one year and 45 days to built the empire state building. it took -- [laughter] two years and two months to build the potato peeler.

something wrong here. eleven years later, we don't have a freedom tower. this is the first jetliner p80 from idea and design to delivery was 143 days. that's what our country was capable of when we needed to be innovative. fifty years since the original concord was designed and it's still the fastest commercial jet in the world, and it was flown completely mechanically, like no onboard computers and switches and things like this. there's something to be learned by all of this. and that is as the world has moverred in to a place where we're making acts and

technologies and servers and things like this. we have forgotten about the things that actually touch all of us as human being. real things that you can hold in your hand, look at out on the street, and sometimes drop on your foot. companies all around the world are having trouble figuring how do we be innovative and capture this. even pg this is a quote, you can't read it, says we haven't created a new meaningful category in some time. this is from the ceo of pg just two months ago. so what does it mean? it means that we need do something about it and that we need take all of the cool things happening in fj and community and internet and put it in to things that matter. the things we touch and feel every day. they haven't made anything new or meaningful in some time. guess who has? a bunch of crazy folks locked in

glass conference room in new york city. we launched brand new consumer products every single week every tuesday at 12:00 and thursdays at 12:00 regardless what's going on in the world. that's going increase to about ten products per week by the end of the year. the reason i started the company, i was an inventers myself, i realized making physical product is really hard. you need have there's some sort of list of tons of different disciplines from design to engineering and manufacturing and retail merchandising. so many things need come together to push one brand new product in the to the real world. what it results is in a world where invention is inassessable. now, we strive to make it assessable we do it by leveraging three things. three things that any company can activate, employ, and put forth to bring all the technology innovation and all the passion that bilged the state building in one year and

45 days in to everything around you. technology, community, and experts. it's the coming together of all three of these things that makes it possible for us to defie gravity every sickle weem. we have got to place we launch new consumer product somewhere between $5 and $50,000. when every company to rubber maid they are spends millions dollars just to throw something against the wall. by the way, the guy pictured here. we call him around the office detroit. he's here somewhere. his name is richard. he runs shop. everything that comes out of this guy's hands. he went to college here. [applause] where are are you? stand up. i can't see. he's here. so all of in happens where people come together submit their idea, some of the ideas are as simple as recycled

science fair projects they had in high school. this is one that was submitted bade guy in wisconsin who graduated high school at the time hep said it's a problem and i needed solution. i can't fit all of my power cords in to the power grip. 709 people came together. and design process and all of the sudden wret world pivotable power strip. you can pivot your outlets and everything. [applause] this is just one product. we do it twice per week. jake's product is closing on million units sold. a 24-year-old kid from wisconsin is made over close to half a million dollar just a year after his product hit the marketplace. this is coming together is a world can do. his product can be found at the best retail stores in the world. now i slow down a bit.

so wrap your head around this. everyone talks about the future. the future, the future. 100 years, 100 years of progress in the fair town over 100 years ago, you guys had a guy that made something like this. it was a car, it was called model t. it was the best selling car in 1909. and it came in black. it got 17 miles per gallon. here we're 100 years later, 100 years later, like, wrap your head around this. the best selling car in america is still a ford! it's still black and gets 16 miles to the gallon. [laughter] that was 100 years worth of progress. let's look at what a community can do in 100 days. 100 days of progress. jenny, a student in atlanta, she

looked around her dorm room and said, everyone around me is using milk crates for things other than milk. and this has been going on forever. when was the last time you saw a milk crate carrying milk if hold records and books. she was tired. they are ugly and i don't want them. second of all, they're not built for this. so how do we take the milk crate and revolution it and change the world. she submitted it earlier this year. a community got to work and we immediately started sketching it figuring how to revolution nice it. we found a ?op new jersey, they spend a few days on it. we found a factory in vermont, they had big molding machines. soon are or later there were tens of thousands of these being made. and jenny and her product went from $5 to $1 million in four

days. knead in the u.s. made by all of us toct as community and people in less than 100 days. it's available at staples and officer max and target. so all of this comes down to one simple thing in my opinion, back then when we were building buildings a year and 45 days and defying the lawings of physics by making super sonic jets. we did it because we had to. that's what we were paying attention to and put our passion in to as a nation. and now we'ring our passion in to making iphone cames games and things that aren't actually moving us forward as a society. why this place works and the community is so dambisa productive is because of the one quote from mr. ben franklin another awesome ben. he said, tell me if you tell me

i'm going forget. i'm going it forget it. i don't care about the new product and discount. i don't care about promotion and the car now comes in pink. i'm going forget about it. he said, show me, i might remember if you show me that car and show me why it's better. i might remember the fact that i should stlait empire state building. but if you involve me i'm truly going to understand. and when people understand the passion that goes in to a product, and the passion that goes in to building a project and coming together as a community, then they're going to understand and really going have your back. so thank you, and please do things other than iphone apps, i guess. [applause] [applause]

>> be sure to join us later this afternoon, republican presidential nominee mitt romney will be in virginia live at 2:15 eastern on our companion network, c-span. a little bit later the focus shifts to state races with the debate between candidates to represent rhode island's 1st district, life coverage at 7:30 also on c-span. and finally, president obama's back on the campaign trail. we'll have him live from the university of colorado at boulder at 9 eastern, live on c-span. >> i was raised by my grandparents. i got to see how medicare worked at a very young age, and it is -- they paid in throughout their working lives. we have to strengthen and extend

its solvency. but i would note that tommy thompson supports a program to replace traditional medicare with a voucher. send people off to the private health insurance world with a piece of paper that doesn't keep up with costs. tough luck, it's out of their own pocket. shifting costs to seniors, as was the sweetheart deal with the drug companies, it's the wrong policy. >> medicare, ladies and gentlemen, is going to go bankrupt in the year 2024. i do not want medicare to go bankrupt. i want to fix medicare, but i want to make sure that seniors in america and wisconsin are protected. and only those that are going to be under the age of 50 by the year 2000 will have a choice -- not a voucher like she says. i have never supported the voucher. what i support, mike, is a program that those individuals that are 50 and under in the year 2020 will make a choice, do i still want to go with medicare, or do i want to go with the federal health employees' benefit which

congresswoman baldwin, all the people in congress, the president gets. >> through the weekend watch more debate from key races starting saturday morning at 10 eastern on c-span. up next, the history, current state and future of the mortgage market in america. you'll hear from charles haldeman who was ceo of freddie mac from 2009 until just recently. he took over the company when the last ceo quit six months after freddie mac came under goth control are. he spoke to students at hard voir harvard's school of business in mid october offering an inside look at running a very large public financial institution. this is about 50 minutes. [applause]ldem

>> this is just under an hour.th >> i'm a member of the faculty here at the kennedy school and the center for business and government. romani school of business and government. it's a pleasure to welcome all of you to this year's lecture, which is funded by nasd, which is now in the, the private broker of the u.s. industry. the focus is on financial regulation and each year we have had a leading public official responsible in some ways for u.s. regulation. this year, our speaker is a tiny bit of a stretch, but not really much at all. ed haldeman was ceo of freddie mac from a 2009 to just a few

months ago. while in that role, ed was not really a formal regulator. he was responsible for running a very large public financial institution. freddie mac and its sibling, fannie mae are what are called government-sponsored entities, gics. for years described as private companies at the public mission of supporting housing or more simply, as mixed public-private enterprises. but in september 2008, both institutions failed financially. they were placed in government conservatorship, becoming quite unmixed just public corporations. the gics have had many problems of their conservatorship. ad was not part of that arriving by the year after conservatorship. but add was part of the

solution. the risk of running freddie mac is a big challenge. it's very large business. about 5000 people. but the balance sheet at its peak, before conservatorship of just under a trillion dollars. that included about $800 b that included about $800 billion of mortgages financed directly by freddie and another $1.7 trillion of mortgages guaranteed of the balance sheet. together with fannie mae, freddie was responsible for roughly half of the u.s. mortgages made to homeowners. since conservatorship, the amount of mortgages directly on the balance sheet to freddie and fannie have declined, but their role in financing u.s. home ownership has in fact shot up. today roughly 3-quarters of u.s. mortgages are made or guaranteed

by freddie and fannie. i had a role in attracting it to run, placed in conservatorship. i was on the freddie mac board, head of its governance and nominating committee. the fur ceo of freddie putting place by the treasury department at the time of conservatorship quit after six months. we had to make a pitch to ed to take the job. the most challenging job which was a dramatic understatement, but the opportunity to do meaningful public service. freddie and fannie needed strong leadership and steady guidance as they rehabilitated themselves and waited for the government to decide just what to do with them. i should point out we are still waiting for the government to decide just what to do with

them. it is now four years since conservatorship and beyond some partisan back and forth about banks' handling foreclosures, housing policy has been one of the elements in the room during the campaign. an outstanding career in public and private sector leading important financial institutions, degrees from dartmouth, 8 ps and harvard law school and started his career with a philadelphia investment accounting firm, cook and dealer was bought by a boston financial firm, united asset management which ed eventually ran. from there he became chairman and ceo of delaware investments, a mutual management co. and next he was called in to run putnam investments in boston, even larger mutual-fund management firm that has experienced regulatory failings by the previous management. he righted that ship and eventually sold a good price for

shareholders to large canadian financial firm. it was at that time we approach ed to run freddie. freddie and fanny, together with broader issues of u.s. government in housing finance is one of the major unfinished pieces of business in financial regulatory reform. is clearly an important issue. we have c-span here tonight filming this. ed has a unique perspective, the perspective of an experienced manager on the frontline and a most thoughtful public policy participant. this evening he is going to talk about where the g s es have been and what to do with them. my great pleasure to introduce ed haldeman. [applause] >> thanks so much for that kind introduction.

i am very appreciative of so many of you coming out tonight to visit me and learn about freddie mac and the g s c. i particularly pleased to be giving the robert glauber lecture here tonight. there are many, many people, perhaps hundreds, maybe thousands of people whose career was launched by robert glauber. i am one of those. robert glauber taught me investment management in 1973 at harvard business school and as he indicated, spent approximately 35 years in the money-management industry. i don't distinguish myself based on my career being launched by robert glauber but what i think it's a little bit special about me, perhaps unique is my career began and ended with robert glauber 11.

and since particularly this week i ought to be careful about the preposition i used in that last claus because bob was on the board. the preposition i used was my career ended with bob, not by bob. this week particularly, i am sensitive to making sure everybody knows we end our time at freddie mac together. i am also pleased the subject of the robert glauber lecture is freddie mac and the gmc so i have an opportunity now that i am no longer the ceo have an opportunity to present a balanced view of the gst. this is the subject, freddie mac, the g s cs which i have come to see others speak aggressively, emotionally. it is a subject that gets very

heated and it is very uncommon for people to present a balanced view. my goal tonight is to present a balanced view of the gst and if i succeeded might be the first time there has ever been a balanced presentation about the idiocy. certainly the employees that work with me, were passionate about the functions they perform, almost a religious kind of mission is what they felt they were doing and freddie mac and it was hard to imagine there were other people in society who had the same kind of visceral feel in the opposite direction about the work they did. neither side able to see the other point of view. hopefully in the course of the next 15 minutes or so you will come to a balanced opinion about

freddie mac and the g s c. i want to start with where they have been and go back quite a bit in time, back to 1938, when the first gst was created, fannie mae to think about what the mortgage market was like at that point in time. by doing so, we will see some of the advantages and good things accomplished by freddie and fanny and the gmcs. before fannie the mortgage market was different than it is today. the only thing available were short-term mortgages, variable kinds of rates, down payment, 50% was the standard in those days. there was a payment at the end of the term, came up with the whole thing at the end of a short-term. very large variations regionally with regard to availability of mortgage money, no standardization in terms of

underwriting at all, all done locally in different standards and the capital market. and rates were quite high in those days. subsequently the mortgage market has changed radically and i think large part because of friday, fannie and the g s c. most importantly the mortgage market got highly connected to the capital market, secondary mortgage function performed by the g s cs connected the mortgage market to large pools of assets, capital markets including not just in the u.s. but worldwide. there was standardization underwriting that was required by the g s cs, virtually on elimination of the variability in rates and liquidity by region. there is a broadening out an access of mortgage money in our country. before very limited in terms of

high income people, very limited in terms of ethnic background. the g s cs broaden that out and made sure there was widespread availability, fixed rate 30 year mortgages. think about what is so special about mortgages in our country today, a 3% interest rate, you can get 30 year money with no prepayment penalty. a pretty unusual economic opportunity. those are the early years. the advantages pscs brought to the mortgage market. let's think about the years just before the financial crisis, think about where the g s cs have been in that period of time and the reason it is worth taking a look at this time before the financial crisis, there are many people who have

argued and written that the gsts caused the financial crisis or the great recession and as robert glauber indicated, i was not at freddie mac until after the financial crisis so i don't really have a stake in this game but this is a chart i would look at to determine to what extent i thought freddie mac, fannie mae caused the crisis. i am not saying perhaps we will find later some contribution, but you would think they caused it and this chart looks at market share and the market share of the bses is at the top. it is that blue line. the red line that starts at the bottom and get high in 2005-2007 is the private market, private secondary mortgage market.

this is the investment bank and commercial bank issuing secondary and be as security, private label securities we call them. look at that radical market share change. freddie and fannie going on the order of 75% down to 40%, following like a rock. the private label taking tremendous share. what would be the cause of that? the cause in my view is a change in underwriting standards, a change from requiring substantial documentation and high underwriting standards, what are down payments, private capital competitors reduced some of those standards and were able to take substantial market share. now imagine you are the ceo of

freddie mac at the bottom market share number, 40%. you have seen your market share go from 75% down to 40%. do you react or not? do you change your underwriting standards? how much can you tolerate in terms of market share launch? i had five or 6,000 employees. it looks like the entire market is going away from me. do i change or not? the ceos, people running the company did make some changes and we can make judgments what we would have done in that position but i at least argue it is a hard call. it would not be easy to be unchanged in terms of requirements on down payment, underwriting standards and have the market share go completely

away like that. this is another indication of, i believe, whether or not freddie was the cause of the financial crisis and here we take a look at mortgage default rates over time. the definition of default, 90 days delinquent. you can see freddie and fanny had the worst delinquency rates, got into the 4% or 5% zone. for the overall mortgage market in our country it got to be 10% and for the sub prime sector of the market got up to be 25%. again, i believe freddie and fannie did lower their standards, look at the resulting delinquency rates and you can

see a big difference between the way freddie and fannie behaved and the way the rest of the industry did. where i have come out on this is i don't believe the two pscs were the cause of the financial crisis. they did reduce underwriting standards, but i think i can understand why you might have done that given what the competition was doing. i do think there were some mistakes and problems made that were connected to the g s cs and certainly one that i found troubling was summarized in a book by gretchen morganson called reckless endangerment which is a story of crony capitalism exhibited by the two g s cs. i view that almost as a playbook

on how businesses can execute crony capitalism and get close to government for their benefits not just in credible lobbying organization or massive campaign contributions but things like hiring repeatedly people coming out of government, opening regional offices in all of the congressional offices and hiring relatives of congressman in order to fill those regional offices so to be sure some of the criticism gretchen offers is accurate. a second problem was the implied government guarantee. this was not something that necessarily was generated by the gsts but rather they took advantage of it but what they

were able to do because of the implied government guarantee was borrower essentially as much money as they wanted to as the government rate. unlike most companies when you put on more and more deficit the rate goes up, they were able to borrow almost unlimited amounts at the government rate and create a portfolio which some people have described as a hedge fund because they were able to arbitraged the difference between government rates and the rate that they used to buy private label securities. i don't think the g s cs -- i do think it is a stretch to call them the cause of the financial crisis. so let's talk about what the gee scs have done subsequent to the

crisis since they put into conservatorship. that is the point in time i am more familiar with and one of the things they have done and the reason i took the job is they have been the only game in town for the mortgage market. and here are the numbers accounting for 75% of total mortgage market if you add in fha, and other government mortgage providers, you get 95%. the private market has been providing a only 5% of the mortgage money where would we have been over the last three or four years without the gst performing this function? in addition, we worked with the administration and treasury department to execute government programs, home affordable modification programs and home

affordable refinance programs and you can see number of modifications done since conservatorship is 1.2 million homes. a big number. the only problem with that number is when the idea of modification was first generated, the program was quickly taken over by political people in and close to the white house and they decided to make an announcement what half was going to do and it would be 3 or four million modifications. i have no idea how anybody got the number but somebody wanted a big number and as a result 1.2 has always seemed like it was not very successful. a pretty big number and the gmcs executed not just the modification program but also the refinance program.

one of the things we didn't do was we didn't do principal forgiveness. i am not quite ready for this, but up here, we didn't do principal forgiveness. some of you have red criticism about us not doing principal forgiveness. we believe pretty strongly as did our regulators that there was a real risk of strategic default were we to offer a program of principle forgiveness which is to say even though freddie have lots of underwater mortgages, over 80% of them are still current. nobody had any problems or continued to make obligation despite being under water. we worried about principle forgiveness, having some impact on those 80% of underwater mortgages and we thought we

should focus our attention rather than add principal forgiveness. i want to spend a minute on another part of our subsequent conservatorship which would be profitability. many of you have read about freddie mac and fannie mae being a black hole. the record in front of you shows two bars, one is the amount of the draw we have taken from the federal government and the green bar is the amount of dividend paid and what a lot of people don't recognize is the dividends we have to pay now are a number like $7.12 billion a year. if you generated $7 billion in in, you would still have to draw something from the government and that is why people talk about the draw. if you look at the total record the entire time of

conservatorship the round numbers are a draw from the government of seventy-four billion and dividend of $20 billion meaning a net drop of 50 and you see in 2008 when that was done, the draw was forty-eight billion so almost everything subsequent to 2008 has been a draw required to pay a dividend. that is a net neutral impact on the treasury. the reason we have been able to get to that level of profitability is all the mortgages that have been put on the last four years during conservatorship have been high quality in terms of down payments and like those score much higher than was the case prior to conservatorship and this new book subsequent to conservatorship, accounts for 60% of the total book of freddie

mac. that was all past. we talk about the real old-time period 1938 and the pre crisis period and post conservatorship. now let's look forward and think about what to do with freddie mac going forward. it has been a great frustration to me, the administration has come up with no program policy or recommendations what to do. it is 50 months we have been in conservatorship. 15 months that 6,000 people work at freddie mac down no, no job security. the treasury was to put out a position paper in january of 2010 with suggested solutions, they didn't do that. didn't come until january of 2011 and the white paper listed three options that would have

been auctioned to everyone on day 1 of conservatorship. no progress was made in this area particularly when i believe very strong consensus of what we ought to do. before you is a proposal that was put forward in august of 2009. by the mortgage bankers association which talks about forming companies, which they called mcgees, a mortgage credit guarantee companies, which would be three to five in number, private capital companies that would compete with one another, there would be no government guarantee of the companies. there would be a government guarantee of the security, mortgage-backed security but for that guarantee, they would pay an insurance premium much like

fdic insurance. the securitization would only be a plain vanilla kind of mortgage. anything exotic would be done in the private capital market and there would be no retained portfolio at all. we had a sensible proposal in my view in august of 2009, three years later, a really smart guy at the treasury department who is responsible for the restructuring of aig, a lawyer and investment banking restructuring kind of person put out a proposal which has many common ingredients in the mortgage bankers association. here the emphasis is on a government agency, federal mortgage insurance corp. which

authorizes management, regulate a series of securitized ears, and the beauty of both of these proposals is the technology and infrastructure and system and human capital of the gsts would not be wasted, the securitized ears that would compete in the capital market going forward. there has been some consensus around a proposal that is feasible and woodwork and one was issued, as someone had an ax to grind, in the treasury department presumably his view is what is best for the economy and a similar kind of proposal and the estimation, and i wish

we could move ahead with something like this and it would be tremendous benefit for the taxpayers' to get some usefulness of this investment they have made in the gmcs and keeping them functioning to use the infrastructure in a way that allows taxpayers to get a benefit, get some modernization of the investment that has been made over time. in summary, where should we go, the most important thing is to go somewhere soon. it is incredibly challenging to work at freddie mac and fannie mae and have this uncertainty and not know if you have a future. it is debilitating over time. these entities are becoming less corporate like and more

government like and from my point of view, that is regrettable. i hope i have given you some insight into where we have been and where we ought to go and i would be interested in your questions. [applause] >> thank you. let me just remind all of view of the ground rules. we ask you to identify yourself and do something very simple, to ask a question rather than make a speech and that the question be reasonably contained. i am going to ask the first question. you have said where you would like to go. you are concerned nobody is going there yet. any forecasts when you think congress is going to go somewhere and what the process

will look like? >> i made my decision to leave freddie mac because i thought it would take a long time before we would get resolution unfortunately. i joined the company middle of 2009 and at that point, everyone was certain that the company would be watched in some form in a couple years. .. possibly in a couple of years. obviously, we have been disappointed in that. as the calendar rolled through three or four years, i concluded looking at my birth certificate that i probably wasn't going to make it. that was one indication of my pessimism about when we were going to get this resolved. it was clear to all of us that as we got into the election year, that nobody was going to spend any time on it, and it has

been remarkable how the candidates have been on the subject, given how much of it we have talked about. significant things like tax policy and policies on deficits. i think there is going to be a long period of time before we will get any action on this. i'm just talking about when someone puts out an idea, which has to be challenged in congress and debated, and then you get something fast, and then you have the implementation. after all, think about where we are as far as implementation in terms of obamacare. unfortunately, i am very pessimistic about when we finally get resolution.

>> yes, sir. >> i am a student at harvard kennedy school. you started your remarks talking about the incredible remarks before the conservatorship. as we think about the entities that will follow, how we think about creating an appropriate amount of political installation against lobbying when it comes to capital requirements or appropriately pricing governments guarantee? >> that is a real important question. i can tell you that during my time in the conservatorship. we had really strong restrictions. we were not able to make any political contributions. not just the corporate level, but i, personally, was not able to do it. i happened to go through law

school with a couple of senators. i was not able to visit with them even on a personal sense. it precluded from any interactions. we had to go to a regulator. initially, all the lobbying and the lobbying people were let go. i can tell you that it has been totally insulated with a couple of exceptions, which were really annoying to me. which member of congress, who felt like they own freddie mac, like they own me, but they would call on my personal cell phone. i don't know how they got it, trying to make me intercede on

some action the company was about to take. presumably a foreclosure can kind of activity that have gone through the process. it was asked to intercede. there was an attempt in that direction. all of that makes me a little bit pessimistic about your question. i think when we get to the resolution, one would hope that we would have the private capital company, which would be regulated very closely with restrictions on campaign contributions, lobbying, those kinds of things. but we are also going to have to have strong leadership for those who don't buckle to the pressures that they receive. but it is a problem.

i guess against the reason that i'm not too pessimistic is because we have gone through this period of time where we have been incredibly disciplined about employment and political activity. >> you also talked about the discipline of the gse during this period. what they have guaranteed. have you come money pressure? >> very modest. obviously, the statements made by members of the treasury department administration suggesting that we were too tight or the other place that we would get a little bit of pressure is how aggressively we took the push backs to financial

institutions. the very modest and reasonable, i would say, not particularly troubling. >> okay. >> hello, i am a student here. i really like your charts. it looks that we focus on the single-family side of things, and i'm interested to see about what to think about the multi-family aspect. >> thank you for that remember to grab a supporter. this is the second time i have spoken since the vice presidential debate, and as a result, every time i sip some water, i wonder whether it is too much or too little or whether it is appropriate or not. [laughter] >> so multi-family is a really great story. it is about 20% -- excuse me, 10% of our business, but it is a successful business.

it is one where we have had -- i showed you where we are no matter what time period we are looking at. there was a default rate, such that many people but that can be spun out and that is a -- another way taxpayers could receive money. i'm very proud of the efforts that we have made in analyzing multi-family. i think that it could be a very successful standalone company. going forward.

>> hello. i am asking this question on behalf of the jfk junior reform committee. would you say that the companies have lost the ability to recapitalize themselves? >> i think in the traditional way of using the word recapitalize themselves, yes. because of the 10% dividend requirement. when most got institutions to have bail out, there was a 5% dividend with an ability to repay that. freddie and fannie, the dividend was 10% with no ability to repay. as a result of that, the ability to recapitalize themselves, to use your phrase, really isn't fair.

and the numbers for freddie mac is like $72 billion, meaning that the dividends payments annually at 7.2%. it is really hard to generate enough capital to meet that dividend and accumulate on your balance sheet. you have a chance to recapitalization. >> i am the senior at the college here. thank you so much for taking the time. you begin your talk by discussing the important advances in the mortgage market after the introduction of gse is. i wanted to know in your opinion and looking forward, to what extent do you think a more purely private area is able to or would be able to achieve the public polls of the gse?

>> okay, let's hypothesize no government involvement. you'll remember that i had limited government involvement, none of which are too big to fail, none of them have a government guarantee, but the mortgage-backed securities that they issued would be government guaranteed and there would be an insurance premium paid for that guarantee. that is the extent of the government. let's hypothesize to go to your question that there is no ultimate reinsurance, ultimate backing of the security. the disadvantages to that, i think, would be largely in the cost of mortgages. i believe that the mortgage rates would be materially higher

as compared to my suggestion. and the reason is that i think that there are big sources of capital worldwide that will only invest in our housing mortgage market. if there is some kind of ultimate government backstop. i think there are big pools of assets in asia, for example, that will only invest if there is an ultimate government backstop. i visited during my tenure with some of the holders of freddie mac security from foreign institutions. and they said they would not buy anymore and we would reduce the holdings, because even under the current state of affairs, they were not exactly comfortable with the ultimate government guarantee.

we made it clear how significant was to have that guarantee. big pools of assets in our housing market. for that reason, i am willing to tolerate a limited amount. >> without government involvement, it would be a higher price for mortgages. and i bet that is right. but the consequence consequence would be a higher mortgage, of course. what would be the consequences of that. would it be good, bad, or not either? >> the consequences of higher rates? >> just. >> well, i think that they would be significant. i think that already, we are going to narrow down the

universe of possible homebuyers. because the down payment is so large and if you compound that with a higher interest rate, you will narrow that potential home buyer down to a level which i think is unacceptable in american society. and we definitely went too far towards the goal of making everybody a homeowner. we had that single-minded objective of getting that percentage higher and higher, and i think that we push too hard. but i think that if you compound a 20% down payment with significantly higher mortgage rates, i think we would be marrying the universe of homebuyers into small groups.

>> my name is jacob and i'm a sophomore here at the college. i wonder if you could talk about the climate and culture when you assumed leadership in 2009. what were the expectations and pressures? >> yes, i am trying to describe a little bit. so there are five or 6000 people that work at this company. many of them, like people employed anywhere in our society had in invested a lot of their money in the company. the 401ks, stock holdings. many people are proud of the company that they worked for, and they bought stock in the company. their holdings went down to zero. i am not saying everyone had 100% of a 401k, but there were

big holdings that went to zero. and then the people were criticized by politicians as being the cause of the financial crisis. these are people doing great work helping people. many of the employees told me that when they would wear a freddie mac t-shirt or sweatshirt to the supermarket or the home depot, they would be accosted by people. acosta for what they had done. as bob indicated, they were put in the conservatorship. six months after the ceo arrived he left. two months after he left, the

person who was a chief financial officer, age 42, took his own life. he didn't do anything -- there was no fraudulent activity, but because of the stress. so the employees had that list of thoughts and pressures with no job security or idea whether the company was going to exist. remember that there were senior politicians who repeatedly told the press that freddie mac should be abolished. in the paper that the treasury put out, they said many times that the company should be ground down. that is what the friends of the gse said. imagine the morale of the people because of that i try to spend as much time as i could being

visible in talking to them and trying to come up with hope for the future. which was around this notion of us getting ready in some form to relaunch the company. the good news is that people hung in there and they continue to work hard. they are continuing to function quite well. >> hello, my name is josh, i am a student here at the kennedy the kennedy school. i want to ask you for your perspective on -- or your perspective on the book faultlines. it talks about the need for cycle group regulation. he observes that we come up with these great ideas. ideas like you articulated very well. they get this number, political

pressures are applied to what he calls credit populism. seeing that we need to figure out ways to build regulation that somehow that won't happen. they are immune to those pressures. any thoughts on how we can do that? >> no, it is a great thought. only partially facetious, one of the best ways i know to prevent many who have been in this situation before.

builds and builds and builds, and people become more and more aggressive as things go up and up. and then they reverse themselves. it seems like a new generation needs to go through that for they believe it. i think experience and people -- having people on staff, the regulatory authorities or companies who have gone through a few cycles is one great thing to have there. then i think that trying to insulate regulators from the political process is really an important thing to do. we certainly did not do that right at the gse. you can see there was an attempt

made to take the teeth out of the regulator. they got too aggressive. they call people on the hill to intervene. those are two thoughts that i have on how you might be able to accomplish that goal be mapped okay, we have to end, so let me take one last question. scott, i am a stock member here the kennedy school. thank you very much for your talk. a question on the campaign. you said that there is a proposal from the treasury in terms of what to do next with the gse is. and presumably, an obama administration would follow something along those lines after dealing with the fiscal cliff and tax reform and all the other issues that are on the agenda. what about romney administration? what sorts of proposal, if any, have been articulated? >> well, let me make it clear that i did not say that there had been a proposal by the administration.

they produced a long awaited white paper in january of 2011. a government solution, he plans solution, or a hybrid solution. i am not being facetious in saying that. so we haven't had a proposal from either side. the mortgage market has changed because of that and i think that the republicans and the administration, as they came in, would want to go more towards a

free-market kind of solution without any gse. i would hope that the suggestion that i made and the mortgage bankers association made would be seen as something that both sides could live with, and that it is largely a private capital solution. there is not a freddie or fannie. they're our are capital companies that are competing to have the ability to pay a premium in order to get a government guarantee of their underlying security. i would hope that that would seem is enough of a free-market solution that republicans would be okay with it. and enough of a protection of the housing market that the democrat folks might find it acceptable. >> okay. thank you. >> thank you.

[applause] >> coming up later today come a discussion on u.s. policy and how the next administration whether it is president obama's second or mitt romney's first, from georgetown university, you can see that live at 4 p.m. eastern on c-span.

>> okay, let's get the album by grace coolidge during their white house years. part of the coolidge family papers. we have one box that's just photographs. and then several boxes of other documents. photographs are heavy. and the album should be in the back of the box here. here he is. unfortunately it's on black paper, there's not much we can do about that because we don't want to change the artifact nature of the album itself. starting to crack, some of these pages are separating. this is a photograph of calvin coolidge the day before he became president. he was in plymouth vermont visiting his father, doing some

chores. he did have the press along with them. you can see they took one photograph fear of him with his suit jacket on. and then another one of him without the suit jacket on. >> more from the vermont historical society this weekend, look behind the scenes of history and literary life of vermont's state capital, montpelier, saturday at noon eastern on booktv on c-span2 and sunday at 5 p.m. on american history tv on c-span3. >> these are the stories your textbooks left out. they're great stories about real people in american history, very important moments in american history that we don't know about. the first pilgrims in america came 50 years before the mayflower sailed. they were french. they made wind. than the good sense to lead in

florida in june instead of december in massachusetts but then they were wiped out by the spanish. we completely let the story out of the textbooks. the most famous woman in america was taken captive by indians in 1695, march to new hampshire and in the middle of the night killed her captors, realized she could get about the for scouts come indian scalps. she went back, scalp them in midway to boston where she was a hair one. she's erected a statue for her, the first statute to an american woman, a prominent statute. showed her with a hatchet in one in an scalps the other. >> kenneth davis is her guests sunday on an in depth. is a best selling author of the don't know much series. watch live at noon eastern on booktv on c-span2. >> next, a former general partner at goldman sachs gives advice to business school students.

leon cooperman has spent 45 years in the financial industry and started his own hedge fund in 1991. today, his own make advisors assets are worth $5.6 billion. last year, he made news for charging president obama with engaging in a quote class warfare against millionaires. his speech about economic expansion and investment outlook runs about an hour and 10 minutes. >> good afternoon. glad to hear. nine meangl is jerry dauterive j my name is jerry dauterive and i like to welcome you to our leadership institute distinguished leader presentation. we are glad you here. hear you d have you here. c-span is taking. i ask that you turn off your

cell phones. i would like to thank you for joining us today. our president and vice president is here of the company. i would also like to indicate that charles haldeman was our distinguished leader and speaker. it is great that also mario can join us to honor his friend, leon cooperman. we go back a long ways. our speaker last year is here to help us welcome leon cooperman campus.

he and mario are legends. i heard it on cnbc, so i know it can be true. mr. cooperman has been in the investment and financial industry for a long time. he is the president of the new york society security analysts. he said earlier today that people talk about him, but he doesn't care for, but he needs to. not only is he a leader in the world of finance, he is also a leader in the world of philanthropy. i was reading an article from "the wall street journal" about

him. and it was entitled, giving others a chance of the american dream. he talked in that article about he feels that he lived the american dream and he has devoted a good part of his life to giving others the opportunity to pursue the american dream. he and his wife are from the giving pledge, a commitment started by warren buffett and bill gates. they give away a majority of the wealth to charity. he is a longtime donor to the columbia business school. he is the recipient of the american jewish committee humanitarian award. the boys and girls club of newark, new jersey, and again, you know, he is a real leader in both fields. he has a bachelors degree from hunter college business school. and he is an honorary doctorate

from rutgers university. it is my pleasure to welcome leon cooperman. [applause] >> thank you for the gracious introduction. i think i'm going to keep the reserve for my obituary. [laughter] >> it is my pleasure to be here. mario delivers. it is the essence of a good friendship. i have found over the years that exceptions like these are valuable to you as the quality of your questions.

i would be happy to respond in the areas you'd like me to develop my thoughts on. as the cover sheet shows, i'm talking about life, hedge funds, the investment outlook. given my diverse background, i will respond to your questions from a number of vantage points. i'm a kid from the bronx that became successful so i could speak to the issue of being poor and being rich and that is an easy one -- which is better. [laughter] >> second, i have been a research analyst. i have been a pontificator, and

a manager of the organization for the past 20 years. i can speak to being in the brokerage business selling research services to people and on the buy side. there thirdly, i was a director of the processing for 20 years. i can speak to the issues of corporate governance. and also lastly, i have had a philosophic involvement. really, it has been a great trip for me from humble beginnings. my god, may he rest in peace, was a plumber in the south bronx. very similar. i have to put mario in the humble category. i was the first generation born in the country of america.

mario's grandfather died in the cool mind in 1890s and he was born in america. mario is equally successful and deserves all the success. but i think in describing a trip from the south bronx to hear, i should be an inspiration to all of you. i say this with great sincerity. with an average iq, strong work ethic and a heavy dose of good luck, you can go very far. i started my journey going to public school in the south bronx. i then went to high school in the cell phones. given my skills and language, i would probably still be

nonwhite. i'm probably still have a problem with english. upon graduating from hunter, i worked for 18 months at the xerox corporation. in return to columbia business school where he got an mba and open the door to wall street. my first observation is whether it was right or wrong, getting an advanced degree to improve my credentials, open the door to wall street, and i'm sure, goldman sachs, probably not recruiting a guy my level, so that mba open the door to goldman sachs for me. i, myself, prefer a phd, but that would stand for poor, hungry, and driven, because i get to learn from their parents. ever since it was introduced into the marketplace, i have

used -- i used it this morning, a men's cologne called obsession by calvin klein. frankly, that is the word i would describe to describe my approach to the business. a shorthand translation would be the harder i work, the luckier i got. i would say that hard work has never killed anybody. and i think to be successful in your chosen field of endeavor, be prepared to achieve that success.

when the sun comes up, it doesn't matter who you are, but you hit the ground running. in my industry, roughly speaking, if you allow me to round off, 10,000 mutual funds, many which are managed, 1% or less, let's say, roughly 10,000 hedge funds that request variation of 1% or 2% and 20% of the profits in the enumeration. assume for the moment that your clients are fools and ours aren't. we have some of the most sophisticated clients. if it is like this, they

basically think you are outperformed. you figure out what to do and the market is underperforming. if you want to get paid more, no resting on your laurels. you have to work harder. you're probably in the wrong business if you have second thoughts. these are some of the elements of philosophy that i have. but they don't want to share them with you. it took me 45 years to develop this glossary. i see a lot of young nice faces in the audience and i want to impart this to you in your careers. andrew carnegie center on 1900 that i wish to have in my

epitaph, okay. one of the secrets to success is to surround yourself with the most able and capable people and don't be threatened by them. but be benefited by them. within my career, have been very fortunate to have, in my service, men and women that made me better than i was. and i was able to hold onto them because i properly share the fruits of the labors. it is important to have the quality people on your side. so i share the benefits of my business with people. those that work with me. my personal philosophy of life i summed up four years ago when i took my entire family at that time -- i had two sons, 46 years old and 43 years old.

my two daughter-in-law's. at that time, two grandchildren. i took them all away for an all expenses paid vacation to a hotel. and i explained to them that a male human who is surviving to age 62, will typically live to age 85. the good news is that i'm doing well, but the bad news is i have lived a great deal of my life investing. i gave up four observations about life that i've get to you. that is, number one, there's nothing more important than family. they root for you and care about you the most. stay close to your family. under all circumstances. second, i really consider mario one of my great friends. it is great to have friends, but to have friends, you have to

know how to be be a friend. extenders cell phone every time. be trusted and supported. in the words of ralph waldo emerson, the only way to have a friend is to be one. that is very important in life. third, i told my kids, never do anything in life that you would be embarrassed about that appeared on the front of "the new york times." finally, when you are the chief financial security officer, share with others less fortunate than yourself. in the biblical sense, we are at a moral obligation to help others in need. i have read a lot of words of other people that struck me in a manner that impressed me better than words that i could make up. i use the words of others.

i don't know any of these people, by the way. i knew henry ford, but not any of the others. the first test of a gentleman is to respect those that cannot be of any possible value to him. i have seen people over the years -- those who treat those in a superior position to them very nicely better and nasty to people that are no value to them. i detest that kind of behavior. my view, respect people no matter what they can do for you. whether they are above human life or below you. people deserve respect and dignity. they will come back and report you in many ways. henry ford said that the best way to make money in a business is not to think too much about making it. warren buffett, who is a contemporary, one that mario and i have great respect for, he said go to work for the people you respect. don't worry about the money. everything else will take care of itself.

you know, we all economic people to a degree. but i think it's very good advice. be with people you respect and admire and don't worry about money and hopefully the rest will take care of itself. william ward, i thought his words were very insistent and i believe in his words. before you speak, please listen. before you write, then. before you spend, earn money. before you invest, investigate. i do that most of the time. before you criticize, wait. before you upgrade to forgive, before you quit trying, before you die, dead. that is a very good sequence of advice. i have a granddaughter that is poetic and she just turned 14. she had been writing and came

back from two weeks in santa fe, new mexico. an educational two weeks for a child. [inaudible] >> if you are not for others, no one will be for you. if you are for others, you will be for you. now or never. i would say the relevancy to you, because giving is probably not something you can afford to do now. you are in a competitive world today. one of the things you should do

is hopefully you want to add your own initiatives. at a minimum to improve your stance in the world is to try to find community activities that you can get back to to distinguish your resume from the next person. it is people like me are getting resumes every day in this difficult economic environment. from high class standing people. 800 sats, they are looking for jobs. what you have to do is find a hook on your resume and show a high sense of community service. when i interview people, basically, the desire and

commitment to be the best, a strong work ethic. here i am introducing a legend. you know, the legends do something different. you know, these are some of the characteristics. you can get help from the university. if numbers don't speak to you, in other words, ben graham wrote a book called the intelligent investor in 1954. in the bookie prophesies that analysts evaluate management twice in the process. once through the numbers. when you look at a company, the company is growing and the

return investment is widespread and profit margins and whatever -- the return to capital and whatever -- those are resulting from the efforts imagine. so you want to look at the financials. also, you want to look at the face-to-face and understand the business properly. if you don't like working with numbers and people, my guess is that the area of security analysis might not be that appealing to you. i found a tremendous amount of interest in the hedge fund industry over the last five or six years. i want you to know that it is not a one-way street. this is an article written in "fortune" magazine in 1970 and 1971 by a distinguished writer

named carol. she writes a lot of the annual reports for warren buffett. she couldn't have been more wrong. this article is written to rein in the death knoll for the hedge fund industry after the 68 and 70 market. if you look at this, everyone has been really beat up. okay? but today, i could name is the hedge funds that are over $10 billion. so the argument that the industry was over was totally wrong. it is a little bit like darwinism, right? survival of the fittest.

what separates the men from the boys is the diversity and how you deal with it. the last 20 years, i had investors, you lose a certain amount of self-esteem is the environment waves, but i always buy my way all out of the hole and come back. and let me talk to you about this. looking at the economy and interest rates, i'm going to try to talk about everything and let the q&a drill down to where you're most interested. we are in equity hedge fund with

macro capabilities. macro being bonds, currencies, commodities. we have a management $6.6 billion. about 14 in our firm. we try to make money from investors in five different ways. no one way is more important than the other way. the five ways we make money on number one, market direction. i don't care how smart you are, we spend a lot of time studying the economy, the fed, market

valuation, and trying to determine whether stock markets are going up or going down. number one, we do a lot of work in the area of allocation. we look at stocks versus bonds. and with bombs we look at government bonds versus industrial bonds. high-yield bonds, and structured corporate credit. we are trying constantly in canada and western europe. what we are trying to find is a straw hat in the winter. during the winter, people do not buy a straw hats. they buy them in the summer. so it could be potentially undervalued.

third, we like to spend the bulk of my own personal time on the long side. we visit companies, we knock on doors. we study industry statistics. we study valuation. we try to determine whether stock is misplaced. we buy it if we think it is undervalued. we wait for the market to recognize what we think we will recognize. then we move on to the next undervalued security. fourthly, we distinguish a hedge fund from a mutual fund or it and it takes two things. an egregious structure. most managed from 1% or less. hedge funds are similar to this and get a percentage. the other thing that establishes them as you can sell stock short. if you sell something you don't own because you think it is overvalued, it declines in price.

we do a certain amount of macro investing where we might have a view of interest rates that we have -- long or short bonds. we can do that with oil. the economy is slowing, there could be an extra supply from the price could drop to $80. the idea of buying it at $80, we might buy that 100 because we think it will do well at $120 for it can be currency or commodity and it could be bonds. 13.5%, all the fees to the investor. at 100 points in excess of s&p 500. we have done not that with an average position of about 70%. we are less than fully invested

and we returned the excess of the market. now gets more difficult. when we talk about the investment outlook. now gets more difficult. when we talk about the investment outlook. i am really kind of added information stock because i've been very optimistic the last 2.5 years. but i'm beginning to become a bit optimistic. rather than specific forecast, i would like to show you my methodology. some of the things i am looking at don't resonate. again, i should tell you something about the right career path to consider. some can tell you more about the forecast in the future. i have mentioned that the 6.6 billion that we manage, roughly a quarter of that is the

capital of the partners of the firm. warren buffett popularizes his notion that he eats his own cooking. if we lose money, we lose more than anyone loses because of the investment and we make more -- we make more than anyone makes because of our investment. in a sense, we have a complete alignment of interest. we live in exciting times. but i have to say that the message i'm giving people now, every forecast or market view is based upon certain assumptions. let me tell you what monarch or that i will develop my views in more detail and statistical substantiation. my first assumption as the economy continues to grow,

albeit slow subpar rate at about 2%, and that we don't fall into recession. that is very important. almost every recession is preceded by a bear market. if we don't have a recession, the likelihood of a bear market is small. secondly, and this is taking a lot of brainpower and people. and that is the ecb, the european central bank, continues to stabilize the command in europe and the fed itself in the united states. and the eurozone governments, particularly germany, acts in a cooperative way to fund a weak european sovereign debt. further, the european banks raise the course of the capital they have to raise. and the ecb takes off troubled loans and they earn money with a

positive yield slow curve. the european financial institutions are earning their way out of the hole. let me just say that there have been two schools of thought. one school of thought has been that the problem is so complex, so difficult to understand that it exceeds one bandwidth then they don't want to invest. the second school of thought, which i perceive would be 45 years and investing, everybody believes that it generally doesn't hit. so maybe it was an wasn't easy way out. what i have been saying is that the breakup of the year awards eurozone, the ecb, the imf, 70%

funded by the united states, germany, france, japan, will all chip in to do what they have to do to kick the can down the road. and we will not have a catastrophic outcome in europe. it is still my belief. when people start to think more about them on those ways, if you listen to what germany is saying today, compared to what they were saying a year ago, it is totally different. the euro breaks apart, and they stock trading separate currency, they will go to the swiss franc were germany cannot export anything competitively. it is important to keep the eurozone together. in the united states we have one central bank. it is more difficult to bring everyone together. the third assumption i'm making is being challenged right now. the chinese are in the midst of

a soft landing, not a hard landing. we will have growth between six and 7%. you know, that has to be watched very carefully. the chinese government, i think, is in the stages of significant easing. they cannot afford a significant economic slowdown. because of the potential for social unrest in the country. the best way to think about the problems is simple. 800 million farmers and we'll need 200 million farmers. many people have to have employment. if they don't have employment coming of social unrest. the biggest challenge the government there has defined, jobs for 25 million more people every year. that is what they are working on. so the principal conclusion is driven by these authorizations and all my discussions that follow, which justified the

statements. okay, the conclusion that i have is it is not clear whether it is a good or bad neighbor, and i still believe that, by the way. the first thing, let's talk about the economy. a picture is worth 1000 words. basically, as you can see from the little column, the average economic expansion, when one gets going, basically is lasting about five years. sixty months. whether this expansion could be longer or shorter than average, if i had to debate that, i would argue that it might likely be longer than average. so many sectors of the economy are still operating below potential come and given the severity of the recession of 2008. so we are starting to come back below demand.

housing is way depressed and below a normalized demand. .. there's still pent up demand the consumer sector. the conservative financial poverty, housing starts housing starts below normal andi

we have one of these factors, but i think these are reasons why i stand before you expectant economic growth to continue. our economic framework is on re this exhibit we are expectingwem somewhere between two to 2.5%roh growth and it's not evident, it's not a feel good environment but nonetheless, its environmenf of growth. the reason i say it is not a feel good environment in thestah statistics, in the u.s. economye typically they lay before us, p people seeking employment grows 1% a year. the productivity of the labor force grows about 2% a year so you need another 3% growth in the real terms to make a dent oo even to keep unemployment level.

we are not growing at that rate ng are growing at a sluggish goi sub-par rate you can argue for su different reasons the need for the government to the letter ani get their house inf order for te budget deficit, the certainty that exists in america over thec fiscal cliff and the tax regime and antibusiness policies are being practiced by some we are not going to go there aggressively. whenever the case may be the economy is growing but it's not a feel-good economy because they growth is not rapidly enough to reduce the level of unemployment inp the economy. giving you some support, very important area in the economyrty for the consumer psychology is housing and you see the ingredients for the recovery ine housingnt activity, affordabiliy is near record high at the toph. left-hand slide. home prices to dispose ands income is running their record low levels. so how does it keep? ahe value of a home is a

function of the capitalized course of renting. brent has gone up much more e lative to house prices so it's now actually cheaper to buy a t home than to rent.to buy than the people haven't been doing it aggressively yet because one ofy the most important expendituresa ey ant home purchase to the extt they are not confident the home prices have bottomed out they don't want to make that leap th. as the search is the evidence come to pass prices out come the back the bidding contest in neil beamer to mistake. homeownership has declined to very low levels. rent mortgage payment is at record high. again, it's not cheaper to buy than rent. you see existing home prices starting to rise. voter confidence is rising anheuser inventory and all this excess inventory has been

absorbed. i think it's an important underpinning of the economy. secondarily, we talk about the fat. when mary and i came to wall street 45 years ago, there is a trite, but correct statement. that was the central bank or federal reserve word wrote the market letter for wall street. when the fed was tightening canoeists restrict it. negative the market and the fantasies he is positive. the central banks all over the world are telling you they want more growth, are willing to risk more inflation. they want more employment and attracting interest rates down to relatively noncompetitive levels. so you look at my supply growth exploded over the last couple years. the federal reserve balance sheet is exploded as they taken books that the banks to get the banks more ability to lend to the private sector. retailing with the federal funds rate that has been seared now for a couple years and recently

fed chairman bernanke spoke and how about the prospect that interest rates remain in the short embassy row for a couple more years. now the ecb balance sheet as a percentage of gdp. the brink of the koran lic. central banks all over the world, china is in very early stages and that's got to be positively. another common sense way of explaining that, and i'll try to remember not to repeat myself, but basically all of us in this audience to varying degrees have a challenge of investing financial assets. some have little, go to school and get an education. some have more. what are your choices today? choices are basically cache, which is zero. u.s. government bonds which i discussed his 1.5, 1.6%.

negative return after inflation. high yield bonds i'll show you in a little while there repriced others common stocks as you go through the next few minutes, you'll see why they're in the financial asset neighborhood. very, very important to any value investor is where you're getting into the market. you could be very right on your stock pick, the running entry point and not make any money. so i try to give you the market versus historical days. for the last 50 years and 2010, the s&p average about 15 times, 14.9. in that period of time the average of 14.9, the u.s. government on come into the right after 6.67%. well, here we are at the markets about 13.5 times the estimates

of earnings, roughly 10% below the average for the u.s. government bond of 1.6% is almost a quarter of the long-term average. so interest rates are quite low, extraordinarily low. when the inflation rate in the country range between 1% 3%, it's close to 17. as i look at this exhibit against the span of time, stocks are cheap against history, very cheap against interest rate and very cheap against inflation. i think the stock market is suggesting and it's probably a good suggestion to look at higher interest rate over the next two years as our economic growth versus history. but the extent that it's been discounted as discount for conservative consumptions. i'll give you a parallel. to the year 2000, the last bubble intact allergy shots. in 2000 from a selling at 100

times our assessment of earnings. it had no dividends commenced at the yield was zero and u.s. government on racer 6.5%. fast forward 12 years today, cisco is 10 times the estimate of earnings. the stock yields 3% versus zero and governments are 6.5. so you can now buy it are incorporation that yields twice the 10 year government bonds are yielding in the multiple that's one 10th of what it was 12 years ago. said the valuation looks appealing. i don't believe the returns will be fabulous going forward as historical numbers brought forward. whatever you prodded the told 14 times earnings where you are now, they returned one year later with 15%, three years later 16% and five years later average 15%.

so we are fine and historical context, where returns prospectively are very tracked it for reasons i'll discuss later, there's always the dark side for everything. i think the terms are nearly as attractive historically going forward. i mention that stocks the end of best financial asset. i find the chart very interesting. at omega we made a great deal of money in 2010, 2011 and part of this year the high yield bond market. as you look at the bloomberg chart, november 2008 was a once-in-a-lifetime, i hope because the suffering and pain you go through this. so dramatic you don't want to live through it again. it safely was once in a generation opportunity in high-heeled or the high-yield market was 25%. even the senior securities to come in at nearly 25%. the equity market was 10% pst by senior security yielding 2.5 times what the equity market has been. if you look the bottom footnote,

i find. when the high-yield index is 25%, the s&p multiple was 13.9. the high-yield index is now sub 7% in the multiple market not materially different than two dozen eight. delegate to a cyclical peak earnings. but nonetheless, the high-yield bond is about a quarter peak coming at the multiple market is not substantially different when high yield was four times greater. anyone who follows the high-yield market will take credit spreads are historically very tight and yields are historically very, very low. that wants in a generation opportunity is gone. then mary and i always had a favorite professor that shaped and nurtured her interest in security analysis, professor roger murray at columbia. i could remember like it was yesterday. 45 years ago we told the class

of 1950 eight was the same this year the market. they went on to explain 1950 year at the yield reversal. prior to 1958, stocks yielded more than bonds. we were coming out of world war ii, there is a great fear of post-world war ii recession, depression, let down in the beginning of 1958, when people thought the economy growing and companies going end up being that the store and its suburbs virtually every week, the market brought in the concept of total return. they returned to stock is not just a dividend, but a dividend coupled with the growth of the dividend. well, we turn back over 50 years of history. as you can see from this chart, when i put this together, over half the stocks now yield more than bonds. government bonds are artificially depressed by the fed, you know, policies. but this is higher than it was

in 2008, which is 45% and looks back over the years that they like we are now. you can buy many, many stocks in a hope your best input managing money, which he knows will never get back where the other money of the university and your investment club activities that she seen many, many stocks yielding an access of arms and these are growing companies. now i was probably somewhat inappropriately quoted. i should arrive late. i was correctly quoted, but i said it would be caught dead using the u.s. government on the net not outlandish statement. it's a correct statement by the way, but too strong. what better method saturday questioned the u.s. government's ability to pay us back. they'll pay you back, but you're just not been compensated for the risk. so i thought it incumbent upon

me to explain my position. historically if you look at the 10 year u.s. government on come the yield mind with nominal gdp. nominal gdp is the summation of real growth and inflation. so if you say to yourself that the world would have been would be something like 2% to 3% real growth in 2% to 3% inflation, that means nominal topline gdp look at company sales heard somewhere between 4% and 6%. keep in mind that 4% were not going to absorb more unemployed people, so there'll be social policy tilted to generating more economic growth. well, if history repeats itself in the 10 year government bond goes back to nominal gdp, that means in a few years time when we get out of this economy, the government bumblebee 4%, 5% or 6%. well, this is bond arithmetic. a train ticket the second time.

if we go for 1.5 to four in three years, including the coupon, you've lost 11% of your money. he lost 16% of your money because it goes to 20% of your money. maximum loss of tax they is 35%. if you buy a bond of 1.5%, you'd leave the state taxes and you really can after tax return of 1%. doesn't wash. i think the capital is being confiscated. i've no particular interest in government bonds as an alternative common stock. now the last area i want to mention kind of comes in the world of contrary opinion. you know, is an expression for the city to come to wall street will come to respect and understand and that is the stock market does whatever's got to do compound the largest group of investments. what never was complacent and

comfortable the forecast for guys like me come in the market is something that surprises you. in the last five years have seen a significant tea risking by the public and by institutions of the equity ownership. so what would the pantry be? the market goes up because everybody is expecting the market to go down. so you look here and see a band, every year in the last five years comes to get selling of equity funds by the public. what are they doing? they buy bond funds. even though the market is up 14% to 15%, but continuing to liquidate. then you look at the pension fund set to appear pension funds go from 60% to near 50. most of actuary assumptions in the pension minus 7% or 8% a year. if either can be real estate private equity or equity is. and many lecture at the public. they've gone from 29% of financial assets in equities down to around 20 in the holding stock funds in decline and bond

funds raised in you so i say the pantry to the public as if the market were not and not going down. now, i don't understand here in front of you and appear like the village because i'm not. the economy faces a significant number of issues that we have to deal with. one is the so-called fiscal cliff. if nothing happens, there's legislated tax increase in expenditure cuts that the economy of $576,000 which is a little bit less than 4% gdp. if we have a gridlock in government, they don't want to talk to each other, they'll negotiate, we can only series that back. i refuse to believe that it

appeared at the end of the day the same group didn't like each other and to decimate, but they did do in terms of legislation to get the economy out of a sharp dive. so rather than push us into a dramatic recession that they'll be compromised as, but it's not 100% clear that it's going to happen. so i think there's something we have to kind of think about and worry about. i have a firm view about the coming election. we can talk about that later in q&a, but that's a personal opinion. it's like talking about abortion. a lot of people with different opinions. i'm very concerned about the huge buildup of federal debt. the commonsense observation of the nation was founded in 177,616,000,000,000,000 federal debt. we went from 2012 to 16 trillion. the up by a trillion dollars a year. it's unsustainable. we have to do with this. the commission some symbols came up with credible ideas, but

would do nothing with them. unless we move in this area, it's going to be a significant issue. and while were not greece, we could have similar type problems. not to the same degree of freedom of sergio with problems as you can see this happening to debt relative to the size of the economy. that's the problem. lastly, there's huge legislated tax increases on the horizon, not particularly friendly towards capital formation. the current tax rate dividends are% out i guess you can see right there 15 f. obama has this way, almost tripling the dividend tax increase. it's going to be about 50% or so increase the tax-free capital gains. if you love or the tax tax return on investing, you're basically going to love her the

amount of investment taking place. so we have to resolve issues, which basically confront us and probably nothing's going to happen until november 6 received a leader of the country and who controls congress. these are factors we have to worry about. now my observation was to go back early into my career. i say that what the big smile and certain sense of modesty, but i got my mba from columbia in january 311967. fas child was at business school for six months old when i graduated. i had no money in the bank like national defense education and student loans to repay. so i'm sure you've learned if you have liability no asset to make it if not worse. i hope you are not an basically had no choice but to go to work immediately. the very next day,

february 1st 1967 i thought of my goldman sachs. on february 1st 1967, the dallas roughly 850. lo and behold, 15 years later was it okay. and i made my money by flying things that were very cheap. so our 700 of the doubt, equivalent. even though the old world market was going nowhere. i can very well appreciated scenario for the cause in need of government around the world to get the financial house in order of the next two years we can remain in environment at see we deal with the fiscal cliff, as we deal with the huge deficit issues in the market and sees a need to deal an intelligent fashion. so unprepared. you folks are young, early 20s, late teens, whatever

tissue can muster another three years for this. as i said at the beginning life expectancy is 82. another three years is going to be very painful to me, but i'm going to do it. i'm going to work out of because this what i love doing and have an obligation to do. i took somebody's money and effort to manage it intelligently improperly. i'm a value investor. some of her versus what is a investor meeting? what it means to me as i want more for less. so when you look at the stock market, basically the s&p 500 is an index to 500 companies. on average across about 5%. on average it's usually about 2%. it's about two times book value of the companies in the index. but that's about 80% of its capital. debt-to-equity plus dead. the returns on equity currently is about 16%. normally it's closer to 14 or 15. and the ratio for that is just a

cold galoshes 13.5 times. as a value investor looking for companies growing more rapidly and sevilla were multiple or have more dividend yield on the market at a lower valuation would maybe give me a lot more asset value versus the value i am paying for. so you could be value invested by apple computer. apple is $120 billion in cash. 12.5 earnings, all the equity capital in the balance sheet. if you have the outgrowth, won't be like us than the last few years, but i think of a 20 the next few years. since growing four times the market. you have to accept technology risk. don't forget three years ago we are standing here talking about where were going to get her thumbs on the black very and now black or subscriber in the united states of america is dropping at a rate of 2%. they do not doubt. i joined xerox out at hunter

college, my first job basically was all about american photocopy. you don't hear about them anymore. when the world of technology, someone's obsolete, so you have to make the judgment call. it's what he thought of. it looks for more for less. i said at the outset that i was becoming a little bit less sanguine. sometimes you're in the midst of changing the view, adjusting of even speaking at the time and you need more time to think things through. firstly, the market now at the lovely tattoo is about 13.5 times earnings. but if any operand of the range in the market of the last three years. seth at the upper end of the range the last three years. the third quarter this year, the third quarter this year will be the first down quarter year after year since the third quarter of 2009. so the rate of increase in

corporate profits actually could very well be down for a while and that's a factor. as we get closer and closer to the end of the year, the fiscal cliff issue amongst larger and there's huge uncertainty regarding tax policy that they mentioned before. i first said china is going with the next acted and has to be watched very, very carefully. finally, the ecb while they take important steps, there's a lot more things regarding fiscal integration, big set to union and stuff like that. so i think we, you know, i think i've adjusted ourselves now to level a fair evaluation. personally the markets got 5% up from the 10% down, but i intend to follow the advice of the professor teaching phd's at columbia and one of the students upon graduation went to the professor said professor burns committee of any bias that i'm

graduating? right now i'd say i tried to develop the reasoning why. i think near-term as much risk in the market is reward, but i do believe properly select the company maybe cooperman, we can make money in the market. i hope i have touched on things that interest you. i'd lock in long-term money aside access to public markets because i think interest rates are a generation must be if they don't belong here. we look at fiscal condition of the country and our plane on the u.s. economy continuing to grow at a modest pace. it's always a student getting ready to go out to pursue my career, it's just get the best education you can come of the best grade you can come to get back to community service, try to distinguish a resume for the next person because you're in a very good live environments and

you have to strengthen your credentials to every extent you can. i'm going to start. take questions. [applause] >> thank you. we have time for only a couple questions because mr. cooperman has to be a mystery to see a screen. if he doesn't get it about five minutes he has to drive to new jersey. i don't want to do that. >> dismissed the jury? who are these guys? >> i'm a student from roger once. first question. you put a lot of a monstrous fundamental analysis about an intrinsic value of companies and they set off for the fair market value. what are some key indicators dbase is often how much reliance

you put towards behavioral analysis? >> output of reliance in my ba view. i'm very analytical. 19 darius matos m. revenues, costs, earnings, and growth rates, market position and growth the market, so on and so forth. we have a certain view of what the growth rate is worth. if it is selling, grand hypothesize that if her security had to be an intrinsic value. the job of the security analysts is to recommend securities of basically selling below intrinsic eye as a result of grocery returns, cash flow generation. most important is free cash flow. there is nothing -- they have no luxury of pursuing alternatives. with the free cash flow they can invest in business, buyback equity and pay dividends. that's the elixir that keeps things going. most important in the good industry, with honest

management. i would not knowingly invest if someone was dishonest. i've invested knowingly within, to people because something was just too cheap to ignore. more often than not, you wake up with fleas, but i'm a little bit like warren buffett accepted out about lacey rose in the sense that he believes in investing the well-run come to me. in fact, his favorite expression was he like to invest in companies be managed by an because sooner or later he'd be running them. it's pretty humorous and no one caught that one. are there to invest in businesses that are cash flow generators, run by capable management, with the management is properly incentivize to do the heavy lifting and benefit from their hard work. so the best case in point, it's rare for manhattan and was an investor with workshare hathaway

for 50 years and that of the partnership and kept his investment of berkshire hathaway. i think is right for a bill in a billion dollars. the essence of investing, find the well-run come to me, make sure it's properly compensated and benefit from this performance. another question behind you. i apologize if i went over. i can't be late. >> and mike dunbar, also super fund manager. i was honoring commensurate or expense to invest in china, how did she get around issues of transparency? >> different question. i have no investments in china. i have one investment in asia. iota aia committee asian insurance come me, which is currently rapidly. use to be controlled by aag, but

in their financial problems this back to the public says the rapidly growing come any bigger attractive valuation. but i'm not a big investor in china. as enough in western europe canada that are not as global as some other people. >> after leaving goldman, why did you start omega instead of taking a more traditional mouth working for the treasury or another government agency? >> i would still be at goldman sachs. i had a lot of figure in that i retired from goldman for one reason. i spent my first 23 years at the firm being part of a running the research department and then the firm came to me in 1889. i've been agitating the prior five or six years come in telling goldman management it would be a mistake not been in a moneyman shoe business. so they came in 1989 and said

you were right, we are wrong, which he bought in asset management business? so i left and was chairman and ceo. after relatively short period of time, i saw the firm's objectives and my objectives in mesh. i had 25 glorious years there. it's a great firm. the goldman understood asset equals revenue. i would grow the business. my objective is very different. i wanted to coinvestment, have my money alongside them and manage a rational sum of money so i can deliver good returns. so after a year doing what goldman wanted to do, i saw they wanted to be on the road making marketing presentations, starting new product lines. you know, i started the first mutual fund of goldman sachs since the depression called the gs capital growth fund and they wouldn't put her name on it because john weinberg, has passed away, his father saved

the firm during the great depression. goldman sachs retries. oldman came out to mutual funds arrested a top in 1929 went to near zero and he did not want goldman to the mutual fund business. nokia for "the wall street journal" yosi 40, 50 different funds goldman sachs is selling to the public. so i wanted to be in different business where retired with $450 million for goldman sachs. asked why he robbed banks and assist us for the money money was. so if you're going out of business we manage for 1% or some variation of 2% to 20% he went to the march for no real and money for the investments, the hedge fund business is a more logical route for me. i hope that answers your question. i apologize if it went too long. i want to cover a broad range of subjects. a sinuses between 930 and 4:00 i reach out, get this presentation

i'd like to impart the wisdom. i sit on the board of the columbia business school would like to work with young people and give them guidance and help out. assure you no bus to reach the business school and everybody was kind of depressed about was going on the environment. he said via the columbia mba, and same for you, he'd give you a hundred thousand dollars now for 10% of their lifetime earnings. i'm sure all of you will be very successful multiton% of their lifetime earnings. >> on behalf of the faculty, staff, administration, thank you, mr. cooperman. [applause] thank you so much good [applause] [inaudible conversations]

i got to see how medicare worked at a very young age, and it is -- mayor peyton throughout their working life. we don't have to strengthen and extend its solvency but i would note it program to, the place of traditional medicare for the private health insurance with a piece of paper if it doesn't keep up the cost, tough luck is out of their own cost as was the sweetheart deal with the drug

company. >> medicare, ladies and gentlemen its right to go bankrupt and 2024. i don't want medicare to be bankrupt. i want to fix medicare and make sure that seniors and america are protected. we have a choice not a culture like she says of it. i've never supported the vulture those individuals 50 in number in the year 20 is a choice we still want to gut medicare or july 1 to go with the federal health employees benefit which comes from engoulvent all of the people in congress the president gets. university of michigan gerald ford school of public policy hosted a debate recently on poverty in america and the role of government. speakers include charles murray

the author of losing ground and the bell curve and derrick bernstein, former chief economist and economic advisor to vice president joe biden. this is one hour and 20 minutes. >> thank you. in 1962, 50 years ago, michael harrington published the other america poverty in the united states. at the time the american economy was in the midst of a golden age of economic prosperity in which a rising tide lifting all boats. since the end of world war to the economy hit the ground rapidly and the wages of most workers had been growing faster than the rate of inflation. at that time there was no measure of poverty. in part because almost no one, academics, journalists or

policymakers talked about poverty. harrington's but changed not only the political discourse, but the public policy landscape. on the first page, he wrote there is a familiar america. it has the highest best standard of living the world has ever known. he then went on to say that it does not change the fact that tens of millions of americans are at this very moment named in body and spirit existing at levels beneath those necessary for human decency. a short time later a review article appeared in the new yorker magazine called our invisible poor, and the author and did a very long review concluding thanks to harrington, quote, the expense of our poverty has suddenly become visible. it is said that walter heller, the chair of president kennedy's the five economic advisers, david kennedy in the book and the new yorker review most

people think he read only the review. but he did tell him to begin to plan to put together some proposals to reduce poverty. in the last chapter, harrington wrote there is no part in attempting the blueprint the tilt mechanisms and institutions of a war on poverty. there's information enough for action. all that is lacking is the political will. less than two years after the introduction of the publication of the other america, president johnson responded demonstrating both the political will and the plan that harrington had called for. johnson declared unfortunately many americans live on the outskirts of hope, some because of their poverty and some because of their color and all too many because of both.

we replaced a spare with opportunity. this administration today here and now declares unconditional war on poverty in america, and he went on to say the richest nation on earth can afford to win. within a few years many of the programs that we know today or implemented or expanded, had the job corps what we now call pell grants, medicare, medicaid, food stamps, and increased social security benefits. the official poverty rate which had been following continued to reach 11% in 1973. at that time leading scholars predicted that poverty was officially measured would be eliminated by 1980. obviously that did not happen and of the discussion and of the debate will focus on why that is the case.

we live in an era in economic growth hasn't been trickling down to the poor, an era of inequality in which the rich have gotten much richer, the no class has struggled in the official poverty rate has increased. the debate is timely because tomorrow the census bureau announced the poverty rate for 2011 most analysts myself included think the poverty rate will increase to something like 15.5%. if harrington were alive today, i am sure he would remind us that the other america is alive and well. so our goal today is to go back to herington's earlier goal and make sure that poverty and inequality are visible. i am honored to welcome charles murray, the w.h. bradley scholar at the american institute followed the center of budget and priorities there are longer

biographies both him and clarence page syndicated columnist and editorial board member at "the chicago tribune" on moderator. i'm not going to read the many accomplishments because i want to turn the floor over to them. i would simply close by saying the debate is timely not only because it is the 50th anniversary of the publication of america and lead to more because the census releases the official poverty rates because we are in the midst of a presidential campaign for the future of public policy regarding poverty and inequality please join me in welcoming charles clarence to afford school and the university of michigan. [applause]

>> it is my honor and privilege to be a moderator here today and i'm so familiar with these and it's been so enlightening for me in the past i've had the opportunity to put them together here and q over these issues that we are dealing with and for the editor that gave me a newspaper column back and the 80's jim squires who told him the columnists are sort of like they don't score many points the keep the crowd alert. [laughter] it may be keeping up to the time

schedule may be a challenge but i want to say that of format would be such that we would have opening remarks by charles murray and then by jared bernstein to get about seven minutes to talk over the future of inequality and how big the economic social culture of the dividing is and how it differs from the divide that michael described a half a century ago. and then they will be subjected to about a half hour of questions from me and questions from the audience via index cards some of which have been tweeted i & through the courtesy of modern electronics which i am doing my best to understand in the century since my 23 year old son isn't here with me i will do it to the best i can.

this is a timely topic as has been said. by the time the book cannot live is in high school and i remember my factory worker dad what class are we and without hesitation my dad said east -- po knott poor but po because we couldn't afford the other "or" not being po no mo. i had to get an education to move on a band that is why i love this country because it gives me the opportunity. i grew up in john boehner's district. >> it turned out pretty well. estimate it turned out okay. was a good working class district in middletown ohio. you could work in the steel

mills in the summer to pay your tuition at a good state university, ohio state university, go bobcats. thank you for your indulgence, michigan. [laughter] >> to move up and come to the journalists that you see today and today they are not with the use to be to overcome the casualty of the postindustrial america while many of their factories around where i grew up and the tuition of the good old ohio is ten times what it was when i was there. things have changed. the mobility is and what it used to be even in my lifetime. and that is what we want to talk about today among the other provides. i -- charles is plan to lead the discussion. i've known charles since losing ground back in 1984. many people will tell you it's the welfare reform bill of the 90's and which always has a way

of writing books that either, nothing in between. we have talked many times over the years and we've sometimes argued it, you know, even when we are deutsch, it's fascinating. i learn so much dust in dialogue so i'm delighted to have him here today. the white house economic adviser of the center of the budget policy priorities and think tanks that we turn to so often for the statistics etc and for the real expert opinion to reverse of the cream of the crop, ladies and gentlemen and we look forward to your questions as well. without further ado, i am going to pull out my little iphone out of to the to -- my son taught me how to work it, and i will be doing the timing here as well. charles, you have seven minutes

to respond to the questions. please have at it. >> i'm not sure what the topic of debate is because it's about poverty and it's about inequality on the pollster so i'm going to ignore both of those remarks. [laughter] i tell you a lot of the things i was going to say don't make any sense of less you get a larger sense of the context within which i am saying it. this is i think a problem for the people on the right in general, and i am on a weird part of the right. as far as i know there are very few people that are on the right that say you are on your own. there are very few against the welfare state because it costs too much to all these freeloaders. there are other reasons for my opposition to the advanced welfare state and a lot of the measures in the war on poverty so there's the question no

version of the debates. it's not a matter of passing time. human life can be transcendental meaning. whether that meeting as defined in terms of religion or in terms in which life can take on significance. but to take on significance, life must be spent doing important things, things which you can take the dissatisfaction as you reach my age. my proposition and i will be interested in the audience wants to add another domain. it basically comes from the four domains, and those are location, family, community and faith.

i will say that to the vocation will include avocations and causes in that definition. but basically they are all they are. there's other ways of having pleasure in life but those are the things that give us deep satisfaction. the reason they give us deep satisfaction is because if we are lucky we would spend our life doing something which we can legitimately say to ourselves and major difference and something which was important to do. finally a vacation that you love is important. a member of the community in which you are engaged in the lives of people around you and a good neighbor and more important than having backyard barbecues to read charge against the welfare state is that inherently

for reasons that cannot be escaped drains the vitality from each of the demands of life. it cannot be overcome by clever designers and the reason is this. the state in fact says life is tough and there are some things that are going to take some of the trouble out, taking some of the trouble out of losing their jobs. unemployment insurance. it can be a good thing. that is not a statement necessarily of the unemployment insurance. it drains to some degree of satisfaction that you get from the job. they're helping children in poverty. it is not necessarily the had that is necessary that in so far as the government takes some of

the trouble out of raising a child, it also drains some of the satisfaction you take out of doing it. that is true not only of poor people but people at the top. if you are has in my case a husband who likes -- he's been a good husband and father and hasn't spent nearly as much time and energy as my wife did in raising the children get more satisfaction by being a parent and i do because of the nature. in all of this i leave open all sorts of things that we can do they debate. all sorts of ways the government might help or might not help. but ultimately, what i object to any great many of the programs that would be defended and probably defended by most of the people of this audience i am saying the problem is they take

too much out of the life. in these remarks i have not attempted to persuade any of you that i am right i do hope as i talk further in the debate it will give you a context for explaining what i mean. >> thank you very much. very prompt and synched. >> extra time? [laughter] >> before you count if you don't mind let me say what an honor it is to share the stage with charles murray and clarence. charles is a giant of social policy, and was the most influential people in that field, and while i profoundly disagree with much of what he has written remains to be true

i've been leading him for years and i've always heard a voice of passion. it's always about trying to figure out ways to help and not hurt people as they try to achieve their golden dreams and i can only hope that i have the same level of passion and commitment in my work and writing so i knew my true at meijer. i disagree with all of the ideas. so let's talk about that. >> we will give you a few minutes on that one. >> in my opening remarks i want to do two things to read a very brief pushback on one of the pieces of the opening because we will have more time to get into that because it is the key where he and i differ and that is the

impact of what he called the welfare state on the lives of people and their achievements of the various aspirations. i'm not even sure that there is a welfare state anymore. i'm not quite sure what that means. i'm sure we can discuss that. what i do mean is we have literally decades of research trying to look at the extent to which measures like an earned income tax credit and temporary assistance, medicaid, education programs, what i can't charles is referring to and their impact and far from the life out of them to the phrase he would use i would argue not only do these programs critically offset market failures and i have good evidence of that by these

programs to achieve the location of the community and even the states that have sent this kind of support they would have a much harder time achieving. that's part one. part to is i want to reflect on michael harrington and this question of how big is the current economic divide and does it differ now verses when he wrote the other america 50 years ago. in fact the economic divide is much lighter now than it was then. the most recent peak was 2007, and back then 23 percent of income, national income of crude at the top 1%. back in the early 60's that was 10% said he was writing about an economic and social and cultural divide the divide where 10% of natural wealth occurred in the top 1%.

most recently of the most recent economic peak but was 23% i think it down to about 20 now but the growth is a major factor in understanding the challenge of poverty today so that's one of the connections i think that's intended. and this is not a static story, it's a dynamic and in an area that may be an area of agreement between charles and myself on that is consistent and that is the following. i believe charles would agree he's written this. public policy shouldn't concern itself with a quality about comes but with the quality of opportunity, and in moving around, charles murray writes that the expenditures, billions for equal opportunity not one so we may find ourselves in agreement and the opportunity plainfield but there are expenditures targeted at preschool, you mentioned some of the ones earlier but here's the

thing on one side of this issue there is the income inequalities and charles wrote not a penny for the quality of outcomes. there is a growing at a very compelling body of research at rates higher inequality, the economic divide that harrington was writing about to the diminished opportunity and to diminish mo levity. that is there is a linkage between the economic divide and the high levels of inequality and a diminished opportunity for folks in the bottom half of the income scale. in the economy with significant growth it is shared and leads to the kind of income growth and reduction that sheldon talked about that prevailed in the 60's and led the poverty to believe on the basis of growth alone could produce poverty so significantly once you introduce the high levels of inequality a couple things go wrong.

the gdp and productivity are now diverted from the lower income families. middle-income families are starving and poverty increases even in the business cycle expansion as it did in the business cycle expansion. poverty went up as the economy expanded instead of going down. this blocks opportunities and reduces mobility. if you think of the seven economic model it predict in come concentration plays out in the political realm, and i feel very strongly about this and it worries me a lot by protecting the beneficiary of any quality growth in the blocking of the policies that would push back against politics reinforce the rising inequality that blocks those policies that would promote more broadly share growth. i will have time to go through more examples of this as we go.

but to bring it back to the debate i hope the problem is and what i think i try to paint is a rich economic tapestry. i think charles crops the picture and is looking at a small piece of it. there are multi causal phenomenon going on and i think it was hamlet says there are more things in heaven and earth ratio than are dreamt of in your philosophy and i would argue the same thing about charles books. we are a globalization and its impact on manufactures where is the housing and the finance and the characterized recessions of the last few decades? where is the loss of retirement wolf and 401k plans as the result of having nothing to do but individual morality ..

>> charles, jerry to open up with an area of comedy and agreement you're a little zinger in the end. >> it's supposed to be a debate. >> doing our best. the zinger in the end about the causes. you spoke earlier in term of

character, behavior, culture. he brings in the geopolitical changes we've had, structural changes in the economy, job disappearance, the new globalism. i'm going to give you an opportunity to respond to that. where does that play a role in your analysis? >> well, if you're going to say such things as, for example, that there has been a fundamental change in working-class culture in the united states by males with regard to labor force, you're obliged to say well, is this because the economy went bad, or is this is because of other factors? and i guess that there are a couple of ways of looking at that. as in any debate, we're going to be picking out individual indicators a much broader -- broader context than can be understood but let me use an example of labor force

participation rate, among males. and i am specifically talking about white males getting rid of all the comcare issues associated with race. and i'm talking about males aged 30-49 which is the prime working years. as of 1960, you had a virtually not 100% but in high 90% of labor force participation among that group. because if you were not working or looking for job and your man in your 30s or '40s you were a bomb and. -- a bum. that drop out from the labor force started to rise, not after the economy went south in the 1970s in terms of some sub dimension, it started to rise during full employment in the 1960s. and it continued to rise, and if you plot it, i have a plot income coming apart. it has a continuing secularize all the way to the present. now, if we had a rotten economy

all this time, is globalization a take away jobs and you couldn't get a job, i can understand that. but we have had periods in the 1980s, and especially the last half of 1990 but also some good years in the early 2000s were basically there were jobs for anybody who wanted to work. nobody safely disputes that. i mean, they were help wanted signs everywhere. so when you talk about causes, to the extent that there just aren't jobs out there, so these guys would like to go out and work but they just can't find jobs, we should have seen a plunge in the dropout from the labor force in the last half of white males. we did not. nothing happened was it's stabilized to continue to go up. everything i'm saying by the way predates the great recession. none of my arguments depend on what's happened since then. you then supplement those data with observational data on the ground, and what you find is in

talking to people who learn in working-class communities there are a bunch of guys out there looking for work, that's true. there's a bunch of guys out there who aren't. they are living off their girlfriend, living off their parents, engaged to the great economy or the black economy. they don't want jobs. and that's reflected in increasing dropout from the labor force. it is a triangulation, both sociological, anthropological and economic, all of which point to a fundamental shift in the attitude toward work. and my label for a growing proportion of men in the working-class is -- [inaudible] and less we recognize that this is going to exist no matter what happens to the economy, as i think was proven last half of '90s, we're missing a very important part of the puzzle. >> before i give you chance to respond i want to clarify one thing. you refer to your latest book, coming apart, which i like by

the way. i think -- >> that was one of the good ones. >> i think very well may be most important book of the u.s. for some concern because a decision mentioned focus just on white america so we don't have the whole racial discussion. starting back up to late '60s can poverty got call arise in our national conversation as you know. when you say poverty, people think black folks in hispanics but as you point out there is a similar kind of blame among whites. i which is one of them your book starts really, around 1960, which reminds me of my friend pat began who thinks western civilization began to decline as soon as elvis appeared o on thed sullivan show. [laughter] you know and i know he's not alone. there are many folksy billy that all the decline started with the end of the '50s, the madman air for these young people out there, and i was just one, am i reading you correctly here, and

-- >> you'll have to give jared some extra time. but i do want to respond in a couple of ways to the. first, i explicitly did not talk about causes of the new lower-class coming apart. i did talk about causes of the new upper class. but the new lower-class i didn't talk about him and the reason clarence was because i didn't want you to get mad at me. i wanted i want other book that a person like you could read and not against the wall. and since i started to talk about causes, i knew you would. because look, i'm on record, losing ground is a prolonged indictment of the 1960s. which has a lot to answer for. i'm going to stop there and going to go back and talk about it more with numbers, but i want to add a very important point. it doesn't make any difference whether i was right or not. about the original causes. and, frankly, it does make any

difference in my view is the jared is right about the role of globalization and the rest of it. we are where we are, and what is happening is a variety of cultural changes that have transcended whatever the original causes were. it's the classic case of, i can describe exactly how the toothpaste got squeezed out of the two. jared thinks he can describe how got squeezed out of the two. it is out of the tube and there is no rewinding that we can do. and if we're going to deal with the problems that we're talking about, there is going to have to be fresh thinking about when we can go from here. because going back to the past is not possible. i do for jared or for me. >> first of all, just where charles ended, i guess i feel very strongly that your diagnosis leads to your prescription. and if your diagnosis is very

individually focused, as i believe charles is, your prescription are going to emphasize, as does coming apart -- "coming apart," a cultural issue industriousness, religiosity, things like that, as opposed to a policy set that i believe is more responsive to more structural economic problems, including a robust earned income tax credit, a robust insurance program, and so i assume we differ on that. and perhaps we'll have time to explore the solution set and how they differ. but now i'd like to utterly confuse you all, by disagreeing about the data. and that's always i think somewhat discomforting when you're i in the audience in summonses thinks with his wit and would end the other person says things move that would. charles, i know you're quite the dinner, as a my, that's a

compliment. and -- >> i'm not by the way. >> so you will be a blue plate in our club, but i suggest whatever data differences we have been we try to work out, maybe in some public forum and taught art and crafts against each other. is a couple of facts that i think go in quite a different direction than charles. charles was asserting just been that, in fact, it really can be a story of the demand side of the labor market, although the lack of ample employment opportunities for thankless guys, because if you look at areas where the job market was strong you don't see much response from the. so when i read "coming apart," i sort of was puzzling over this, and i looked at the sample that charles was looking at. white men age 30-49, high school degree or less, and a few other things, a few other ingredients thrown in the that charles can tell you about. but i felt -- so here's what i

did. and going to talk about -- i was going to say regression. it's really a correlation. i took, thanks to my colleague, i got a time period of annual hours of work of white guys age 30-49 from high school degree or less, basically charles sample, and i looked at the relationship between their annual hours worked, including zero, concluded you are out of labor market, and i correlated it with a government that i just ran a regression of the% that change on those hours on the change in prime age on record that one very will explained 76% of the variation. in that series of hours worked. so keep that in your mind. that's .1. now, that is not an economic problem via the economy. that's one correlation, but by a very simple and plausible relationship, movements in

unemployment explain three quarters of the annual hours of labor supply of this group. and when the unemployment rate goes up, their hours go down. and vice versa. it's a very tight fit. part two, and this has to do not with that sample but with single moms. in part because of work of charles and losing ground we shifted from a cash-based welfare system, to temporary assistance for needy families in welfare reform that was passed in the clinton years. these folks are i'm sure, sheldon, et al. and others have been found of work on this issue. if you look at the employment rates of single mothers and you compare them to the unemployment rate of say, married moms can begin, controlling for education so you're not getting that in the next. you will find, donna and other folks at the center on budget have done this work, you will find that the unemployment rate of single moms grow

precipitously, growth steeply in the 1990s. now, part of that is a murray a fact, and it has to do with requirements within welfare program. researchers try to tease out what shares, with a full public job market for the first time in decades. i don't think we've had one before or since. we had a full employment -- we're large increase in the earned income tax credit which incentivizes were. we had an increase in the minimum wage. a lot of moving parts. alston is employment rates of. the analysis suggests that maybe 15 or 20% of it was well for reform. the rest of economy and measures like the earned income credit and solar. so you have been married moms who aren't affected by policy, so they are the potential for the unemployment rate struck a long city the dukakis in the the

months go by the company much mag-moss and starting in 2000, they all sort of fly down. once employment growth became quite weak, i told you poverty increase in the business cycle of the 2000s and fell off the cliff in the recession, you see a very good controlled experiment of charles hypothes hypothesis. the idea was that if the job market was creating employment demands to give the single moms and the opportunities they had to seek, and wanted to seek common once especially the wages had ample subsidy attached to them come you see very large employment ethics. quite different from charles on the getting see these effects at all. wants it weakens and falls off a cliff, you see the opposite happen. so i very strongly feel, charles absolutely has a point in that corner of the picture, i very strongly cautioned an

interpretation that leaves out the role of labor demand, of job availability, and to social policy that incentivizes work. >> without getting too deep in the weeds of those numbers there, good job of going from aggression -- [laughter] >> i saw a certain contradiction there myself. >> how do you respond to that? spent actually coming in from this is another case where there's kind of a subversive agreement between the two of us. because you two very different populations among the let's talk about white males. those that are in the labor force, they are working pretty hard. and including in the white working class, hours of work has not gone down, you had another set of guys who are not in the labor force at all, and i would point out there's something really simple about this statistic i gave you. percentage of men not in the

labor force. and there's a real simple relationship to policy, because if you want to cure the economic problems of guys not in the labor force, you are saying to yourself if only we can create full employment economy began, we've been there done that in the last half of the 1990s, and it did not change it. so you can have, with women, something else altogether going on. women have gotten in the labor force. can make you a quick synopsis of what i think has gone on quick. in 1960 if you're a guy holding down a low-income job with a wife and family, you had an authentic voice in that community of respect. it was respect both within that community, you are one of the good guys. you are looked up to, and you also had respect in the broader community. a whole bunch of the things in

the reforms of the 1950s, but multicultural, you also had some revolution in women's participate in the labor force, and yellow income guide today does not have a position of respect in the community if he is a father and husband. that is gone. that is a statement of fact. those communities no longer vital to what he did, and on the contrary you have people start sunday you are a child working for chump change. at my saw it women went into labor force? don't want to turn back the clock on the? no, i don't. there are things that happen as a result of good things, which are bad things. and one of the things that has happened is the role of the male change dramatically, and that is reflected in a growing population, not a majority, a growing population. and i guess the only thing i would add onto that is is i am not trying for a global explanation that absolves the

markets of everything and blames everything on government. i am trying to force an awareness of cultural shifts that have occurred in this country that are very deep and very important, and our most damaging of all to the people in the bottom of society. >> what about the role? >> look, if you go back and read michael harrington, or pat moynihan, even william julius wilson who i know you sparred with in the '80s, there's been a cultural peace to all of the analysis. pathology of poverty, culture of poverty. this was not unfamiliar language to michael harrington. but i don't like it. i don't like it and i don't know really what charles means, and i

read his books carefully, when he talks about this cultural shift. i don't mean to imply by the statistics i'm citing that there are no sexless guys, or the share of the sample that you have picked out, the white working class knows what they labor for dissipation rate. they are a shrinking share of the total, very much so. a factor own numbers show they shrink by half of the total population. but if you think it's very much overdone at have two objections to the first, and this is not the position of charles murray or any the researchers just mention. in the real world, klitschko unit could speak to this just on our journalistic perch later, i think in the real world, the cultural emphasis becomes damagingly divided again, not charles.

this is, culture becomes a synonym. i think that's kind of the play right now in our national debate for behaviors that are acceptable in the subgroup that the rest of us agree are bad. but coulter is a much richer phenomenon than that, and cultural differences remain a beautiful and you america. again, i'm sure charles would agree. and i think many of the cultural critics, and i would include many of those i named above, actually, get this wrong. where people like charles when he talked about this cultural shift, which i think he -- identifying as a social dysfunction within a culture are actually viewed as a part even within that culture. so what you're getting is a cultural shift, doesn't make a lot of sense to me because i don't see cultures and bracing these bad behaviors, that subgroups agree are okay. if you look -- game culture. gang culture is a good example.

the parents of kids in the games hate the fact their kids are in kings but if you look at out of wedlock birth, parents of kids, teenagers have out of wedlock government are often aghast -- so it's a coveted dynamic, and i caution against going there because a, i think it feeds right into a very damaging divisiveness that our society and economy is right for right now. i think it invokes discrimination, and i don't think it means the same thing that any two people you safety. i think it is way to a fuzzy concept. >> well, let me just ask you in terms of, it is a fuzzy concept. we talk about shared values it within our community. is a too fuzzy for us to deal with? because we all agree it is there, but is it something -- we all agree it has an impact spent

i think it has an impact. >> what can we do as far as -- >> a lot of it, we should embrace. if there are cultural values are inconsistent with the broader community, at a much more complex question that i would get to charles murray. i don't think that there is an obvious role for government in addressing that kind of a thing. i do think there's a very obvious role for government in promoting the economic well being, success, the opportunity to the building of kids to realize their potential, things like the. and that success -- i'm afraid the destruction from what's really important, which is making sure he will have the opportunities they need to realize their potential. >> one more follow-up. welfare reform, just as an example. there are those who argue that welfare reform as you mentioned

put welfare recipient mothers from work, and change a culture that before had distance advice were, the one that incentivize were, and that is help to reinforce those kind about his that you're shaking your head. >> don't go there. i wouldn't go there, click. i mean, as i said, the research i could cite chapter and verse that argues that somewhere between 15, maybe 30%, he can talk about this more authoritatively, of the increase in the employment rates has to do with the policy change. and i think that's a perfectly legitimate thing. i don't think a society can support a cash welfare program that takes money from one group of taxpayers and give it to another group that's not conditioned on workers that's neither fair nor sustainable.

i started life as a social worker, and i can tell you that the culture of work is embedded in poor families, middle-class families and wealthy families. they want their kids to get ahead just like we do. at all of this cultural stuff i'm afraid becomes way too close to discrimination and they're the bad guys and we're the good guys. that's how it plays out in the real world. charles, let me ask you. you have taken the past to express something of a pessimistic view of the ability of government to do -- is there a way? >> to put mildly. >> is there something useful for government can do in order to change the culture in a productive way? >> no. [laughter] next question. thank you made elaborate spent i wasn't being flippant. let me see if jared, if we can take this thing called culture

and what to me is the indicator. because we have cultural diversions. there is no social institution that is more central that is the culture and especially and culture but all cultures, the marriage. you go to 1960, and you have a definition of the working class that jerry to give you pretty much, people working in working-class occupations, blue-collar with know whether high school education. upper-middle-class, people with college degrees working in managerial or professional jobs. those of the two. upper middle class, working class. in 1960 compared 94% of all whites 30-49 for married and about 80% in working-class who are married. so there was a difference that it was a real small difference. that marriage was the overwhelming norm. as a 2010, you still led 84% of

the whites aged 30-49 in the upper middle class from a. in fact, that number has been pretty stable since the mid 1980s and not only that, the forces been declining so a lot of those marriages are first marriage. more marriages than in the past. marriages alive and well. and the white working class, same age group, 48% married. now, they are our real few examples of such a shift in a central cultural institution in 50 years as the one he just gave you from 84% to 48%. why is this important? i'm not speaking as a right winger is attaching a moral value to marriage by saying, look, marriage is a building block of communities. single fathers don't coach little league teams very often. single mothers very seldom have the time and even if they have the inclination to go to pta to

all of the things that go to social capital, the kinds of things that robert putnam document so thoroughly in bowling alone, social capital which makes communities work just goes off the edge of the cliff when you this marriage. in addition, you have an increasing and agreement among social scientists who follow these data come left as was right, sarah mcclanahan been a very good example was now too many of you in this room. who says single parenthood is bad for kids. not that someone can be wonderful mothers and raise wonderful kids. of course, begin. but are there built deficits come and what happens to the flourishing of children? and add to that issues. so in that one indicator i've given you, which is a very cultural indicator, no matter what is the cause of the changes were, you'd have had a difference between working-class america and upper-middle-class america, which so transcends any importance anything having to do

with sheer income inequality that door so. and unless we come to grips with that change, and the disintegration of that is produced in the functioning of working-class communities, we're going to be stuck in dead center in trying to come up with solutions. >> an example of marriage, is there something that government can do what we as a society can do to restore marriage as an institution? or do we need to? can we deal with these problems without even addressing marriage? >> i think you understand the phenomena that you and charles are talking about, and it's a very important one and i fully agree with the work of sarah mcclanahan for example, cited a second ago. you have to understand the related cultural -- to me, this is a cultural phenomenon of feminism. you have to appreciate women's educational occupational up

bring and come pashtuns in recent decades. and the earnings advance which have gone in a completely different direction than 10. men's wages for middle and particularly low income has stagnated and fallen, while women have consistently gone up and i'm not just talk about at the very top of the wage scales, but in the middle as well. less so at the bottom but there's been progress there, too. again, educational upgrading, occupational upgrading. i'm not saying that there aren't lots of women facing tough problems in the job market, and gender wage discrimination is alive and well, but remains a problem. no question about it if you just look at the relative growth rate of women, and that has given women a lot more say in when they get married and when they bare children. this is not a bad thing. this is not a bad thing. but at the same time you also have come and this is a bad thing. you that the jobs in the earnings opportunities of non-college-educated men falling

quite sharp. i would say the sharpest and most pointed argument and argues that resonate with me and many others against losing ground was but a sociologist named william julius wilson wrote about the commodity foods after losing ground that observed a very strong correlation between the decline, yet something called the marriageable mail index, just looking at it is looking at the economic conditions of particularly young black men who would otherwise have been partners with women, you know, not marriage rates were rising at the time. he very clergy identified the lack of a earnings decline and job opportunities. so i'm not saying that, i don't want to be an economic reductionist year and say that if men's economic conditions begin to improve, the marriage problems that charles documents would go we. i'm saying, but i am thank you related points.

one, the fact that women have more economic and spiritual independence to decide when they get married and. children is a good thing but i'm sure charles would agree. and second, if the economic condition of their marriage partners were improved, and there is follow policy, and important public policy, i think of make a positive difference as well. >> charles, in your book you talk about, and this is in your latest book, "coming apart" can you talk about how many people have lambasted the educated class, coming out of the '60s, cultural revolutionaries if you will. for attacking marriage, tradition institution. but i'd is that today it's the upper educated class that has the lowest out of wedlock birthrate, and the highest church attendance as i recall, and farther down you don't the more you see this

disillusionment of past institutions. your book came out, we had an e-mail chatting back and forth but you are reluctant to want to analyze why speed i didn't want to make you mad again. >> i've learned new patience with anger management. why this is happened that we have declassified that matches a cultural divide. >> i was smiling because i get really irritated at the upper-middle-class. i know i'm a member of, but who better to be irritated at them? look him in the '60s, my generation, marriage, no and we don't need the. sexual revolution, great. this, that, and the other thing. and as we got older, we have the resources and the wherewithal to recover from our silliness, and with it. so we said okay, when we got our life in order to now i am no longer smiling.

here is the thing that figures me the most about the 1960s. we changed the rule of the game, not for everybody, we change them for poor people and we especially change them for poor young people and we most especially change them for poor young black people. and it happened in everything you can talk about. it's not just the welfare system and the increase in benefits for single women. >> i can just put that aside. the changes in education that went on in the 1960s, where but it became a whole lot easier to go to school not learn anything. a lot easier to drop out of a whole lot easier to get away with stuff that, in fact, kept you from getting an education. in crime, we had during the 1960s crime took off after being plateaued throughout the 1950s. well, you know what? there was wisdom in the city put people in prison, italy make it into smarter criminals. as we had a rising job

reductions in occurrences of crime figure productions in people in prison for crack or quit reduction in the 1960s. a wrong reduction, not just a reduction in terms of the ratio. it became a whole lot safer if you're a teenaged kid to engage in crime. when i did an analysis, more delinquent which there are none, in the 1970s, the average number of arrests before they went to a custodial facility, for the first time, 13.6. so became a lot easier to engage in crime. it became a whole lot easier to survive if you're a guy without having a job. you go through any, any of the day to day ground level ways of looking at the world that a poor person at a poor young person at a poor young black person especially had, and the 1960s, changed those rules which made

it profitable to big which were disasters in the long term. and it did not have the resources to recover from that. they couldn't be like the upper-middle-class and say lsd was fun, the sex was fun but i'm going to get a job and have kids and the family and so forth. so the baby boomers have a lot to answer for, in my view. and in that sense, we did something that in my view during the 1960s was incredibly destructive. >> i'm going to ask -- it feels right, to the baby boomers -- [inaudible] as role models for a free behavior? once others have picked up the habit, abandoned them, went off to the suburbs. >> well look, there is this kind of cottage industry now among the punditry to scold baby boomers but i was reading a

paper the other day, bill heller or keller, the guy who wrote for the new york times, had an article about how the baby boomers are greedily eating up the entitlements. >> [inaudible] >> you know, i've got to say once again, it doesn't, it doesn't resonate with me. and it was a part of "coming apart" that i had trouble figuring out. at the end of the book, charles suggests that people like us preach what we practice. and i would -- that the elites i think tried to impart some of their international news and pretty -- religiosity to everybody else. or to the bottom third who aren't doing that stuff. i was describing it to a conservative friend of mine, and he said even if i wanted to do that, like what would i do?

a good question. go to a neighborhood and stand on the street corner and say let me tell you about how industrious i am. for part of it is pragmatic, i don't get it. look, i really, the problems that you describe in the '60s, you know, sounded in no small part correct. however, i disagree with where that has led us today. and, in fact, i think him and this goes directly against, i think, a lot of your deeply held principles here comes i want to can get to the core point. i think we have done considerable correction to many of the problems that you've identified, particularly the provision of anti-poverty programs and social support. for example, a recent very authoritative study by academics without a republican or liberal

thumb on the scale looked at the end of, anti-poverty effectiveness of come a whole interplay of social progress. this was a paper with lead author i think was bob, a good reputation as kind of a stone cold eyed econometricians on this. and they did an interesting thing. they said let's look at the anti-poverty effectiveness of all broke ribs that charles has starred in the '60s and bled as of our initial descent, and let's not just look at whether they reduce poverty on a because guess what, if you give income to some of their poverty can go down. but let's account for any work disincentive. we not enough years of research that we can estimate the extent to which there are work dance -- disincentives or to have incentives to have babies out of wedlock or the kind of destructive incentive that charles will talk about being planned in the 1960s. and what they found was that those were minuscule. and effective think i have a

quote there, their findings here, i don't -- okay. a combination of means tested on social insurance transfers in the system have had a major impact on poverty reducing the poverty, poverty and near poverty by about 40 percentage points, so 29 points down to 15% in the u.s. him and importantly, this impact is only negligibly effected by work incentives which in aggregate have almost no effect on pre-transfer poverty rate in the population as a whole. so i would argue that we've come a long way, and have built a system that is quite effective and give you one more point and then i will stop. the great recession, if you look at the official poverty rate over the great recession, 2007-2010, you'll find they wind up from something like 12.5% to 15-point win. i think i'm right about those members. they went up significantly from 12.5%, official poverty. the official poverty rate,

doesn't count any of those benefits that i've argued are so important. it doesn't account for a nutrition program that acts just like cash but it doesn't account for medicaid. it doesn't account for the earned income credit. it doesn't account for the child tax credit, or theories of subsidies like that. put this into the mix, and poverty barely moves over the great recession. it went from i think 15.3, to 15.5. so if you include the benefits that were supposed to dampen the impact of poverty over huge market failure, where charles and others can't say well, they should've gotten jobs, there were no jobs to easy and extremely effective safety net at work. so i would argue that he identifies problems that were real, but that social policy has done a much better job than is commonly realized at dealing with.

[inaudible] >> i don't know if these were tweeted in. charles, the first one is for you. you don't say much about nonprofit organizations in the committee. and they play a role in shaping the lives of residents? it sounds like one of your readers. >> someone has read -- [inaudible] >> that's where fishtown is working-class neighborhood into duffy. i just use that as a generic label. nonprofits play a role. by the way, i've got to interject something. i've had so many debates with people who haven't the least idea of what i said. never read anything i've done. they've only read reviews of what i've done. jared, i can't tell you how it warms my heart that you actually read my stuff, you know?

i don't care if you agree. you read it. you know what i said las. [laughter] spoke i've even got you on my kindle, so there. >> doesn't mean you read it. >> nonprofit tends to play an important part, but community as it historically has worked in the united states has been, i won't try to attach a percentage to come an awful lot of it has been in formal. a lot of the social capital to find commuters together, doesn't have any organizational basis. fishtown is a good example. white working-class community. it was a hard drinking, hard fighting community. but boy, was it safe. there was no crime in fishtown because if you try to coming to fishtown and committed crime, they didn't bother calling the police but they took care of it themselves. it was also a place where kids could play outside safely. the reason was because people kept an eye out. and you can go to a place like

fishtown and using data, you can document as the author of patricia -- quoted extensively in the book to document the ways in which all that has been ravaged. so i am -- when he put it this way. if you had 48% marriage of prime aged old in 20, you've got no community. by me, it's just a contradiction of terms. community depends too much on all the things that adults do because they have kids that they're racing together. and when it goes away, it goes away. >> i mean, again, and i like charles personally so much and -- i just, i think -- so the

problem is with the way charles views the world compared to the way i think the world works, it's not that it's unmarried people got married, everything would be okay -- >> you're not saying everything. >> is not they would get a much better economic trajectory. i don't think they would. a good example is something i think compelling research that was done on teens who had chosen out of wedlock. something to every poverty research agrees, every poverty researcher of greece is his problem, something charles has written about critically for years. well, there's a ring -- recent study that i thought argues, i won't go into the weeds out of respect for the timing. but it argues convincingly by looking at things like kids who got pregnant or miscarried or

kids who are trying to isolate a counterfactual of someone who looked a lot like a team who had, the teen who became a mom and the one who didn't. and it looks like the teens who became moms and had this very poor economic trajectory, research will look at them and said that's because you became a teen mom. if you try to do the best you can to do a counterfactual and look at some is just like them who didn't have a child, it turns out that the economic trajectory was awfully similar. just about the same. now, i'm not saying that means should become moms. it's bad for the kids and certain not good for the opportunities. of whether we're talking about marriage or out of wedlock birth, is that shakespeare quote about there's more to this than you are seeing.

there is, if the economy and the opportunity to especially opportunity, the educational opportunity with the ability to access and finish school are not there for you, what your american without you have a kid out of wedlock, it's just extremely tough. and public policy that doesn't realize that and try do something about both for the out of wedlock mom and for the one who didn't is i think the rest. if you focus too much on the culture and behavior and that marriage and a mom herself, you will miss that point. >> okay, i want to jump in real quickly. because i'm the hedgehog on this issue as opposed to a fox for those who read your isaiah berlin. i made the assertion that only but teenage birth. i said about families, communities don't exist. that families with children are what provides social capital that makes communities work. and i think that's an important hedgehog truth. that can unite people across a

wide friday of ideology. at you can see boy, it's the fault of the economy we don't have families, but the simple truth, communities don't work without families and children. that's the way the world really works. >> for kidney, charles, i've got a question for jared. i will let you respond as well if you like. jared, why did the obama administration do more -- why didn't the obama administration do more for poor communities, given his work as a community organizer? >> if you look, get them going to quote one of my colleagues from the center on budget policy, a guy named our lock sherman, you can go on the website of her institution, cbp.org. you will find a number of papers that look at the impact on poverty of the stimulus, the recovery act. the recovery out listed millions

of people out of poverty. the millions -- if you weren't working it didn't help you but obviously a lot of people kept their job. the child tax credit was made refundable down to lower income level, lifted off people out of poverty. the making work pay tax credits helped. with expansions unemployment insurance, critical for the safety -- i like him you heard sheldon say we will probably learned more about poverty went up in 2011. and questioned if the shoe when things is because we have pulled back some of the safety nets, particularly insurance of extended unemployment insurance programs running out for people and the labor market that was still much too unwelcoming. all of those measures him and more, there's a subsidized jobs program that was are effective, big bang for the buck program in

helping people. i would argue in the recovery act the president did quite a bit. >> charles, t. want to respond to that? probably just as well. >> i don't follow current politics. i don't know what's going on. spink you are probably have the government didn't try to do anything. >> but let me ask you, but see, i had a question for you. charles mentioned the need for fresh think about where we can go for me. are there any fresh thoughts around which the left and right may be able to generate some galvanizing political will? >> yes, there is. i read the book, 2004 gives, advocating basic guaranteed income. and there's people on the left who said was he doing that for? >> that was one of your good ones by the way. it was short, too. >> look, i think that's the way to go. and i have my reasons for wanting to go that way.

i think -- we aren't going to go back to a libertarian pre-1932 state. that's not going to happen. and so it is going to be a lot of expenditures and income transfers it and i want to strike a grand bargain between limited government people like me and social democrats. i want to say okay, you guys come huge expenditures, you give us limited control over the way that government can screw around with people's lives. and the best way to do that is to my we thinking, taking all the income redistribution we have now, transfers of all kinds including by the way corporate transfers, all kinds of transfers and use that to provide everybody with a good basic guaranteed income. and i go to the book to describe to my fellow libertarians why i think this would work. but there is a potential their for discussion of ideological

lines. >> i wrote a column on the same thing. since then, dave chapelle had an interesting -- on his show. greater social scientist. one of the great social critics of our time. not exactly the same idea that you are working with, but his bed, his us get was a what if sort of proposition. what if black americans really were paid reparations in cash. and the bottom line is they would have to it spent by sundown, mostly on lottery tickets. [laughter] it was a hilarious bit. you had to be there. [laughter] comedy central will probably rebounded tonight. the way it's going to a rerun them for ever. but with that little nugget out there, and you can address this. i'm sure people say this. if you hand people guaranteed income, how do you keep --

>> that's a longer conversation than we can afford right now. i will someday so i spent a lot of the book trying to work through those questions. are legitimate questions. >> in other words, get the ball, right? >> it is an interesting book. >> can i take a stab at this? >> go ahead. >> i think it's very helpful to have big fingers like charles put out big interesting ideas like that. but it is absolutely so far away from anything like politically realistic i have a hard time wrapping my head around it. so i'm going to say something that could easily be accused of being equally politically unrealistic but i don't think so. i mean, i don't know if anything -- these days, clarence knows, he writes -- these days it's publicly unrealistic to count on congress keeping the lights on. but, you know, in more normal times when going to talk about i

think is important. and potentially realistic. and i actually think maybe charles would agree with me. we now have a program -- charles and i agree that there is -- i shouldn't say that. i have very much hammered on this point that there is not enough work out -- sorry? one minute. great. there's not enough work out there to meet the supply of underutilized workers, particularly non-college educated men. we have a workspace welfare system now in part coming out of some of thank you's work and i think that is a perfect legitimate social policy. but not if work does not exist. workspace welfare without work is a cruel hoax. would faced -- work based welfare with work can help the lives of low-income people.

we saw this as a mission in the '90s during welfare reform. so i would propose that if the economy isn't creating enough jobs for low-income people, and it's the role of the public sector to create them. so we should have direct public service employment for folks who need were, want to work, who we want to work when there aren't enough jobs. instead of giving the money, create, create work -- create jobs for them. and believe me, there's enough work to be done in this economy and our infrastructure we could find good things for people to do. >> thank you very much. [applause] >> thank you very much. our time has run out. >> on behalf of the for school, university of michigan, please give another round of applause to operatives events. [applause] >> thank you very much.

>> join us later today for more campaign 2012 coverage with a debate between candidates represent rhode island's first district. watch that live at 7:30 p.m. eastern on our companion network c-span. later its president obama back on the campaign trail after spending the last several days even with hurricane sandy. we will be live from university of colorado in boulder for his remarks at that rally. that's at 9 p.m. eastern on c-span. >> i have watched shows on weekends with interview politicians, and the politicians at on what they're doing in congress and different legislation or the different opinions. spent most racially i watched the debates because i was in front of my computer and so work and wanted to see if so i knows on c-span spent i like it because it usually goes down and more important to the issues, and it's not antagonistic and is not hostile and it does seem to have an ax to grind or an agenda they're going to push like some

of the other cable tv shows. >> i agree. it seems there, like you get the real story and does not commentary and things that are negative. >> i go there to get the news and the facts and get more detail than just headlines or talking points. so i want to learn something, not just be entertained. >> and it's not as exciting as cnn or fox, but you get the real stories. and i like it. >> they watch c-span on comcast. c-span, created by america's cable companies in 1979, brought to you as a public service by your television provider. >> recently, a zocalo public square and cal humanities discussed the current state and future state of the news

industry, focusing specifically on investigative reporting and collaborative journalism practices. this is about an hour and 25 minutes. >> thank you all very much for being here tonight. thanks to cal humanities for making this possible. the topic is vigilance within democracy.the the topic was inspired by the jefferson quote about the price he prim with the price of freedom andce liberty were, were vigilant. also said, as reported to have said that in given the c choice between government and gm newspapers, doingen without ones the others would prefer to havep newspapers in government did but then he got elected to office and to begin tackling he had misquoted. from that, zocalo said big

questions may lot of different perspectives. we have re-different people here -- three people here from different parts of the country, different backgrounds. they're all journalists. they are all people who have looked at a wide variety of topics in their work, and have among the topics they have looked at, are the media itself and specifically questions about how we keep a check on power, keep a check on government. you will hear from all three of them. i will introduce each of them as i ask the questions. immediately to my right is bernardo ruiz. his most recent film "reportero," is an incredible fun if you have not seen it -- -- film if you have not seen it, it follows a reporter at an embattled mexican news weekly

reporting on an opening -- organized crime, and corrupt officials. the film was completed and toward mexico and the human rights watch film festival and l.a. john fastenal, january 7, 2013 on the -- january 7, 2013 on pbs. it is also -- he also produced two documentary's examining the drug crisis and is a previous director of the american experience roberto clemente, winner of an award for outstanding television documentary. he has done a number of other things. the question is -- what does digital mean at this time of transition, how we get information by newspapers, the changes inep