>> thin meredith fits to the role of regulators and disinformation and discretion enabling them to keep the market safe and

sound and as a result control competition. peters book that talks about aig. he is absolutely right it was central to the narrative. people said derivatives caused a crisis but ignored the fact many problems had nothing to do with derivatives regulated insurance subsidiaries invested in residential mortgage backed securities and that pose a problem. the aig narrative did not talk about that because that was not convenient to regulate derivatives. the aig narrative also did not talk about the fact that agee was like the insolvent

because that was not convenient. that government needed to distinguish it from lehman brothers. they said aig was not insolvent. there would have been a different view is saying it was that they were left out. after it was passed we saw the incident used by regulators one tag phrase as the chairman of the commodity futures trading commission the subsidiary will spread out our entire economy. with activity in london and new york. peter has been effective at challenging the narrative.

we need to do challenge the narrative to make changes to dive frank to prevent the further acquisition from the power of god frank. he is willing to asked why the fdic is the entity in charge of the authority. lie in which it has no experience to regulate insurance or hedge funds can suddenly become a regulator. it is a hard question. one of those could be a force booker good if used properly citibank had problems. [laughter] could use the liquidation

authority to wind down citibank and send a message to the market's, there will be consequences for failure and would that change the consequences? you cannot define what is systemic and to all circumstances ocher. but timothy geithner response is what regulators do whatever they want and we will figure it out, i trust us. what would peter do during the crisis? and what is appropriate? i look forward to discussion of these issues and congratulate you on your block. [applause] >> thank you very much.

is an honor to be here and comment on peter's book in the '60s willis friedman and and the shorts set out to do difficult things at a herculean task to challenge the narrative of what caused the great depression. they threaten to the underlying rationale for a system of federal agencies and the way policy makers looked at the world. they were not immediately successful, but because they were right and meticulous and careful unreasoning and relentless and did not shy away from controversy, they had success. the role of the fed and the monetary policy is now well

recognize. so much so the chairman to the fed when he faced a similar crisis and recognize the role of the fed and contraction ary monetary policy. that shows avoiding one mistake does not prevent others. hence peter wallison book, a task no less daunting than that faced by a lew friedman and shorts facing an economic disaster and the lessons learned that led to policies and institutions institutions, that must change, will bring on for their calamity. i applaud the effort and i appreciate the format of the book. when i first got it i thought a couple hundred

pages of new ridings from peter that i thought this is stuff i have already read but there is new stuff in there to. these essays are important because it was written while the crisis was unfolding, and begin when then it can't -- kindling was set, lighting the match match, a finning the flames, letting the embers smolder and not put them all. what do we love to have similar as aids one negative essays from friedman and shorts after the depression? they were looking backwards. we have the opportunity to live with essays that talk about and comment on the situation as it unfolds. i am struck by the breath of the issues in the remarkable consistency throughout the book with the essays were

written. so the first chapter reid is the last chapter because it pulls it together it is a long book but take invite by byte the way it is organized as still shorter than the dog freak act by several hundred pages said cost less [laughter] even with advertising. his book stimulates thinking and so i want to touch on a few thoughts that come to my mind to re-read the things i had before the purpose is that history has bad policy results dodd/frank succeeded to replace the financial crisis with the regulatory crisis. the gao report last week

said 10 of the federal agencies tasked with dodd/frank, not all of them, had hired a reassigned to thousand 541 people to work on dodd/frank but the comptroller has only 2700 people nationwide in comparison. with three new agencies every regulator copes with the changes and mandates of the structures and the duties of dodd/frank. the same people with musical chairs also write the regulations and undersea -- oversee the industry. we're fortunate while dodd/frank is unfolding we have not had another financial crisis because those people would have been distracted with dodd/frank during that time. but their preoccupation with

the regulatory crisis is probably the reason we have heard nothing from the regulatory agencies about the ongoing public treasury deficit securities over lovell of new regulations we will hit just as the housing market starts to recover. one of my favorite essays is deregulation in the financial crisis, an urban myth. i lived through the legislative efforts of the '80s and '90s as did mr. allison and it did not feel like deregulation. many mandates imposed, in industry and the market and discretionary authority given to the regulators. and each of these some would characterize as the regulation, each came with additional price tags for

new regulatory burden for example, the way the act had a whole new regime of privacy regulations objecting the banking industry and all others to the new regime and for the first time that was subject to sec supervision that is something classical denied even to. by the way peter emphasizes the 1999 legislation enabled banks during the recent recession to play a major role to take on the failing on bank to ensure the more important functions continue to operate in the un interrupted fashion. but i do believe i do take issue with the paper the of

the stress test administered by the bank regulators. he quickly demonstrates the stress test was plenty rigorous and assume the obama administration recovery program would fail, not only fail but make things worse which is curious the entity was also the treasury department to promote and carry out the president's recovery program. it is not the rigor but the necessity. p except s that they were needed to restore confidence it was correct it was a gamble by secretary geithner but perhaps unnecessary and in fact, investors are already beginning to return to banks long before the results were reported.

i do agree with the assessment of the outcome to expose the alarm is some like paul krugman for what it was. one other conclusion is they show how far off pate mark to market accounting is to violate assets that the banks intend to hold. they told these and particular florida cash flow, not fire sale value in performed far better than revealed. one more thing the stress test demonstrated the banks suffered through swaps and derivatives and other exotics reasonably well and absorbed the losses. what caused the great challenge was traditional bank activity as retail and

commercial lending. the people who made of regulatory mistake might not have known better but the record of the book and written as sayings were evolving demonstrates they have no excuse for not knowing better. for political reasons they're locked into a view of the world is connected from reality that was not helped by the helpers' to had the task to the improved. peter wallison book will help us to identify mistakes and lead to solutions. right now the current efforts focus in a dispassionate way in review of the dodd/frank act what is working, what is not and how to reform what is done. much of that might have been avoided if a more bipartisan

approach, that looked at the issues more broadly but welcome on time or late, the leader reform comes, the more herculean task before too long, a continued down the destructive lines too far, and the task may evoke comparisons with hercules cleaning the stables. [laughter] thank-you. [applause] >> thank you, wayne, and to the whole panel for a very articulate comments focussed remarks. i will give peter chance to respond for anything that came out of the comments and then give the panel a similar chance at a second round. peter?

>> i was shocked there was criticism. [laughter] that was not the arrangement. [laughter] john allison's point* was important about the federal reserve role in creating at least the bubble. i looked at this because many people have taken in this position. i don't have a chart that shows this, but look in my dissent, there is a chart that shows the growth of the bubble beginning 1997. by 2000, that bubble was already larger than any bubble we had. it is already above 10% in size. by the year 2003 it was

three times the size of any bubble we ever had. i mentioned 2003, the major component that it caused a financial crisis with lower interest rates from john taylor a professor at stanford a monetary economist and well-respected. i talk dabblings and he agreed with me the bubble was begun by the government housing policies. they had a huge growth of housing values through 2003

and 2005 that the fed activities did accelerate the bubble that is already created. so i will rest in the shadow of john b. taylor that i don't have any better opinion than that. but happens the bubble began by housing policy creating much more demand and it grew to a large size by 2003 into their picks up at that point* to argue that is in the acceleration occurs with the fed interest-rate. i will stick with that. without the housing problem created by the government

housing policy, we never would have been in a position with the fed lower interest rates through 2005 would cause any kind of financial crisis. also what john touched on was the importance of dodd/frank as legislation that takes over an industry. the book covers this, people have not noticed this is like obamacare. the same thing was done this industry left in private hands the shareholders are still in charge, but so heavily regulated it is a

war of the government. these two major provisions both have the same characteristics and hester peirce referred to the biggest issue and i believe and that is true. that is what creates the greatest danger. not in my talk but a lot of time in the book. four crony capitalism nothing greater or more dangerous than what has been done with the financial stability oversight council to declare non-bank financial institutions are dangers choosy financial system to be stringently

regulated what that means overtime as they are pulled into the select category the fed can control what they say or do for all matters of public policy should they suggest they oppose the administration tax third trade there would be dead discreet warning from the fed to tone down and you don't have to have that type of controversy at message is the essence will be made possible from the feds for control over the institutions just like it does right now. of the wood to take to which time but it could be used effectively if move toward citibank everybody would run

in the institution would become a shell. it is still full it works but we need to beef up the bankruptcy law to deal with failing financial institutions. with what wayne said which was very insightful, i thought, the 2009 stress test, i originally was very skeptical. but i had to it to report on the stress test the major

financial institutions were insolvent although some needed more capital and was insolvent that eases concerns in the market that fit well with the mark to market accounting because that cause a panic among investors all over the world. once the fed came in to say it is not insolvent created from mark to market accounting was relieved and at that point* the equity prices of those 19 institutions began to rise. although i was skeptical, i came to support its after words. the important thing is

coming it was an anecdote to a terrible policy. mark to market is a ridiculous policy in a major cause of the financial crisis that will be covered in detail in the book i am now writing what caused the financial crisis. sorry to mention "the new york times", an article in the business section about the fact those a make rules white car mark to market has rethought poll idea now taking the position of banks should be able to treat her assets with cash flow they should value that way and not to the market which could be panicked might

treat them. thank you. >> each panelist can have another one minute maximum. something else? >> look at the numbers, react to the federal reserve issue, we did have the housing double that would have burst and then space been less destructive it would of been exponential after 2005 and went off the chart. yes, we would have had a correction but healthy and necessary, and driven by the fact greenspan wanted to go out note -- out a hero not understanding the

motivation. [laughter] they have their own personal agenda and he wanted to step on the gas and they could not pull it back in. it was exponential. >> having stepped on the gas previous times had made him a hero. >> i just want to highlight what i would call crony stated some verses capitalism but that means banks pay attention to regulators they and what customers think that is a sad change and not beneficial for the average consumer a cost of the offering that it's lost.

>> i would echo that point*. died trying really changes the nature where banks looked. before dodd frankly with book to the customer for prices are products now they look to the bureaucracy. they're all waiting to see with the consumer bureau would do with qualified mortgages that identified help they could interact with customers. the serious problem, a dodd/frank is so much power to the federal reserve i fear it has turned it into another political player in washington and undermines the independence of the fed. >> we are about to come to your questions, ladies and gentlemen. first, with the federal reserve and systemically important financial

institutions. i have a line that the biggest of them all is the federal reserve, it has the biggest possibility to create risk and booms and busts in the economy and if i could get a quick advertisement one month from now in the same place we will have another book event from brendan brown entitled the global curs of the federal reserve. that this is interesting, a comeback for our next book yvette. [laughter] let me remind you of a e. i. rules please wait for the microphones to tell us your name and affiliation and ask the question if you put a statement first in the form

of a question as long as it is brief and if not the chair will remind you your statement time is over. >> afternoon, i have a question. mr. wallace then, it is one thing to say i told you so after the fact if you were writing all along with the broadcast media but what would have been your solution legislatively? did you have a chance to talk with mr. greenspan who by the way he mentions publicly he did not think dogs drink would be strong enough or implemented to the

fullest potential only part of it has been utilized so it did not use of full strength intel recently. what would have been your predictions and how would you have solved four years ago? would it have been worse more than $90? >> if i was right to would be worth more. that was a question that came up from some of the commentators and it is difficult to put myself in a position to provide any type of alternative solution because things had gotten to a point* by the time the financial crisis came about nothing could be done to prevent it from running its course. my preference to allow the

financial crisis to run its course. we have something like this 1907, the panic with the market according of cash in one year later the entire market came back, the economy came back and people functioned about as well as they had before. the fact the government tried so many to prevent things from happening has caused more uncertainty for many of the players and as a result it is taken much longer for the economy to come back. if you believe the cause of

the crisis was a government housing policy, the first thing you would do is say we're changing housing policy but that would not have solved the problem because bad mortgages were already out there causing tremendous losses. we should have a system to resolve the large financial institutions. a good bankruptcy system would have done that and once we resolve those issues it is over in the economy comes back but putting in place a new lot that causes as much uncertainty and it is guaranteed to make the recovery slower. >>. >> i'll notify m public

policy student. i have a question part of the argument for too big to fail that meet the bailout is because there be a crisis though big in the interim it will not be functional to be sacrificed such as much slower economic growth would is your reaction to that i read about the volcker rule and as far as i read, i may be wrong but the volcker

rule prohibits prop trading as well as come if the financial is egyptian shows the customers get benefits out of it? am i mistaken? >>. >> we have too big to fail and the full parole question >> i have written a lot about this and we don't have a good way to evaluate it in the institution is too big to fail but what we've known now is the institution that is $600 billion in size, lehman brothers, not

too big to fail because they'd drag no institution down with it. that is the whole idea with too big to fail, in theory if it fails the losses suffered by all others are so large they all are brought down that is why fsoc is given the authority for what is interconnected. when lehman brothers failed never others failed with the exception of one money-market funds that held a lehman brothers commercial paper and broke the book as a result of the losses, one example, but to be too big to fail you have to have many, many other firms

failing and we have no record of any other firms failing when a $600 billion firm failed. would have been if a very, very large banks like jpmorgan chase? we don't know. but almost everyone keeps track of exposure to everyone else. that is part of the business in the financial area. as a result the likelihood is a large bank could fail to be taken over by the government, the fdic, resolved without the issue of too big to fail to be raised. the volcker role is not quite right. the danger is institutions

that are connected with banks are not permitted to trade with their own accounts, assets, financial instruments for their own accounts. they can trade for customers, they can hedge and in market making, if you can tell the difference between trading for your own account in better than hedging and market making you are better than the regulators. [laughter] i don't know what to say about the volcker role but was badly conceived and almost impossible to implement. >> i want to add onto big to fail. i was in the back room looking at the trading patterns making decisions you to find and not to find.

when in the brothers' failed we did not lose a penny. we manage the risk. with bear stearns maybe a little bit, what cobia, the losses are trivial compared to residential builders, if that is what you were worried about, you should keep them in business. may act as if the banks to manage as a derivative risk. whenever our exposure you had to put up the cash. there was a huge inflow of cash. people were begging us to take money with the flight to quality and if we let the correction happen city group would have been and of business, that is good, not bad it is good washington

mutual are out of business and they should have failed. citigroup as failed three times make the prediction able failed again because there temptation is enormous. it would not have been much fun but we're better off. >> give us half a minute of your view on the volcker role. >> it is a waste of time. [laughter] it had nothing to do with the financial crisis and it is trivial. it is not a big negative but a waste of time. >> with the competitive enterprise institute, mr. wallison your narrative on international finance

narrative? did you find that was similar to that of dr. franken how was a different? >> it is somewhat similar but applies only to banks which is somewhat different from dodd/frank and in the case of systemically important institutions it could be any. there are similarities and differences but with basil they try to micromanage the assets that banks hold in we should have learned the lessons what happened in the financial crisis that has been completely ignored that banks were herded into owning not all the mortgages, but also mortgage-backed securities.

overdoing the same thing at the same time with the basal regulation. that was a huge mistake. we paid for it. net asset mortgages declined in value, mortgage-backed securities declined and all banks look weak at the same time especially with mark to market accounting. it is a big mistake through basal womack one and womack to and during the same thing now with basal iii. so the average between equity with any asset they want to carry and that means

they will look different that means is they're not in trouble at the same time. >> did even in more egregious example to buy something they shouldn't have come in the treatment of preferred stock fannie mae and freddie mac and this government housing policy the second point* is and how governments are interested to have banks lent money to the government. one of the rules of basal is to give preferential treatment or to a friendly government when wear question then we will wrap

up. >> if things aren't to blame as the cra why was that a global phenomenon? >> interestingly the banks in europe got into trouble because they bought mortgage-backed securities for the longest time buying u.s. mortgage was considered one of the best investments you could make because the rate was very small because in ireland, spain, they had very large bubbles which is the interesting phenomenon. they had those without fannie mae and freddie mac

said some but the difference was it did did not contain said prime mortgages because they did not permit those so their losses were tiny a very good study was done in he went to europe for the losses resulted in the deflation of their bubbles were small the main problem came from the fact they all alone substantial amount of mortgage-backed securities. >> almost to the end of our time we would like to give each member a parting shot. >> i think the book that

peter has written is the need to bring in as many points of view as we can and never say the debate is done, let's go. there has been way too much of that. dog freak was created as a partisan law we are forever reforming it is no consensus was established. when will dodd/frank we done? never it was never a consensus formed to so our laws and regulatory program will forever be in flux. >> i would like to close with no warning we should pay attention to peter's argument as peter mentioned quite rapidly and before those requests are enshrined

in legislation. >> i recommend you read his book and get your friends to read and. [laughter] if we let the myth survive we will lose long-term this is a thought out well-documented attacked. >> peter, last chance for now. >> how could i be that? thank you very much for coming. it was a great opportunity for me and i hope you look at the book. it is long but reid a few of the essays included within it. if you have questions and would like to send me an e-mail i would be delighted to hear from you. >> we look forward to have you join us at the reception and show your appreciation for the excellent panel.

[applause] >> this is in the 1700s she said that. >> abigail adams on the new history series, first ladies influence and image called mrs. president she was outspoken of reviews of slavery and women's rights as one of the most prolific writers of any first leadership provides a unique window into colonial america and her life with john adams. join in the conversation monday night live eastern. on c-span.york.

>> 10 things congress doesn't want you to know about how it does business. number four, a powerful members of congress save seeds and hold fund-raisers outside district to increase leverage over other members. number five, congress spends more than one digit billion dollars every year on 200 programs not authorized by law. number six comic-con research team the braves this social security trust fund to cover shortfalls. >> did you look to the appropriation bills not done over the last two years because of the dynamic and say we appropriate x amount of money in the committee programs, it is over $350 billion no, better funded but not authorized by

congress that tells you there is the imbalance in congress. powdery appropriate funds for program lee did not say to spend money on that is the power of the appropriation committee in the pork going back to the states. is it better to look good to oklahoma or is a more important to think long term what is the health of our country in the long term? and politically puts you on the losing side of every argument but have to work hard to explain yourself. >> ever seven, members of congress frequently do not have the opportunity to read the bills they are voting on. number eight, when the marcs secret and anti-democratic ways congress spends is to

direct money in the report language that only the members of the committee can photon or amend. number nine, congress spends callous hours debating a budget resolution has no intention of keeping. number than, congress circumvents the limits to avoid scrutiny by exploiting its own arcane budget procedures. >> those are all true. the budget resolution season in february, is a waste of time? >> no. right now we have three point* $6 trillion spending spending, the big criticism of the last two years is crit -- congress is gridlocked. really? satin reauthorize spending

three point* $6 trillion? what they are gridlocked is spending money we don't have better things that are not absolutely necessary. we are gridlocked to make ourselves look good to the constituents. there is no gridlock with spending your kid's future in washington, we would not spend three point* 6 trillion if we had a budget last year. but we did a continuing resolution that means it is bipartisan and the president signed it better be borrowed money we did not have the 600 billion was wasted by content. literally did not benefit directly to the assistance of this country other than those to administer or develop board give out the program see you could look with the

want to say every program, a stand-up is effective and efficient and what you see is minimal because members of congress have not done their job but turn a blind eye to say it is hard for oversight and i will get criticism when i do, let it go. so now the $350 billion worth of programs were appropriated money, and never authorized by congress or the authorization has lapsed. it means they are not working because if we appropriate many then why not put them all into one? >> host: how much freer is

there in members of congress? >> may be a larger perspective i was a businessman before a physician with an older individual i was known as grandpa in my medical school class practicing 25 years. my goal was to be a physician not at the risk of my populous other than reputation with my patients so to put it in context it depends on the goal of the house member use if that

goal is above your personal goal to get in office that has notoriety, power, position, then you will define you will keep that in perspective. your number one goal is the position or notoriety, the secondary goal is to secure the future. what happens, how do you value your position on certain policy changes? that is not in purer or terrible, just human nature. make a point* if you solve this problem, if we secure

liberty and freedoms for our kids, stop sending career politicians. >> host: senator coburn did you get hot style reaction from your colleagues? >> no. well i did on breach of trust. i don't think many have read it. i am honest, i make the speeches in my caucus and on the floor. i am okay to take the consternation and criticism if i think our country is in trouble, it is in trouble. we are bankrupt. is a great article. with those accounting principles as those county governments operate we have

no idea where we would get the money over the next 75 years. 1 trillion more of bills coming due than what we have over 75 years. if you did not grow the economy at all, why put ourselves in a position? the fed has increased the balance sheet with $2 trillion of funny money and ultimately the pain of that will fall to the middle-class and the very core in defeat were both parties say they want. we don't have the courage to date to make the tough choices, even if we lose our seat to secure the future for the country.

reporter sells first instead of the country. any american citizen who reads back in black, go to our web site, there is common-sense ways to save money. just this week the air force announced, we will spend $64 billion on a 80 projects the gao says half of that will be wasted it will never get completed or never do what it is supposed to do. with back-to-back we had a program cancel this because it will never work. this is out inefficient government is. finally the air force canceled it as the

$100 million of first. they paid the settlement fee to cancel of $8 million but the person that was responsible for the contract did not get fired in was not held accountable, in the company that did not provide the cerebus was not sue to get our medevac. nobody runs their household that way. most eight governments do not operate that way, but we are incompetent when it comes to spending american taxpayer monies. widely waste money on information technology programs that don't work? that is 60 percent of the pentagon so why do we do that? with is the leadership to get this stopped? we will oversight and look

at the bad actors in demand those people get fired and those nonperforming to get the money back. ..