complimentary content experience around programming that brings more value back to realtime viewing. thirdly in the area of measurement for programmers, measuring social engawjment around their programming -- engagement around their programming using twitter that. and finally in the area of complementary advertising models. so i think among the technology companies sort of our ilk, you're not going to find a bigger fan and supporter of the tv business than twitter. >> yeah. i think for jawbone it's the same. i haven't really seen any kind of conflicts or issues. i would say for us the thing that's been interesting, we've been working quite closely with comcast, we're sort of just used to a different pace of innovation, of rollout, how fast we want to bring products and services to market. and, you know, i think it's sort of aligning companies on being

able to do that. now, comcast has been great, and they are moving very, very quickly. but i think just as an industry as a whole, it's something that's new for us, is that pace of innovation and the pace of deployment of new experiences is different than what we're used to in silicon valley. >> comcast ventures is a major investor in our company, so we're certainly aligned from that respect. and i think in general thanks to the platform you provide, we're able to create new journalistic and entertainment services. perhaps we might compete with some of the cable network, but i don't, you know, it's a very different type of business. today and this week, for example, we'll be covering the verge, our tech site, will be covering the apple developer conference, wwdc as well as e3 as well as this event, you know, and we like to apply the level of coverage for fans of technology in the same way that, say, a cnn would cover a major

news event which is to say really drill down, really apply quality. but do it in a way that is web native. you know, not built for television, but built for the internet and all of the kind of creative aspects of our medium. so, you know, we think that we're building value for broadband users generally, and we appreciate the value they bring to us. >> with what cable provider do you guys have? >> at home? >> at home. what cable provider do you have? >> are well, i'm a loyal comcast guy. but, you know, i will say, you know, we actually experiment with a few of them. so we have fios in our office downtown, and we have comcast as well. >> i'm just curious. >> comcast. >> okay. >> same. >> cablevision. >> time warn or cable. [laughter] >> many i have fios. but i've probably had everyone at one point or another. let's pretend thatne wrong?

[laughter] what could they be doing better? just us. just us girls. [laughter] >> hossein brought up a good point. this isn't applying to everyone who isn't listening to us, but some of the people who aren't listening to us can move a lot faster, you know? and that applies whether you're a technology company or especially a media company. we're a media company, but with we use technology principles to innovate and it rate. there's a med of building things called agile which means you're always releasing things, and if you make mistakes, you go back and it rate them quickly, and you can't be afraid to disrupt anyone, especially yourselves. and you have to listen to users, you know, create aeedbk

ocy data coming in based on what you put out and really listen and act on that data. and that applies to, as i said, you know, obviously on the technology side, but even on the media side as well when you're covering an event or putting out new programming for a consumer, how quickly are you moving? get out of the cycle of, you know, waiting for the fall release schedule and testings. >> i agree with that sort of to reiterate the point. i think in a world where there's so many new disruptive technologies and new experiences constantly, there's opportunity to try things and try them and fail quickly and see what sticks. i think that goes in hand with the pace of innovation, but also the pace of how to monetize some of these experiences. some of them will stick and monetize better than other ones. but, you know, as long as people are using them, there's opportunities. and i think that it is moving very, very quickly. >> the willingness to fail? not just -- >> yeah.

i mean, i remember when twitter didn't exist. i remember, and now can't live without it. right? and you see how fast behavior is changing. we see it with some of our stuff. we've got this device, up, where people are tracking all their sleep and activity. we're going to announce some interesting things with comcast tomorrow, thinking of that as the content of you and how does that show up on the screen. but that's something people didn't do a year ago, and now they're addicted to it. all this behavior change is happening fast, and i think if you embrace it quickly and test it and try new ways to sort of exploit that utilization, it'll happen. >> ali? >> i largely agree with all of that. but i guess the way i would say it, and this is probably a statement that would have been more appropriate five years ago than today, but my statement would be to view technology as a friend, as an enabler of new experiences for your customers as opposed the a foe, as a disrupter.

and that's not just the hardware that a company like jawbone is building or, you know, obviously the things that twitter's doing around realtime communication that's connection of programming. but generally having an orientation of technology being an enabler and an extender of your business as opposed to something that threatens to disrupt it. >> tom? >> well, you know, as a cable industry we're spending billions of dollars a year every year, year in and year out, on technology development and infrastructure deployment. and it's technology in the infrastructure that we're spending that money on. and i'd like to go faster. i'd like to see us go faster. and even though we're going very fast and the capacity of the networks is coming up, it's amazing how quickly the network capacity gets filled by applications if you build it. so i think we can keep going and keep building and create demand, and to those in the programming side of the business whic is a

lot of th room, you know, anything that you put anywhere is going to end up on every screen. and you can't control it. if you think you can control the space where you've distributed a piece of programming, somebody wild a device an bring back together and put it on the of or put it on the distributed wi-fi network in the house or whatever. so there's no way to control where your content goes ultimately, and if you think you can segregate where it goes by calling in the internet and this cable tv, somebody will build a machine to disabuse you of the notion. >> well, thank you for infrastructure. [laughter] i'll be a little more specific. i think the tv everywhere initiative is really a seminal moment for the industry. we can, we can move faster, we can make some vast improvements in the way that works, but it basically boils down to embracing the internet for distribution of the content, and

most specifically, i mean, tv everywhere for mobile we'd like to make it for tvs as well because, in fact, it sort of revenge of the tv out there. turns out that is still the primary place where people want to watch all of this content. and, you know, people didn't used to have to log in to watch tv, and now we're kind of, we've got that going where you have to log in to watch tv. these kind of problems are really ripe for solving in the industry as well as just general embracing of the tv everywhere initiative and getting our content out there. >> all right. that's all the time we have. i want to thank our panel. if you could give them a round of applause, jim bankoff, hossein -- [inaudible] steve shannon from roku. we're supposed to walk out that way. thank you so much, appreciate your time. nice work. [applause] ♪ ♪

>> and now, ladies and gentlemen, please welcome the moderator for our content creation panel, the editor-in-chief for television at variety, cynthia littleton. ♪ ♪ [applause] >> and now the rest of the panel. the chairman and ceo of showtime network's incorporated, matt blank. [applause] the president and ceo of amc networks incorporated, josh sapan. and the cochair of disney media networks, anne sweeney.

♪ >> thank you. good morning. thank you all for coming out, i really appreciate it. um, we -- just as we were all talking backstage and listening to everybody that was speaking before us, it is just a diying array of few ways to watch programming, new ways for viewers to engage in programming and literally as i'm trying to keep track of all the acronyms, i realize that it, essentially, boils down to those two things; new ways to watch programming, new ways for viewers to engage with programming. as programmers, how has that explosion of platforms and opportunities, how has that changed your jobs? how has it changed the nature of what you do? >> well, i think we all realize that the consumer has taken control, and tear not giving it back -- they're not giving it back. so every new technology that comes forward is something we have to integrate into the way

that we're thinking about distributing our content and also what happens to our content when it appears on a device, it appears on a new platform. we have an astounding relationship with twitter and "pretty little liars" from abc family. and that show just never goes off the air. it never goes out of consciousness because the twitterverse and our viewers are one and the same. >> uh-huh, uh-huh. josh, you've had an incredible run this year with "the walking dead" on amc. a nice thing to have as the company is now newly solo, to have not only the number one show on cable, but in all of the television universe. can you talk about how you harnessed all these new opportunities to really platform that show in an incredible way? >> sure. it's been a good run. we do look at every platform as

an opportunity. to do different things. second screen viewing, webisodes that are incremental to the show, a show after the show in which people get to talk about what they just saw. and then i think perhaps most interestingly and importantly what occurs between seasons. and in a certain sense, we look at the off season as not the off season, but a full year of people who are very interested and try and provide them with the opportunity to stay on as a fan and, in fact, to invite new fans in. and i think we all have seen that. and actually it's one of the most interesting, i think, things occurring in tv is what happens between seasons. we've all seen shows -- i think "homeland" and others -- build in between seasons, and you come

back to linear television, and it's up 30-40% in seasons three, four and five. that is a rich, rich opportunity to expand a fan base and to expand an audience. so i think it's every piece of technology is a big opportunity, and i think the calendar is not quite the calendar anymore. >> uh-huh. but do you actually program to that off season time? do you come up with original content? do you try to seed the, seed the audience to come back to your platform, or is out about driving people to awareness that you can catch up with season one, catch up with season two? >> it's both depending upon the platform. on internet-delivered services and on cable on demand where it is, in a sense, the same content, windowed and delayed which has been successful in bringing in lots of new people to subsequent seasons on welcome back activity -- web activity,

on twitter and other platforms, it's incremental for the people who have already seen it. but perhaps, you know, sort of the interesting thing of it, it seems to me -- consequence, perhaps, is -- and i think showtime has done it so well and "pretty little liars" and our shows is it creates a particular invitation for stories that go on, because people really like their favorites, and they don't want to give 'em up, and they can plan viewing them with their friends or family. and so i think it, the technology gives particular rise and actually influences the nature of the content. i think happifully, it's made it better -- happily, made it better, richer, the craft better. so we do it all, and it does it to us too, by the way. it's doing it to us. the technology is basically informing a little bit what's happening on the cruttive side

of the world -- creative side of the world. i think happily, mostly for the better. >> yeah. i think serialized television really benefits from all of these technologies, and if you have a good mystery on your hands, then all the better. >> give them the opportunity to where you've just got to watch one more episode. >> yeah, speculate. great conspiracy theories. >> matt, can you talk about showtime anytime and how that, you know, the rollout of that service, how that differs from, you know, the traditional programming of especially pay cable shows -- >> sure. >> -- where you give your viewers no shortage of opportunities to catch up during the week? >> coming off the last panel, i wanted to start off by apologizing and admitting that we have participated in the government's prism program providing everyone who watched "homeland" and "binged" viewed. [laughter] we view showtime anytime, this is another attribute.

being premium, we sort of think we have to be there first, someone is paying for our service. as the technology allows us to do different things, we were very early in hi-definition, premium category really invented the svod world, and, you know, at each of these times we've seen dramatic impact on how people use our service. and showtime anytime is another way of putting the on-demand platform out there. we're very different, as you know, you know, unlike the joshes and annes networks, we're not terribly focused at all on how many people watch the premier of one of our -- premiere of one of our episodes. if we do well, you'll see it in the press. if we don't, we just don't talk about it. but the reality of our network is that, you know, 80% of the people who watch "nurse jackie," and it just had a very successful season, watch it

after the premiere on a sunday night either dvr, on demand or other place during the week. 60-70% of the people who watch "homeland," who watch "dexter" in a given week don't watch it in that premiere. so we're very much in the hearts and minds business in terms of how we see the impact of our programming on people. and any way to take that on-demand platform which has been so terrific for the premium business and provide different access to it and different ways of accessing it, we think, just helps the service. i remember when we were launching on demand, there were people who thought, well, your business will be totally virtual in no time. people still like to watch linear television. they still like the watch it vertically, one show after the ore other to a great extent. but certainly the case of a premium network, the more ways we can provide that on-demand

platform, the more successful we're going to be in getting people to watch our shows. >> with uh-huh. you mentioned, you know, the pay cable conceptually kind of created the svod business. as you may have seen, there's a lot of chatter about the growth of svod businesses that are, you know, outside of the traditional cable universe. that's for the major media conglomerates, it's been a double-edged sword because from the content creation, there's a lot of licensing money that's coming in. and i'm guessing that, you know, for amc the deal to bring back "the killing," that probably wouldn't have happened had the netflix component not been there. i guess it's a question are they friend or foe or somewhere in between in terms of your traditional cable businesses versus the new world that we're talking about? >> my sense is they can peacefully coexist. because it's all about a windowing strategy, and be identifying -- identifying first windows, second windows through

services like stream picks. you know, there are different places for content producers to put their shows. the other thing we should pay close attention to is ad vod, advertiser-supported video on demand because when fast forward is disabled is a very positive thing for the economics of television and certainly the economics of television production. >> uh-huh. >> yeah. i think, i think that svod has been largely a friend. there's always the specter of friends turning to foes either unwittingly or growing up and becoming foes. so i think today it's a foe. we've been quite careful in the manner in which we license and window. so we put extended periods of time between what goes on to cable tv and what goes on to an svod service. so it's really we certainly enjoy the economic reward, but because in most cases it's the availability on svod so

proximate to the subsequent season premiere that it actually is just a big juice-up in one sense for -- >> [inaudible] >> -- the premiere on cable tv. so it's a pretty happy world today. i'll just add one comment which is i think as cable video on demand gets were better and betr and capacity expands and dvr capability goes the way it goes, i think that some of the tricks including recommendation algorithms and other stuff that makes the internet-delivered svod services particularly appealing today, that cable tv will start to do a lot of that. and that's a happy thing to look forward to, because that does keep it all in the system. so i think we're on our way to a much improved cable vod service in terms of all the bells and whistles. >> is that something that in your discussions with cable

operators, is that something that you talk about, about, you know, the need to improve that authentication platform, the need to make, you know, to steal some of the sizzle from netflix? >> very much so, and they're all over it. i think they're really, the ones we speak to are very aware of what's going on and how people are consuming, and they have aggressive plans, and they're deploying the plans. so it's -- we don't have to ignite it. i'm expressing what we hear from them, and actually we're pleased about it. >> gotcha. >> same question? be. [laughter] those are such good answers. you know, look, i think we rook at the svod problem in a number of ways. it is a revenue source to us which probably says make more programming, own more programming, l control more programming. in terms of competition, you know, the premium services were in business when there was no amc, when there was no ifc, when

there was no disney channel, no espn, no abc family. yet we've never had better with performance than in this highly competitive environment. at the end of the day, for us this is about making great content, controlling as much of that content as possible. feater of those things are -- neither of those things are easy to do. we have a pretty good track record of doing it right now, and that's our primary focus. and if we're successful with that, our brand is going to be successful. and whatever additional competition, additional clutter, different ways of distribution come into the marketplace, showtime is going to be a highly-demanded brand. and, you know, we do not want to slide back into a world where we're worried about every time somebody turns on the tv and do they have to go to showtime.

people are always asking me, you know, you've been doing this so long, when are you going to retire? well, the day that we become the least objectionable alternative is the day i want to retire. i want to be the most desired alternative when somebody turns on that television or fires up thatipad or fires up that smartphone. and, again, it's content. for us it's all about content. if people want our content, all distributers are going to want our content, and all consumers are going to want our content. >> >> uh-huh. it must be, i mean, you've all been in the cable business a long time. it must be, though, a little bit unfamiliar. you had been the disrupters. you'd been the people charging in and changing the world of television. it must be a little bit unfamiliar now. >> we're still the disrupters. i mean, i think that it always drives me crazy. every time, you know, we look at a new show or we see a new show

and we say, wow, this is going to blow people's minds, maybe we're right, maybe we're wrong, but we're still trying to be disrupters. and, you know, the thing that gives me, sort of drives me crazy right now when you read in the media every day and the business news channels love to talk about it, you guys love to talk about it, i think your favorite companies are companies with no revenue and no earnings. [laughter] your second favorite companies are companies with revenue and no earnings. [laughter] and then you have anne, josh and i running companies that keep growing subscriber, keep growing revenue, keep growing bottom line, keep growing free cash flow and we're like, ah, how do you feel about being disrupted? disrupt me every day like that, i tell you. i want the wake up every morning like that, that way. [applause] >> you know, i think we're still disrupters. i don't think -- i think we've got probably close to 100 years

of experience on this stage, but i think -- >> that's me alone. [laughter] >> josh and i are so much younger. you know, i look at the watch apps that we've created in our company. that's disruptive, but that's also responsive. and i think when you talk about companies that are disruptive, the best companies are those that are responsive to the consumers. we know consumers love our brands, we know they love our programming, we know they want to hold them in their hands, they want to take them wherever they go, and we're making sure that they can do that. so if you look at the watch disney channel portfolio, you look at watch espn and most recently we announced watch abc, you know, that's being disrespective to -- disruptive to, but also i think disruptive in a way that is part of this great ecosystem because it's done in concert with the mppds, and it's done in concert on the abc side with the local broadcasters.

>> you know, i think on the earlier conversation tom rutledge said that they're in the business of providing it all. so i'm not so sure that the notion of disruption which would put, normally puts one on their heels is -- i actually am not sure that i see it that way at all. there are certain new, certainly new technologies that provide different experiences. if you're in the content business, each one is just this rich, fun opportunity. because twitter is a big part now of what we do, and second screen viewing is we have institutionalized second screen viewing. it's fun. and we do webisodes on the show -- >> you guys have really done a good job. >> yeah. we do webisodes on totally separate content. that stuff is all additive. so if you're a fan of "the walking dead" or "rectify" or "breaking bad," you're fining ways to get deeper and richer experience and much more connected social experiences particularly by using all that stuff.

that's not a bad thing. that is a good, good, good thing. we sort of welcome it. and if you actually look at ratings of good tv shows and subsequent seasons, we spoke about this ever briefly, we saw -- and this is the metric if you want to get to the tv metric, is what's the ratings in season three, four, five and six. so we've seen these escalations on our tv shows, and they have been, hopefully they're good shows, but they have been enabled by the disruption that has actually created this god damn ground swell of people talking so that, you know, this guy who does "the walking dead," robert kirkman, said it's an eternal zombie movie that never ends. [laughter] and what happens is during the year the audience is actually just getting bigger, and the appetites increasing. so i would like at all that stuff as just cool, not worrisome.

>> yeah. that's the lightning in a bottle is that, you know, who would have thought? >> no, but it's not just "walking dead," because you sees calculations on -- we had, you know, probably 70% of our scripted shows saw increases in seasons where tv historically has gotten a little long in the tooth. >> but can you correlate that? is there any data that shows you that people watch withed ten episodes, people caught up with the previous seasons on one of your platforms or on netflix? can you draw a direct line between the availability of catch-up opportunities? >> let me just give you one. last fall in the second season of "homeland," tremendous on-demand viewing of the first season of "homeland." so there's a lot of ways that this binge viewing relates to linear viewing, and being a subscription business we have a view that we've got to provide something week in, week out all year round. so we have four seasons.

and then we have shows that bridge several of those seasons and things that happen like boxing, 60 minutes, sports now throughout the year. but what we see almost universeally is higher ratings for the final episode of a show in the season than for the first episode. we see for 12 weeks, and, you know, the beauty of these 12 week serialized dramas is you've got those people sucked in for 12 weeks, and then you move op. but, you know, those shows will be in the top ten of trender for those the weeks. so -- 12 weeks. so we're not just creating a viewing experience, we're creating an experience for all of this chatter, all of this talk around the shows that in a subscription business is very important. and i think if you're, you know, even in the eyeballs business, it just makes those shows more important, more interesting and brings more people under the tent. >> we'll leave the last couple of minutes of this program. you can see the rest of it on our web site, go to c-span.org.

live now to the federal reserve who is holding their meeting this morning with fed chair ben bernanke to discuss the final rulemaking process concerning capital requirements for the nation's largest financial institutions. this is just getting under way. .. for the largest most internationally active organizations. the rule also incorporates aspects that complement the board's broader financial

stability agenda. we will also consider technical changes to them capital rules that were effective to conform with the final rules. we have with us many staff who spent long hours working on woolmaking. they should be commended for their conscientious efforts. of the board to today's discussion of this important issue and take notes vice chair yellen and governor stein eye joining us by conference call. we will now turn to governor r turullo who has played a key role throughout this process. >> the capital rules would be a milestone in our budget crisis ever to make the financial system safer. strong capital requirements alone cannot insure the safety and soundness of our financial system but there central to good financial regulation precisely because they are available to of for all kinds of losses no matter how unanticipated.

the stress testing and capital review measures, we have already implemented. the additional rules for large institutions that are on the way. these new rules will be an essential component of a set of mutually reenforcing capital requirements. the rules will have several important consequences. first, they will consolidate the progress that has been made by banks and regulators over the last four years improving quality and quantity of capital held by banking organizations. adoption of these rules assures that has memories of the crisis fade efforts to build and maintain higher capital levels will not be allowed to win in. second, remedy shortcomings in existing generally applicable risk weighted assets calculation that became apparent during the financial crisis. in so doing they would enhance the effectiveness of the collins amendment which we strengthened in the final rule by making it as minimum o capital buff as

requirements. adoption of these rules means we will have met international expectations for u.s. implementation of the basel iii capital framer giving us a firm position from which to focus our expectations others implement basel iii promoting global financial stability. in characterizing this as a milestone in financial regulatory reform i should note this marker has quite different meanings for banking organizations of systemic importance on the one hand and thousands of smaller banks on the other. for the vast majority of banks the rule we adopt today will mark the end of major modifications we plan to capital bonds. as the governor will explain in a moment most of the significant changes from the proposed rules we issued last year that were made in this final rule are intended to reduce and simplify the number of modifications from

current standards that will be applicable to smaller banks. with respect to larger banking organizations we have a number of capital related initiatives remaining. before turning to those initiatives i know work continues in the basel committee on simplifying the more complex positions and capital requirements applicable to larger institutions. of particular interest is work on standardized capital requirements for market risk that would provide a sound backup for model derived risks. as to what remains beginning in the fall it extends full stress testing requirements and capital plan reviews to the dozen or so banking organizations with greater than $50 billion in assets that have not been followed in exercises we have undertaken since 2009. we also have in various stages of development four rulemaking that will enhance capital requirements for the eight banking organizations already

identified as systemic importance. first, we are very close to completion of a notice of proposed rulemaking establishing a leverage ratio for these firms about the basel iii minimum. despite its innovativeness in taking account of off-balance sheet assets the basel iii ratio has been set too low to be an effective counterpart to the combination of risk weighted capital measures that have been agreed internationally. second, we should be ready in the next few months to issue a notice of proposed rulemaking concerning the combined amount of equity and long-term debt these firms should maintain in order to facilitate orderly resolution in appropriate circumstances. third, after the dirksen senate office building 7 the detector the basel committee has completed refinements to its office for capital surcharges on banking organizations of global systemic importance we will issue its notice of proposed

rulemaking to implement this framework in the united states. given the current stage of basel committee work we may be looking at such a notice later this year. finally, staff is currently working on recommendation for an it vance notice of proposed rulemaking to seek comment on possible approaches to require an additional measures that would directly address risks related to short-term wholesale funding including a requirement that large firms substantially dependent on such funding hold additional capital. once final these measures would round out a capital regime of complementary requirements that focus on different vulnerability is and compensate for the inevitable shortcomings in any single capital measure. this regime would conform to the mandate given us by congress to apply to large banking organizations more exacting regulatory and supervisory requirements that become

progressively stricter as the systemic importance of the term increases. the capital rule we consider today is a key element of this broader regime. in itself as a foundation for the forward looking requirements embedded in stress testing and as of base on which to add additional requirements such as capital surcharges for banks of global systemic importance. with that i turn to governor duke, chairman of the subcommittee on smaller banks for her introductory comments. >> thank you. i will focus my remarks on elements of the rule that are most pertinent to community banks. for the beginning i emphasize having adequate levels of high quality capital is just as crucial for smaller banks as it is for the largest institutions. the financial crisis demonstrated community banks could be devastated by economic turbulence when they did nothing to cause the problem. banks were able to withstand the adverse economic conditions and continue to serve their communities with those that

started with solid capital positions. as proposed last year the capital rule would have achieved the objective of increasing quantity and quality of capital and bank of all sizes but it would also create substantial regulatory burden on community banks. in the final rule i believe we have maintained the objective of strengthening capital requirements but without the more onerous regulatory burden. the board received 2200 comment on the proposal with a majority of comment letters from community banking organizations. in addition the federal reserve sought input from community bankers through in person meetings. board staff held several large outreach sessions around the country geared toward community bankers fielding hundreds of questions. i met personally with representatives from banking organizations of various sizes with different legal structures and business models and several members of the board did the same. this our reach was critical to understanding how different elements of the proposal would affect individual banking

organizations. after hearing their concerns numerous changes have been made to the proposal to reduce its complexity and minimize potential burden placed on smaller and community banking organizations. staff will discuss these in detail. i want to comment on three changes in particular. first in light of comments or concerns about the burden of calculating propose risks for banking organizations existing residential mortgage portfolios and potential reduction in credit availability due to the interaction of the proposal with other mortgage related rulemaking a final rule would retain the current risk for residential mortgage loans. second, the final rule would allow non advanced approaches banking organizations to make a onetime reelection to opt out of the requirement to include most elements of a coke see eye in regulatory capital. these banks would not be required to recognize unrealized gains and losses in their regulatory capital they would not be permitted to switch back

and forth to take advantage of unrealized gains and ignore unrealized losses. third, community banks objected to the phase-out of trust securities as part of their tier one capital. the recognition of community banking organizations limited access to capital markets, final rule would effectively grandfather certain existing trust preferred securities as permitted by the dodd-frank act. ultimately the relevant measure of the final rule is not to compare it to the proposal but to evaluate it against existing regulatory capital requirements. in this regard i believe the final rule would strengthen quality and quantity of bain capital without introducing unnecessary complexity for capital volatility for community banks. if you view changes from current requirements. common equity tier one capital requirement would require all banks to hold more common stock and retained earnings under current requirements. because most community banks already capitalize primarily with common stock and because

retained earnings are primary source of additional capital of view this new standard as a validation of the community capital model rather than additional burden. the minimum requirement for tier 1 capital would be increased from 4% to 6%. these are important element for community banks. the grandfathering instruments need tier 1 capital standards proposing only at minimal burden on those community banks. it would also create a capital conservation buffer that would work to limit capital distribution and capital levels approach regulatory minimums. community banks stress limited access to capital markets resulting dependence on retained earnings. capital buffer concept is appropriate for community banks because it does not on its own require banks to raise outside capital. it simply mandates earnings retention until capital is above regulatory minimums. the use of calculating various capital ratios would have more stringent limits on inclusion of

mortgage servicing assets and deferred tax assets at risk weights would increase. admittedly this provision increases capital requirements for institutions with high concentrations of either of these types of assets but in the crisis these are less effective than expected for absorbing losses. leslie risk rates would increase for ones that are past due or nonaccrual as well as high volatility commercial real-estate loans. i want to emphasize the higher risk for these loans applies only to a small subset of commercial real-estate loans. a certain high risk acquisition development of construction loans of a type that resulted in large losses during the recent crisis and savings-and-loan crisis. all other commercial real-estate loans would retain their risk rates. continuing effort to improve communication with community banks about regulatory changes that has prepared a one page

summary designed force the community banks that describe the key changes discussed today. i am hopeful this summary will allow community bankers to zero in on changes that affect them. i would like to thank staff for their strong and tireless efforts finalizing these capital requirements. i am confident their work will contribute to a smaller and more resilient banking industries that will benefit the overall economy. i will now turn it over to mike gibson. >> in our staff remarks today i will briefly discuss how the final rule fits into the large larger package of reforms undertaken in response to the financial crisis. i will turn it over to describe the final rule in more detail. the stronger capital standards that will be put in place by the final rule arequipa regulatory reform program. a hallmark of the reform program is the principle that regulatory measures should increase for the larger more systemically

important banking organizations as governor tarullo mentioned this today's rules meet the principal increase stringency since -- many changes have been made for the proposed rule to reduce burdens on community banks and provisions of the rule to not apply to medium-sized banks. other areas of our reform program build on stronger capital standards and also reflect the principle of increased stringency. i will briefly mentioned three of these other areas. stress testing and capital planning, capital surcharge, resolution. the federal reserve stress testing and capital plan rules will incorporate strong minimum capital ratios and trotter definition of capital in today's final rule as these changes come into effect. our supervisory stress testing satisfies the principle of increased stringency because bank holding companies below $50 billion in total assets are not covered at all by our supervisory stress testing or capital plan rule but largest

bank holding companies are subject to tougher stress test that include the global financial market. as governor tarullo mentioned we are working on a notice of proposed rulemaking to implement the basel committee absurd charge from 1% to 2.5% from additional tier i equity for global banking organizations. the surcharge will build upon the basel framework. obviously the surcharge knees the brunt of the increasing stringencies since only two large u.s. bank holding companies are currently on the list of global systemically important things. third, we made the largest bank holding companies subject to regulatory and supervisory measures that will make the resultable in the event of failure. these bank holding companies are beginning to submit resolution plans or living wills to the fdic and federal reserve which will improve their prospects fo.

in our supervision of these firms we designated resolveability as a core expectation of our supervisory program. all of the work on resolution meets the principle of increasing stringency because it only affects large bank holding companies. all elements of this reform program taken together are intended to increase the resilience of the financial system and ensure the banking sector can support strong and stable growth in the u.s. economy. let me turn the meeting over to and that we q killed --anna lee huki hukill. >> as well as across the federal banking agencies. represents a major step in addressing weakness in the regulatory capital framework highlighted by the financial crisis. the final rule enhances the agency for capital regulation to help ensure banking organizations maintain strong capital positions that will enable them to continue lending to creditworthy borrowers in their communities even in times

of financial stress. this will in turn improve the overall resilience of the u.s. banking system. quantitative analysis by the basel committee said it would lower banking crises and associated asset losses for having only a modest impact on gross domestic product and lending. moreover transition provisions would help mitigate the negative impacts. this morning i will highlight the main provisions of the final rules that would achieve this rule as well as the revisions that relate to the proposal to address burden concerns raised by community banks. my colleagues including art window, april snider and bennett will answer questions about details of the rules following my remarks. the final rule restructure the agency's current regulatory capital rules into a harmonized comprehensive framework. larue incorporates requirements consistent with the basel iii and its established but the basel committee on banking supervision with certain

provisions of the dodd-frank act including minimum capital requirements for institutional and companies and requirements that all federal agencies remove references to credit ratings from the regulations. the npr, the board is considering refinements to alternative standards of credit worthiness to credit ratings contains in the final rule. the agency final will applies to all banks, savings associations, bank holding companies not subject to the board, small bank holding company policy statements and certain savings and loans holding companies. savings-and-loan holding companies with substantial insurance activities raise significant concerns about appropriateness of the proposed regulatory capital framework for their business model. in order to provide the board more time to consider issues raised by, enters the final rule does not apply to savings and loan holding companies with 25% of assets held in regulated insurance underwriting companies. in addition final rule does not

apply to grandfather unitary savings and loan holding companies that are largely commercial companies until such time as they promulgate a rule governing the establishment of intermediate holding companies pursuant to section 626 of the dodd-frank act. the final rule increases quantity and quality of regulatory capital for all subject banking organizations by establishing among other standards a new minimum common equity tier one capital ratio, a higher tier i capital ratio and stricter set of eligibility for regulatory capital instruments. most banking organizations already meet higher capital standards and the rule will help preserve benefits of banking organization at stronger capital accumulated since the financial crisis. the final rule also advises corrective action framework for insured deposit for the revised capital standards. the final rule establishes limitations on capital distribution and certain discretionary bonus payments at the banking organization that does not hold sufficient amounts of common equity tier 1 capital

in addition to minimum risk-based capital requirements. this capital conservation buffers designed to provide incentives for banking organizations for capital during the nine economic periods so they're prepared to withstand severe stress events and remain above the minimum capital levels. the final will emphasizes common equity tier i capital because it is the highest quality less observing form of capital. the final rule also revises the agency's rules for calculating risks related assets by introducing standardized approach that weakness is identified over recent years to enhance risk sensitivity. it is important to note certain provisions of the final will apply only to large international active banking organizations consistent with their written profile, complexity and level of sophistication. the final rule layers on a number of macro prudential futures for these firms for example they are subject to a countercyclical buffer that allows regulators to increase capital conservation buffer and lessen the capacity in the system in times of excessive

credit growth. in addition these firms are specific to counterparty risk requirements as well as additional leverage requirement that takes into account off-balance sheet exposures. moreover international asset firms calculate their risk capital ratios understand guys advanced approaches and use the more conservative ratios when determining compliance minimum capital requirement and capital conservation buffer. as noted the final rule establishes the robust comprehensive capital requirement framework for banking organization the ball sizes. at the same time in response to public comment it reduces complexity and regulatory burden for non internationally asset banking organizations relative to proposal. since the, and period closed at the end october staff reviewed 2600 letters, but most commentary supported more robust capital standards many commentary expressed concern regarding the burden imposed by the proposal. a number of smaller banking organizations and savings and

loan holding companies with substantial insurance activities requested exemption from the proposal. as governor duke violated the most notable concerns by commentary through late june and the proposed treatment of accumulated other comprehensive income, proposed risk for residential mortgages, regulatory capital treatment of trust preferred securities that currently count as tier i capital at the time line for compliance with requirements. under the current capital rules most components of a 0 see eye on gains and losses available for sale securities are not included on regulatory capital. proposed rule would require institutions to include most aoci components in their tier i capital. many asserted this aspect of the proposal would cause significant volatility in capital ratios to in large part to fluctuations in benchmark interest rate leading to difficulties particularly for smaller banking organizations in their capital planning and ability to manage interest-rate

risks. recognizing used by larger more complex banking organizations for managing interest-rate risk are not readily available for all banking organizations of final rule would dresses these concerns by allowing non internationally organizations or one time option to continue excluding most aoci components from regulatory capital. most commentary concern's proposed treatment of residential mortgages. proposal would introduce a more granule risk framework for residential mortgages by dividing exposures in to two categories based on their underwriting and product characteristics and assigning risks based on value ratios. coming -- the proposed treatment would inhibit creditworthy borrowers and jeopardize recovery of the fragile housing. violated concerns regarding compliance burden and the state that proposed risk rates were not appropriate for certain product. commentary also noted potential cumulative burden on mortgage

industry when considering regulatory initiatives to related to other aspects of the dodd-frank act such as qualified mortgage and qualified qualifying residential mortgage standard in view of all these comments the final rule contains current treatment for residential mortgages. another significant change from the proposal related to the treatment of trust preferred securities and other capital instruments that will no longer meet criteria for tier i capital under the final rule. the proposal would have required all banking organizations to take out such non qualifying capital instruments in tier i capital over a transition period. many encourage agencies to grandfather nonqualified capital instruments for banking organizations with less than $15 billion in total assets asserting their exclusion would unduly burden banking organizations and potentially carry their lending capacity. in light of the smaller firm's limited access to capital markets the final rule allows banking organizations

$15 billion in total assets to grandfather trust preferred securities and other non qualifying capital instruments in tier i capital subject to limits consistent with current rules. larger banking organizations would be subject to proposed phase-out consistent with dodd-frank act requirements. turning to the timing for banking organizations to come into compliance with the final rules a number of smaller banking organizations savings and loan holding company's requested more time to comply with requirements of the final rule. in response the final rule requires large internationally active banking organizations to comply with the final will include its transition provision beginning in january of 2014. other banking organizations including all savings and loans holding company subject to the rule would have until january 2015 to begin compliance. this simplifies transition provisions for smaller banking organizations and allows more time to make the requisite system changes and if necessary retain earnings to meet new

regulatory capital thresholds. since june 2012 analysis of the proposal indicated overwhelming majority of banking organizations already has sufficient capital to comply with the proposed rule our updated analysis for the final rule indicates an even greater number of banking organizations would meet requirements without transition today. more than 95% of bank holding companies with assets under $10 billion meet current regulatory capital requirements would meet the 4% minimum common equity tier 1 ratio and 90% would meet the 7%, and equity buffer level. the shortfall for institutions meeting the 7% buffer is $2 billion, this has increased $2 million for analysis of the proposal we attribute to increase their earnings as well as the proposal by described. auld bank holding companies with current regulatory chapter requirements meet the minimum

common equity tier 1 ratio and 95% meet the minimum of her with aggregate shortfall of $2.5 billion. in closing the final rule improves the level of regulatory capital across banking sizes and risk profiles leading to a more stable and brazilian banking system. the final rule meaningfully addresses starting potential implementation burden of the proposals that maintains progress, with robust banking system. this concludes my prepared remarks and my colleagues and i will answer your question. >> thank you for your hard work. we technically have two votes, one is on capitol proposal, second on amendments to market risk capital rule, i propose a single round of questioning, followed by a vote.

let me begin with a question. one of the criticisms on one difficult issue related to basel, the advanced approach, the idea that banks in some sense calculate the risk in terms of models. and this is related also to the issue of comparable across countries especially whether or not banks in different countries are assigning approximately comparable risk rates to similar assets. can you comment on projections, validation, what we do to ensure that risk rates being assigned by advanced banks are in fact reasonable and how does this relate to our stress testing and what we learned from that process? >> regarding that, what we do

for the advanced approaches, the federal reserve system has implemented a basel coordination committee that is used to compare and establish standards for exiting banks from parallel runs. supervisory requirement that banks have to meet standards in the basel ii and exit parallel run and use the model capital requirements as part of the minimum capital requirements. to date no banking organization has received that approval to exit parallel runs but we have taken a number of steps to make sure they are well under way to achieving that point. some exercises include having specialized teams of examiners around round ii advanced approach organizations and able to take a consistent approach across banks and understand what they are doing and what is best practice for the out wire practices and supervisory process to help move to where we

think they need to be. looking at banks, validation of models, very important component of the final rule as well occ as guidance on validation as part of our examination and determination whether banks are getting ready to exit the parallel run. ..

>> that provides baseline levels of comparability. >> i understand that the money spent in the time recently, the point you make about comparability about what assets or lack thereof, we published a paper that featured the treating capital models and there is a credit risk capital requirement in both of those papers found a lot of variability of asset calculations including other analysis focused issues. we are talking about how to address concerns and is was mentioned in the united states, we have this and we have been putting things through very stringent model approval process. other countries have done different things. some countries have imposed different areas and they don't

always have confidence in certain models. there is a different range of approaches by separate issues that we are paying a lot of attention to in the working model. >> go ahead. >> i just have one question i would like to ask. what we put out a year ago suggested risk on both residential loans and the risk with the trim on loans. we have kept the proposed raid on the trim on loans, but we debate the proposed higher rate on the higher residential loans. my understanding is that community banks express both

proposals and i wonder if you would please explain to me why it was decided in one area but not the other and with respect to high-volume real estate -- >> i'm sorry -- go ahead. >> okay. >> with respect to high-quality real estate loans, these are loans that have been associated with higher risk in recent prices and in the past financial crisis is. the staff would recommend not. in response to the comments, we did make some changes to the definition with commercial real estate to clarify that they would only apply to the subset is acquisition development substructure loans. those loans are actually safer because they have a lot of borrower equity commitment that

would not be subject to the higher work rate. we also suggest to clarify in the definition that the parochial loans would not be covered in certain community development loans would not be covered. so we actually did make some changes there in response to the comments that were particularly trying to the staff and concerns that were raised. we do think that going with the current risk rates, at least for now, for several reasons it is important. one great reason is mentioned. a lot of them were concerned about calculating the ratios as well as the mortgage is based on product categories. this includes current treatment at this time and not placing

additional burdens on smaller banks in particular. the other aspect that we have really focused on as far as comments go, it is the proposed risk rates that could interact with other mortgage rates are coming into effect or will be coming into effect and exactly how that goes, well, how that will affect the mortgage market at this time, it may not be known. we want to see how those regulations all affect each other and affect mortgage blending for adding additional regulations. not changing the rates at this time are giving us time to see how everything interacts with each other prior to adjusting the rates. that does mean there's less activity iniing risk rates

to mortgage. but the agencies always have the opportunity in the future if they do appropriate teaching to change the workplace. so there are many reasons for the different approach. >> and you very much. >> okay, turning to governor duke now. >> i have two questions. we talked about the comments that we got from the community, we also heard from savings and loan holding companies. there is an exemption for small banks but not one for others. we have heard a lot from insurance companies which is a different thinking model. any member where the priorities activities are nonfinancial in nature. can you talk about that a little

bit. >> with respect to the smaller savings and loan holdings in the dodd-frank act, there is a provision that provides an exemption from consolidated capital requirements, generally those with $500 million or less subject to the small bank holding statements. there is not a similar position for small businesses. so we don't feel that we have the latitude to provide an exemption for those firms. and as anna mentioned in her remarks, we are providing a temporary exemption from the rules for insurance holding company says part of the comments that they raised on the proposal and they don't take into accountability the asset matching liabilities and we also had concerns of those who talked

about the burden and the concerns about the interactions with the consolidating capital requirement and the regulatory requirement is required by each state. we thought it was appropriate to take a bit more time to address the specific insurance company business model concerns, with respect to the commercial savings and loan's companies, we thought it would be worthwhile to wait until the board proposes some kind of intermediate holding company is, largely to establish requirements so we don't have things blocked up with one another and we need the

framework first and to apply those. >> thank you. in a separate question we talked about this. but can you tell me what are the main differences beginning with this and also how do we get the communication going? >> the primary difference in the implementation is the credit rating in the united states that we are not able to do due to the dodd-frank act. asking to finalize alternative standards, including the credit ratings in the final role. there is a couple of areas where it is part of capital and the statutory aspects are required

to take out certain things over a three-year period, so we are doing a shorter phaseout period. for the tier one capital instruments, equity is important. whereas the certain debits could potentially qualify under this accord and we are a little little bit tighter on that and. >> with respect to europe and other jurisdictions with the u.s. finalizing our rule, you are finalizing ms. and that will nearly complete the implementation across the member countries because other jurisdictions have already committed to the rules. both us and the european

politics are taking effect in 2014 with these new rules. we are excited to get started with this and there are a couple of areas where the european final rules don't appear to be exactly in these rules. and this includes risk rates on debt. it involves regulatory capital and comparability assessment across country we are looking forward to seeing what the committee says both with our rules and the european rules. something we have already gone through in this process, we hope that every jurisdiction will be held to the accountability of

the standard. >> thank you, mr. chairman. >> i just want to follow up on the vice chairs question. particularly with respect to the residential mortgages we are talking of the final role that is making progress with residential risk rates. is this an area where the complementarity of our measures is going to make a difference? this includes the adverse scenario and the portfolio specifics and the stress testing that include respect to higher risk mortgages for those in the residential mortgage structure? >> yes, if they gather a lot of data on the low-level that will

capture other characteristics of the mortgage it will be risk sensitive, you are right, we are giving up some of the changes that we are making in the final rule. but we retain a lot of sensitivity through the structure. >> thank you. >> thank you, mr. chairman. we have put a lot of intensive work on this final regulatory capital rule. i would like to thank the occ for their efforts and participation in what has been a long and challenging process. i'm pleased to say that i think the interagency efforts have culminated in a set of decisions which are now reflected in the final rule. it appears to be an improvement over the proposed final rule and reflects many of the comments that were provided during the public comment. mattering time that the proposal was issued. while i applaud the work

reflected in the final capital, we shouldn't pretend that these are not relevant to the development and validation of all capital. capital is a important indicator to turn to shareholders and creditors were significant losses and before they implement the resources. it is a measure of the financial assets. the risk rates are imperfect at times. things can quickly descend into a failing mode. but before the capital is eroded and plans are triggered and liquidation authorities are implicated to provide this with necessary roles in slowing failure, such supervisory roles are meant to help banks identify

and correct risks with the government and appropriate risk management. capital requirements don't compensate for risk management. as we know from the federal reserve and the banking regulators do not regulate the entire financial system. they do not apply to the entire financial system. strong levels of capital are necessary but not sufficient as a feature of an overall regime of prudential supervision. my question to you this morning is about how these final capital rules have been tailored to fit within the broader framework of credential supervision which must have requirements that are capable of being understood by the bank and we have to comply with them. by the examiners who have to examine for them and by the

public, which ultimately must trust them. it is the simultaneous need to not unduly constrained to bring stability to impede a base regulation, particularly with those that have alternative competitive problems. what are the complexities of the proposed capital rules that have been reduced for community banks as compared to what was proposed? well, i would like to hear you explain whether it would be possible for banks to implement these rules without requiring them to engage in extra research. >> i think is the governor mentioned, we are engaging in several means of outreach to

help community banks understand the rules and what is changing for them. we are putting up a one-page guide to put the basis of the standard community banks on one page and what are the most important changes on the other. going forward i would also include some ideas of what is changing and what we'll be proposing for regulatory reports that many banks use for the calculations. so this will be coming through for public comment as well. in addition we will be doing outreach to banking organizations with focus as well as getting ready to answer questions.

>> okay. this has to do with capital calculations of the bank and then you have to figure out what lies behind the capital calculations and determine the virtue of the ratios. so they might bear no resemblance to what appears to be part of this or they could be masking an emerging problem and they may need to understand what the emerging problem might be. so examiners need to be able to talk about the determination of soundness and financial stability. for this reason they have to figure out the complexity that is more suited to this. however how much capital ratios can add, the information that they yield will never be perfect. as precise as rates become,

examiners still have to make decisions with limited certainty about the outcomes. at the end of the day, there will still be traitors and software and management practices. my question about this is how do we ensure that the final capital framework allows examiners to make these determinations? and does the final rule abandon protocols for using corrective action and if not, what effort was made to align the corrective action designation with the capital requirements to verify thresholds may be addressed? >> i will answer your question in two parts. first, changes to the corrective action framework has been made to align the framework with the

new minimum capital threshold. the penalties in the categories remain the same. but the threshold is all capitalized and banking records regulations have been made. there hasn't been a change to the ability to designate a bank based on supervisory evaluations. i think what you describe is very consistent with how they can examiners think about capital and the way it is rated for supervisory purposes and the institutional levels. regulatory rates are one aspect that are probably not even the most important aspect to determine how they can meet this

profile by using additional information and whether what kind of concentrations and other exposures and other factors figure into evaluating the capital adequacy with the larger bank holding companies that have the additional tools and stress testing which include the regulatory capital minimum and what is the overall capital adequacy of the bank and how much that involves. one thing that i would highlight that is consistent is requiring anything to do its own analysis regardless of the regulatory ratios. what are the risks and trying to make sure that they have enough financial intermediary information.

>> there are some large financial institutions that pass through to the safety net by transacting a complicated and opaque financial instrument. if the regulatory system tolerates arbitraging the capital requirements, such as system itself will encourage an underpricing of risk. we are worried that this underpricing of risk punishes investors to accept more risk than they bargained for and to punish borrowers who were overleveraged. and it hurt others who lost their jobs and homes. as regulators come we have a duty to understand how the regulations are fully priced. i would like to see the entire financial system, including those that regulate money market funds and exchanges to make more

transparent risks that they impose not only on investors and creditors and others, but also to the public. i know that the final rule includes qualitative and quantitative disclosure requirements for banking organizations. with $50 billion or more in total consolidated assets are not subject to the advanced approaches. then there are these banks are required to increase the amount of publicly available information about their banks. can you talk about that and little more detail? >> yes. he mentioned that they have those qualitative and quantitative aspects in different categories of exposure. this includes securitization exposures and we have been asked

to describe this with the policies for taking on risks and managing that risk and the disclosure requirement requirements can be met in a number of ways and are subject to pretty expensive disclosure regime and the way to set up is how it is brought together with the disclosures to meet the various requirements and bring them together to meet this with the rule. and that is some of the more qualitative things that the banks explained to the public. this is part of the field itself >> the disclosure issues are really the most important with the complexity and size of

institutions. this includes disclosure expectations is this including how we change from one period to the next and how risk populations are done there will be an international process of following up how different banking organizations are improving their disclosures. >> one final question will be part of what i have to say. prudential supervision also needs to preserve lenin, particularly in our nation's

most distressed and credit starved communities and in communities where there are alternatives. we want to ensure that there is not an unnecessary reduction in credit and economic activity among people and places that have had tenuous access to these services. i notice that the acquisition development and construction loans are given a heavy risk weight but certain lending that is done in pursuit of community development is excluded. my question is what is the rationale for the exclusion and i'm thinking that this is for the institutions that have development of financial institutions and we continue to engage in community development funding. is that the truth?

>> there are others who get exclusions but preferential treatment under the national banking act. so the rationalist is for lining up the regulatory treatment. >> okay. thank you. governor signed? >> can you hear me okay? >> yes, we can. >> let me add my thanks to many staff who have put so much care and effort to bring this to completion. we are working on a strengthening the financial regulations generally. it is very much a simple idea what more capital and higher quality capital and common equities. it is perhaps the single best tool that we have for taxpayers and the broader economy.

i'm sure each of us can think of things we might have done differently. but the substantial increase represents a major step forward. thank you to all of you. one specific question that relates to what the governor and others have alluded to. it is the treatment of other comprehensive income. the prior version of the rule removed the filter that prevents gains and losses on security from falling through the regulatory capital. it would have resulted in these gains and losses heading regulatory capital. there is a provision that allows a smaller not advanced approach to opt out to keep the capital

ratios insulated with gains and losses. i think i understand the logic behind this provision particular as it bears on risks and duration risks on both sides of the balance sheet when rates rise. it reduces the values of the security holdings and at the same time and increases the value of the stable deposit franchise on the liability side. so if you were to flow through losses to capital but you ignored changes on the liability side, you're arguably painting a misleading picture and he would introduce volatility into measures of regulatory capital. that is as i understand it the motivation, it's especially for the smaller banks were capital volatility is burdensome. i think all of that makes sense. i think i understand the logic.

the question i have is if you leave this in place, we are left with a situation where there is no regulatory capital device in place that attends to capture this. as we have seen, this is a good reminder that the interest rate can move around sometimes pretty sharply. the question that i have today is what other mechanisms aside from capital regulations include this and can we use this to reassure ourselves that the banks are not overly exposed to interest-rate debts? >> i will take the question. he pointed out wisely about the accounting model and we don't have a full value of the balance. therefore we can calculate this at this time.

but as far as measuring interest rates goes, we are only partially corrected now. we don't have a standardized ways of doing that. as far back as 15 years ago, we have been discussing capital adequacy. in 2010 because of the low interest rate environment, we have issued interest rates in this realm and mainly how they should be adjusted in managing interest-rate risk environment. we wanted our friends to not be caught off guard. outlining some of the basic expectations and the changes in interest rates and how they can affect the organization's capital and as well as things like corporate governance.

in 2010 that was received relatively well and was part of the guidance. we just what were the principal concern rates and we got into a bit more detail as far as the problem goes. this includes the appropriate methodology and we want to discuss the basic assumptions around us margin projection as well as others. we have instructed our staff to continue to be vigilant in this management but not come up with the quantitative adjustments as much.

so the basic assumptions around stress testing are considered and i believe we have the basis for which we can move forward with this. i think this is part of the risk management practices. we want our individuals to follow up and be vigilant but appropriate changes to strategies so they don't fall behind. there are some areas where we are not giving as much attention and some of the guidance does not address all the concerns that you have. >> thank you very much. >> governor powell? >> thank you, mr. chairman.

i would like to complement the staff on the final consideration. i had witnessed the process of careful consideration of comments and lots of very thoughtful approaches and i would say that the final product seems to be an improved balance between implementing and improving and raising capital standards the regulatory burden and i applaud that. in particular, it seems to be this time that the process of reviewing the comments and reacting to public god has resulted in a better value for smaller institutions that have less capital access and different business models. this includes concerns in the final product. were we received a good deal of comments as proposed is more

servicing assets, and i guess i would ask if you could comment on the questions that we have in the comments and concerns you expressed, and the analysis and the decision to proceed? >> under the proposal of the final role, we are maintaining the deductions of the capital. i think that the rationale behind it is similar to the limitations that we have with mortgage financing capital. and this is a changeable nature and the value of these, particularly in times of stress. we do preserve the proposal and we have limitations with the final rule. the idea transition.

now, there are a handful of provisions that need to be adjusted with business models. there is difficulty in sort of reviving this at times. >> okay. thank you very much. what i would like to do is talk about two issues. one is the proposal and the other is the technical amendments to the market risk capital rule. after we hear positions, we will take two votes. let me start with the vice chair. >> thank you. i support the capital standards and also the proposed rulemaking

and i want to thank the staff and the supervision for bringing this important situation for attention. putting in place the ability to implement the proposed rules and i have received comments about it and so many people are concerned about complexity and the potential impact on the credit of proposed changes. i think what you are looking at today shows appropriate sensitivity for these concerns are in most importantly is this proposal talks about banking organizations large and small.

in this includes capital distribution undergoing stress with minimum levels. of course it does remain that we must ensure the safety and consolidate the financial institutions in the capital requirements to include the safety and soundness of the financial system and this contributes importantly to the goal here for. for the last several years banking organizations have talked about the uncertainty that can affect their planning and i hope that we can regulate some of this with certainty. >> thank you. >> thank you, mr. chairman. there are many capital

acquirements, including the capital equity requirements that is so important to the resilient system. including capital payout and banks declaring regulatory minimums. the advanced approach is talking about the credential requirements mandated by the dodd-frank act that secures a multidimensional approach with one of our largest institutions. at the same time as i discussed in my opening remark, i think the capital global proved to be quite workable without unnecessary operational necessity. it will assess the changes to the proposal and will be responsive to the concerns, including the one that was

proposed. we can confidently proceed with capital plans and business strategies and as i read through the notice, i realize this took hours of hard work and i want to again recognize the staff that went into achieving such a balanced result. i would also like to thank the governor for his leadership in this effort. he has been relentlessly determined to create a strong capital regime with sturdy safeguards against arbitrage. we have spent endless hours and negotiation within the international community here in the u.s. and i will admit it is occasionally messed. but it shows our financial

system to come and it is a rule that i'm proud to support. >> thank you. >> thank you, chairman. among the more productive hours, i support both rules. thank you. >> thank you. >> governor? >> i want to again commend the staff of the tireless work, as well as the work of the committee on bank supervision. >> thank you. >> governor? >> thank you, mr. chairman. i just wanted to add my thanks once again not only to the staff, but the governor who has been a great vision and implementation on all of this. again, just offering my support. thank you.

>> thank you, mr. chairman. >> i support both. >> thank you. >> i support both items and i think that these are important steps towards making the bank safer. i would like to thank the staff for their hard work. we have a lot of participation, and i think it shows in the final product. this represents important monitoring and comparisons of the different regimes, which i think have strengthened the financial system and i think we have been responsive at the same time to domestic concerns, including concerns of small banks and that was a delicate balance that we have managed well here.

as the governor initially pointed out, this is really the beginning where the framework can be done to strengthen our internationally active banks, including looking at the leverage ratio, capital surcharges, senior debts and holding companies, liquidity, stress test, so many different components together to ensure stronger banks. it is very good to have rules out there by the examiners and by us here at the board and we will need to be critical and we need to make sure that the risk models are safe to make sure that they are adequately developing risk and independent capabilities to assess the risk

with stress test and we need to supervise the examination to adequately make use of this new framework and disclosures are very important so we can understand what capital standards are and how they are applied to individual institutions. effective disclosures is a very important mechanism for improving market discipline and improving confidence in our banking system. i am pleased to support these measures. i have a motion to pass the final regulatory capital proposal. >> yes. >> thank you. those who are in favor, please say so. >> [inaudible] >> are there any other

extensions? >> okay, i need a motion for the proposed capital rule. >> are there any pose? >> any other comments? >> okay. thank you. i think the board and the meeting is adjourned. [inaudible conversations] [inaudible conversations] >> thank you. [inaudible conversations] >> we have been tracking c-span viewer reaction to the fed's meeting this morning.

one viewer says it's only businesses could go back to a free market. and another viewer says regulatory cost should be paid by banks and not tax deductible as a business expense. that is a couple of our viewer responses at the fed meeting this morning. you can share your thoughts anytime you like using the hash tag c-span chat. booktv and primetime continues tonight with memoirs by scientists beginning with richard dawkins discussing the experiences that led him to be a scientist and an appetite for wonder. then we have doctor carl hart and the journey of self-discovery. and i'm 15:00 p.m., the autistic brain, thinking across the spectrum, which highlights the author struggles with autism and the science behind the disorder. and at 10:20 p.m. eastern, grown-up with a famous mathematician father in the

martians daughter. booktv begins at 8:00 p.m. eastern here on c-span2. over the past few months we have featured a number of ceos and corporate leaders on c-span as they testified at congressional hearings and spoke another public affairs events. tonight we will show you some of their remarks on topics ranging from the economy to immigration and tax policy, among them, american express ceo will be featured. >> i'd like to see a few key things. number one, i think the consumer has really demonstrated incredible resilience in a very challenging economic environment. the question is always how long will it last. but the consumers have held up relatively well. i think that you also see the spending and the credit performance in which the rates have come down and to the

industry overall, they are close to historical lows. they're performing 50% better than others and i think that that demonstrates some view that the consumer health is pretty decent. consumer confidence has held up pretty well. but i am not surprised about economic recovery as i look at this in the broad scale. it is going to be relatively slow. and i don't have a great deal of confidence that there is going to be any turnaround in the near term. i think that what we have to hope for is that it will stay stable. sumac would like to hear from you about your experiences working for a company, or if you own your own business. what is your message to corporate america? we will take your calls and comments on facebook and twitter and that is tonight at 8:00 p.m. eastern on c-span.

live coverage today on c-span and that 1215 eastern, the alliance for health reform discussion discussing the future of health care and how the law will impact access to that care. and 2:00 p.m., national religious leaders call for religious exemptions dealing with contraception and the health care law. and the induction of catholic bishops. that is live on c-span. yesterday a group of legal scholars reacted to yesterday's decision on the federal defense of marriage act and california is proposition eight. it talked about the benefits relevant to heterosexual couples. this panel discussion hosted by the catholic information center is one hour and 15 minutes.

>> we want to address the ongoing national debate about same-sex and traditional marriage. the united states versus windsor declared that part of the defense of marriage act or doma, which defined marriage as between one man and one woman was unconstitutional. in the second case, the court held that it lacked the authority to decide the question i was going to address, namely whether california state constitutional provisions were permissible under the federal constitution. both doma and the proposition eight cases were divided. in the wake of these important cases, we are privileged to hear from an accomplished group of panelists who have offered their formidable talents to help us better understand what happened last week at the supreme court

and what future impacts these cases might hold. we have the professor of jurisprudence at amherst college. he received his phd from the university of chicago where he is a student and he was one of the principal architects of doma. edward weyland is the president of the ethics and public policy institute. a graduate of harvard law school and former assistant to anthony scalia, he participates in the u.s. senate judiciary committee. a graduate of harvard law school and duke university, she is an assistant for judge clarence thomas. we would like to give our panelists an opportunity to respond to one another and finally we will open up the

floor for q&a. before we dive in, a brief word about why we gather. as catholic and people of goodwill, we seek to understand the events of our day is fully and accurately as possible. as pope francis recently said, those were led by the holy spirit know how to survey and affect reality. that enabled us to live this out truthfully. our success depends not just on what we talked about, but also how we view it. i would like everyone to join with the panel at the end in striving for charity. that includes solidarity and the results tonight at the center of these topics, including our gay and lesbian brothers and sisters in those who are wrestling to understand their own views on same-sex marriage in those striving to live in accordance

with the church in present-day society. with that introduction, let's dive into our discussion and we will turn it over. >> thank you for that introduction. the chairman joked that it is no laughing matter. and neither is this occasion and as a prelude to my remarks, i would like to recall the debate over marriage over the last several years. some of us raise the question of whether the notion of same-sex couples could encompass two widowers trying to pool their social security benefits and pay off the expenses of the nursing home after the death of a spouse after these people take advantage of the new arrangements of the law with the understanding that a same-sex couple need not be defined by sexual or erotic

the people on the other side said no, it has to be clear that the law is recognizing a legitimate sexual relationship. another say, how would we know? well, it struck down the lies and it said that it no longer requires confirmation be a part of marriage. now that was not exactly overflowing in massachusetts, but even they would have been embarrassed to say that consummation was no longer required for marriage. now, i have mentioned just one part of an argument as we have engaged in this question.

in mr. kennedy's understanding, there were no arguments on the other side. the opposition could be attributed to an irrational characterization and it could be argued that it was justice kennedy himself who was showing the most irrational decision. justice leah pointed out the way that justice kennedy characterized the minds that brought forth the defense of marriage act. it stopped short of mentioning me because i was one of the minds who thought through the defense of marriage act. this includes the part that was struck down. congress stipulated every reference in the federal code

including a union of a man and woman. this is the most horrible of challenges because no one can question the authority of congress to testify the code that congress alone legislate. as ed pointed out, there are so many bases as for the definition of marriage it whether it is a tax law or the naturalization of spouses. i have the privilege of leading the testimony over the defense of marriage act back in may of 1996. looking back at it, i discovered that justice kennedy had been much on our minds at the time and what i like to do is to sketch and briefly the background is why justice

kennedy had been the driving force in creating this problem from the beginning. the defense of marriage act up for it to currents in the law and one emanated from hawaii. the supreme court had installed same-sex marriage drawn from the equal rights amendment in that state. so the question is not whether a couple can be married in hawaii and bring their marriage back to the mainland through the operation of the full faith and credit clause at the time. a closet leads us to express the marriage performed in another state would be a respected in the second stage. in that way if they were required to respect a marriage coming from hawaii and bringing

marriage back onto connecticut, if the state was required to expect that arrangement,, we are in a position in which one state could indirectly nationalize same-sex marriage for the whole country. they could refuse to respect certain arrangements coming in from a broad distance. this one has a moral objection to certain kinds of marriage, for example people below a certain age. but that is where this can come in. because working its way through this at this time was roaming versus evans. we will leave it to another time with details on the case about gay rights in colorado and what we anticipated was precisely what took place with justice

kennedy's opinion, which came down after the hearing but just at the time when the house was at the middle of the defense of marriage act. this was the moment in which justice kennedy declared that the morals of the homosexual life seems inexplicable by anything towards what it affects and it lacks a rational relationship state entry. centuries of jewish and catholic teaching are part of this. no longer could they find a reason ground of justification. therefore, a state could not be incorporating any longer within its flaws, and adverse moral judgment on the lot they could

not honor a same-sex marriage coming in from another state, for example. now, they could now knocked out the authority of the states and that is what brought forth the defense of marriage act. ..

demeaned and humiliated gays and lesbians simply refusing to accord to their relations the dignity of a marital union. so in misconstrue, if new york provided for -- hisconstrual -- but at the same time, kennedy implausibly contained the opinion in section three was carefully limited to section 3 and would not touch section 2 to

allow states to confirm to their own policy on marriage. that will soon be dissolved because if the decision of the court didn't strike down section 2, kennedy's key premise planted long ago in romeer versus evans surely will because it is a premise that worked its way through all of the litigation since then. in the text in 2003, justice kennedy held that the state could not justify the laws on sodomy because there was no rational ground to break into the autonomy of personal relations and condemn homosexual relations with people pursued in their private lives. he insisted at the time that this judgment entailed that this judgment entailed no formal recognition in the law of any other relation. that is to say, marriage, to

which justice scalia famously said at the time, do not believe it, do not believe it, it is coming soon and took only five months to prove justice scalia quite right. only five months later the supreme judicial counsel in massachusetts before it invoked anything in massachusetts law invoked kennedy's language in lawrence versus texas to strike down those laws on marriage in the commonwealth and install same-sex marriage and then kennedy in turn, invoked lawrence last week in striking down doma. it all holds together. and as scalia remarked last week, we are simply waiting for the second shoe to drop. that's all. the will come forward to test the laws and the constitutions in the very states including the laws that offered no recognition of same-sex marriage and all a

judge needs to do now sin woke justice kennedy's overheated language in u.s. versus windsor to conclude that these laws or constitutional provisions reflect only an irrational animus, that they can supply no reasoned ground of justification. so use an old line discussing marriage now without justice kennedy as they used to say, is rather like playing hamlet without the first grave digger. but some saw as the tragedies of the week there is a lesson here i think i'm afraid about conservative jurisprudence. many of our friend would like to believe that these decisions are indeed limited and constrained, that the court will respect the difference between striking down section 3 of the federal code while respecting the authority of the states under section 2. or that in hollingsworth the decision will simply be reduced to the holding of the court in

the district court case which touches no one but the litigants and has presidential value as scalia says with no other court in the land but events have run well beyond those innocent hopes. the marriages are already taking place and the political class in california is acting as though same-sex marriage has been restored now to the whole of the state. what our friend seem willing persistently not to see, not to see, and what justice scalia has seen all along, the underlying moral judgment, the underlying moral judgment, moral wrongness, the wont of rational justification for refusing to credit same-sex marriage, that underlying moral judgment, sets off a dynamic of its own. that premise promised to run through all of the cases to come, bringing down all of the

remaining barriers to same-sex marriage, and to sweep past all of those distinctions in the positive law that our friend treat as though they really meant something. where do we go from here is the next question? do we have a couple moments for that? i will just take maybe two more minutes. how are we doing for time? all right? on this matter i have some suggestions to make and we'll take up this matter more in the discussion, what i might say under this is this. lincoln and his congress did not take the path of a constitutional amendment to deal with regime-altering decision in the dred scott case. they moved to counter that act through an act of ordinary legislation which lincoln signed in june 1862 which forbade slavery from all existing territories of the united states and any that may be carved out, anything of the dred scott decision notwithstanding.

they're putting the question to the court to take a sober second look at what you've done, consider that you might have been mistaken and if this doesn't work, we could rise to the level of a constitutional amendment. 17 years ago when we were beginning with this i thought it would have been useful to get a constitutional amendment going right away regardless whether it would pass, i want it out there and moving that would be apt here again but that would not be taken seriously right now. so in the meantime i do think we should come forward with a statute to restate the parts of the defense of marriage act that the court professed to leave untouched but to draw out the implications that the left would not find congenial. i heard one offering today what this means is that if that couple in new york could be covered by federal law because new york allows same-sex marriage, but, those privileges of federal law would not follow them if they wentdy

seems to be implying upholding section 2 but i don't think the left or president obama would entertain that for a moment. that's where the challenge would come. but of course, if we get that statute going it doesn't stand a chance of passing but that is not the point. if the republicans take the senate again in 2014 it does have a chance of passing. probably would be passed but the critical point now is that raising this point, bringing forth this bill, offers us the chance to see just who among the republican political class will have the spine and the conviction to support this measure and find a way of making the argument in public. if we find republican so-called wise men telling us that we really can't talk about these matters in public any longer,

at will be a telling sign. thank you. [applause] >> we'll hear next from mr. wayland. >> thank you, christian. thanks for being here. great to see an overflow crowd interested in this set of issues. he has addressed the doma case. i will be discussing the prop 8 case. i would like to begin outlining how i see and i think how most supporters of marriage see the relation between the constitution and marriage. it is quite simple really. it is important to distinguish the constitutional question from the policy question. the constitution simply does not speak one way or the other to the question of so-called, same-sex marriage. it leaves the matter to the democratic processes for resolution. to the states, in defining the basic institution of marriage and to congress in addressing what marriage means under the various provisions of federal law. it is constitutionally

permissible to retain traditional marriage laws. it is constitutionally permissible to redefine marriage to include same sex unions. the claim that a person has a constitutional right to marry another person of the same sex is wholly implausible which, unfortunately is a very different matter from predicting how the courts will rule on it. throughout the history of our country as virtually everywhere else in the world marriage has always been a union of man and woman. male-female nature of marriage reflects elementary biological reality only opposite sex unions naturally generate children. the essential reason for government recognition of marriage is to encourage the generating of children in the optimal context of marriage and to discourage it in socially harmful, nonmarital contexts. marriage is a male-female union existing in every state the time the constitution came into effect t existed in every state at the time the post-civil war amendments were adopted. as a historical matter no one

contend the civil war amendments were against the marriage or had anything to do with homosexuality. in face of all this, claims of right to same-sex marriage are to the following. they're riding nothing more than camouflage imtoings of one's own moral preferences. i have my own policy views on marriage. i don't claim the constitution entrenches them. the other side does. claims for such a right also involved profound confusion what marriage is all about and what its core purpose has been and, such claims treat as fact, undisputed fact, matters beyond doubt i don't know walker would tell us highly contestable assertions very stuff of policy debate. and the ruling by the district court in the prop 8 case by former judge von walker illustrates all these flaws and more. now, before turning to the explanation and criticism of the

supreme court ruling in the prop 8 case i would like to provide i hope some hope helpful background to the case. let's go back to the 2000 when the california voters exercised their power of the initiative to adopt proposition 22. proposition 22 defined marriage as a union of a man and a women. it was substantively identical to proposition 8. only difference, proposition 22 had status of statute under california law. given opportunity override the statute the state supreme court ruled in may 2008 lo and behold the definition of marriage acknowledged had been the definition of marriage forever in california violated the state constitution. well the defenders of marriage are ready for such a ruling. that was 4-3 vote. defenders of marriage had on the ballot in november of 2008, proposition 8 which after intense public debate was adopted by the people of california. no sooner though had the state

litigation over proposition 8 ended then the odd bedfellows couple of ted olson and david boies filed a lawsuit against proposition 8. state officials whose duty to defend the law refused to defend it. this was then governor schwarzenegger and then attorney general brown. later of course jerry brown became governor again and kamala harris succeeded him as attorney general. they both continue the policy not defending the law and more importantly for these purposes, by refusing to appeal the adverse decision that judge walker issued. i think it is important to give some flavor of the incredible hijinks that occurred below in this case. think it is fair to say and i documented this in thousands and thousands of word and hundreds and hundreds of posts over the years that never, there has never been i would submit a federal judicial proceeding more

lawlessness than the proposition 8 proceeding. judge walker was reverse ad total of three times before his, before his, even reach ad final judgment to go on appeal including once bit united states supreme court. he issued a series of absurd factual findings this were contradicted bit other side's own witnesses. he ended up in this case brought by two couples, ended up issuing a brought statewide injunction that would have bar all state officials, including in counties that where these couples did not live from implementing prop 8. and, after he retired from the bench, we learned lo and behold all this time he had been in a long-term same sex relationship was thus effectively deciding his own right to marry his long-term partner. some ways on appeal it got even worse. the case ended up being assigned

to a panel that included judge stephen reinhardt. judge reinhardt's wife, runs an aclu affiliate. she had consulted with attorneys in this very case about their decision to file the case in the first place. she had a organization file briefs in this very case in front of judge walker, arguing that proposition 8 should be struck down. she publicly celebrated the ruling in this very case yet judge reinhardt saw fit not to recuse himself. i could go on and on about the absurdities here. let me jump forward to the particular standing issue which the supreme court ruled. one thing judge reinhardt did write, he certified to the california supreme court the question of what exactly is the status of the proposition 8 proponents who stepped in to defend the law when state officials wouldn't? what authority do they have under state law? and the california supreme court unanimously ruled that it is essential to the integrity of

the initiative process in california that the official proponents of an initiative be able to assert the state's interest in an initiative's validity on behalf of the people when the public officials who are charged with doing so won't do so. in other words, that the state said, the prop 8 proponents are standing in the shoes of the governor and the attorney general in defending this, this prop 8. they don't need to have the standing that on aggrieved litigant would ordinarily have. , the argument goes because they are exercising the state's authority but when this issue was presented to the supreme court you ended up with a odd 5-4 division ruling that, no, this does not suffice for standing under article 3 of the constitution. i will try not to go into too much legal jargon here but chief justice wrote the majority opinion. the dissent was written by justice kennedy.

again you had mixed group in both alignments. look, this is an issue that is open issue for the court. i don't pretend it's an easy issue but i think it is significant that the constitution i think best understood simply doesn't speak to the question of how states allocate their own internal authority. there is nothing in the constitution that says states can't assign authority to one person rather than another. and indeed, the separation of powers principles apply against the federal government don't apply against the states so i think it's quite a step for the court to have said, given what the california supreme court had to say about the authority of these prop 8 proponents, that the there wasn't standing. more serious consequence of course that the court's ruling makes the executive branch lawlessness of state officials effectively unremeadable in this circus of a case where one

official after another failed to carry out his duty. the supreme court rightly or wrongly, i think wrongly has said, you know, we have no authority to step in to decide the substantive claims that the prop 8 proponents have brought. now, the very limited good news of the ruling is that the court did not address the merits of prop 8. that is mixed news. i would have preferred it do so frankly which way it would go. if the court is going to rule that marriage laws are unconstitutional, have the guts to say it up front rather than proceed by stealth over the years and try to impose this on the people when they're not looking. but the issue for now is still technically open and will continue to be litigated in various states and also fought democratically in the various

states. i would like to close with a couple sets of comments. first to highlight the virtues of the democratic processes. the wisdom of the constitution saying this highly contentious issue like so many highly contentious issues is left to democratic processes for debate and decision. one virtue of the democratic processes everyone feels he has a fair shake. we try to persuade each other. we try to make arguments that are appealing. we treat our neighbors not as enemies but as potential converts when instead you run into court try to claim you have a right as we see from prop 8 litigation, the incentive is to stigmatize and demonize and to brand as bigots people who held the very position that barack obama at least pretended to hold until, what last year, the year before? the democratic process of course also allows us to revisit issues over time, to realize, oh, this thing we thought was a great reform has had horrible unintended consequences. let's think about fixing it.

i think it offers use systemically advantages over courts inventing constitutional rights. finally i would like to emphasize why marriage matters. i referred to that briefly before. we seem to have now this notion we can simply redefine basic institution at no cost. lincoln famously asked how many legs does a dog have if you count a tail as a leg. seems 3/4 of the country would scream five. no. a dog has four legs. if you're calling a tail a leg you're very confused. and, i think we see the consequences all around us of the collapse of the marriage culture in recent decades. i want to emphasize the collapse of the marriage culture is knot the fault of homosexuals. heterosexuals who have done, the bulk of the work in ruining our marriage culture, you see the damage all around us with huge percentages of out of wedlock

births, divorce rates. all the misery, all the governmental programs that can't possibly put humpty-dumpty together again when you have families broken up like this. this ought to be the time when we realize we need to work to restore a vibrant marriage culture, not take a big step i fear an irreversible step in the wrong direction by redefining marriage in a way that orient it away decisively away from the mission of raising children. thank you. [applause] >> we'll hear from the sabrina now. >> thank you. my job, you heard a little bit about the doma case, about the prop 8 case. my job is talk about some of the legal implications that come from those cases and i think professor arkes and mr. whelan talked about both of those. basically i have good news and bad news.

the good news very briefly, really same-sex marriage advocates did not go around the country raising millions probably of dollars cases to bring them to the supreme court for the result they got. they wanted to nationalize a redefinition of marriage would be imposed by the judiciary and entire country at once. they didn't get that. they lost. that is good news. they didn't get a default judgment found technicality at least here one quirky holding will stand. i do think of course that those, that decision was a terribly unfortunate one and the doma decision i think was clearly wrongly decided but the good news it does at least keep the marriage somewhere where it belongs, which is in the hand of people and elected representatives. as i pointed out, that is where it belongs. that is where it belongs under our constitution, not in the hands of unelected judges imposing their view, not only of the constitution but really of morality which is ironically

exactly what justice kennedy said we shouldn't be doing in law. they're not in fact doing it through the political process but reading it into the constitution. that is absolutely not the way to decide one of the most contentious issues we're facing today. that is the good news. we still have states and our elected processes at least for now as a backstop on these things. and we haven't put, that means we have not put all our eggs in one basket. we'll not have to do this necessarily nationally at the moment. we can see how it plays out in various states for now. the bad news unfortunately is everything else. the legal implications are really troublesome given decisions, particularly given the logic behind them. starting with doma decision, there's a real danger to the grounds that there is a lack of rational basis for the federal government to enact laws defining base marriage between a man and a woman. that is not redefining marriage. this is what we're taught.

this explicitly defining marriage as it has been defined basically through all of human history. we've seen this slope even slippery than some predicted. on wednesday the case came down. on friday the eastern district of michigan was already applying it to require that state fund benefits for same-sex couples. this is in a state that has, does not have same-sex marriage. they're already saying look, there is no rational basis to not fund these couples. so this is truly frightening. i think it unfortunately underminds chief justice roberts careful attempt to the decision. he wrote, there were two dissents in the case. chief justice saying, this is narrow decision. this is only talking about the federal right to define marriage. the states can still do what they want. justice scalia, this is basically the end. world as we know it. i think unfortunately at least for the earn district of michigan they may be showing justice scalia had the better of

the argument because rather than limiting itself to where the decision said, merely that the federal government doesn't have an interest in defining marriage as between a man and women, leaving open the question that perhaps states which granted historically had the taken the role of defining marriage, domestic relations law and things like that. they said you have to look to state law to do that was the line that the majority in the doma case took. well, i think the logical next step if there is really no rational basis for the federal government to do this, what is the rational basis for the states to do this? while i think actually you could articulate a very rational basis for both and even more of a rational basis to do it perhaps for the state than the federal government i don't think we can count on the judiciary to necessarily see the basis when they refuse to see every other rational basis presented to them. we see that is already happening. then another natural consequence that is going to happen in fact puts the decision in conflict

with itself we're going to see very uneven and confused regime of laws. the doma decision itself, are justice kennedy's majority pointed out we shouldn't have a situation where there is competing marriage regimes in one state. they were concerned there would be a state like for example, massachusetts, could get married as same-sex couple not have federal benefits. we'll now see the flipside benefits. there is the question, professor arkes pointed out you get married in new york and move to north carolina. you had federal benefits one day and lost them the next day. how is that rational? one could point out that the is value of doma. that is rational basis for having it. it is rational for a consistent federal system on this issue. putting that aside that the first chink in the armor they'll will be pushed on. they will put on the argument that it is strange to have uneven system of marriage. now we'll have the portability of bern fit because we shouldn't

make people lose federal benefits simply stepping across-the-boarder. there will be complicated questions, for example, the windsor case came up in the context of a state law. what happens if you get married in new york, move to north carolina. still own property in new york. die in north carolina and probate, and estate is probated through north carolina law but what happens to the property in new york? does that go to the same sex spouse in new york or get run in different fashion in north carolina? for the purposes of federal estate taxes do you pay federal estate taxes? you are not married in the state of residence but married in the state of new york. hard to see how that happens. i predict the next step will be force these to be portable. that will be the next supreme court case to be brought. new york becomes the new las vegas. everyone goes to new york or 13 other states that have same-sex marriage. you get married there, take it home. this puts a lost pressure on section 2 of doma which says states don't have to accord full faith and credit in these

marriages particularly where the states are involved in administering the same federal benefits. what position does the state take? their state may have a constitutional amendment we don't recognize same-sex marriage but have to administer medicare program that recognizes two people as married. it will be complicated. unfortunately i think the trajectory will be resolved in favor of same-sex marriage and done by unelected judges imposing that rather than the people deciding for themselves. my strategy if i were trying to nationalize this thing from in the pot strategy. the frog in the pot they will stay in the pot until they're boiled alive but if you put them in a hot pot they would jump right out. taking step by step, builds complacency and cultural acceptance and that is the logical strategy. that is one in some way as lot of people were warning about as the case was being taken.

comparisons were rampant between this case and row v. wade. justice ginsberg herself was making a case, big defender of the row v. wade case pointing out when you have a social movement like that is undecided, that is very contentious issue the court takes it out of the hand of people and nationalizes it all at once. i would add nationalizes it through illegitimate legal process by inventing a right that isn't in the constitution you create a big backlash. you can trace some of the strength and success of today's pro-life movement to that decision because it shocked people and gal vannized the pro-life base. what the same section marriage advocates didn't want a case that would do that for the marriage movement and i think, then the question is, will it? if we, if we treat it as don't worry, this is a very narrow decision, perhaps we'll get all of the downside without any upside of at least galvanizing the base. in terms of the prop 8 decision i think that the biggest legal

consequence is the risk that it brings to the initiative process. justice kennedy pointed that out in his dissent. when you have a situation there, that a state initiative can be not defended by the executive branch of the state government, by the governor and the attorney general, now any state initiative in that circumstance is completely vulnerable to attack. so all you have to do with my strategy, in this case, if you wanted to nationalize same sex marriage, get a friendly governor and attorney general who you know won't defend it. attack state initiative and win by default every time. don't need to appeal to the qualpro tex clause or fifth amendment due process clause that got brought up in some of these decisions. you piece by piece take apart all the remaining 37 states that do have traditional marriage because you have to wait for your opportune moment and it is a one-way ratchet in that sense. the ramirezifications for loss of initiative process go well

beyond marriage and other process used to advocate. there is large number of them that have to do with the citizens pushing back on judicial decisions. i think process was initially sort of a progressive movement attempt to avoided having power in the hands of republican, the democratically elected officials in a republican form of government. not the party republican but actually now it is being turned around and people pushing back against judicial usurping of power. initiatives are trying to go back against the kelo decision to reinstate property rights. in michigan, this case is coming up before the supreme court, the michigan civil rights initiative which followed decisions allowing affirmative action in higher education there and saying we're going to as a state have a race-blind hiring and race-blind college admissions. that is being brought to the supreme court. there you have a state executive will defend the decision.

if you didn't, the exact same thing would happen. it would be bowled over and default into this process. that is a troublesome consequence because, again, many of the states that have traditional marriage, it has been enacted through the initiative process. frankly, doesn't even have to be an initiative at this point. could be any law, we're entering an era here which is troublesome to see either the president's refusing to defend doma. governor of california refusing to defend the laws of california. rather than having a view toward the institutional values that we have and governmental structure, there's a, willingness to just not defend a law, not because there is i think a really deep-seeded legal concerns about it. but more just because this is not my policy, so i'm going to now going to stand up and defend it that is very problematic because it gives the governor and attorney general veto power over any law, and not only laws

passed during their administration. any law on the books you can refuse to defend. that sun fortunate development that is not how our constitutional systems and i think most state constitutions were designed to operate. the other potential next step we see a challenge in a state where there is standing to attack one of these laws, again bringing the same qualpro tex clause argument saying that the 14th amendment requires equal treatment of all people and therefore requires same-sex marriage to be, forced on all people because that would be treated differently to not have same definition of marriage we've had for four centuries. the question is really whether justice kennedy would buy this argument and that is what everyone is looking towards. there is a few reasons to think he might not go that far perhaps why the decision ended where they would. he was torn between oral argument, voices of children in same sex, families, and as well as the lack of history in

let's see how it really works before we decide to institutionalize it on a national level. he did go out of the way to mention the state repeatedly in the doma decision. he was trying to tie it down to something to make it narrower. i'm not concerned that the other four would care about that issue and would be worried overturning a state law, for example, that had traditional marriage. it is also, if he was that excited about nationalizing same-sex marriage at this point, it is unclear why he wouldn't have just jumped on it and tried to go there in his dissent in the prop 8 case. i think, at least for now, that seems to be the justice kennedy really isn't willing to go all the way. he could also be a frog in the pot as well. maybe he is still feeling out the water. we'll see if he evolves along with our national culture. that brings me to my final point sort of what's next?

i think there are two angles which those who are concerned about this issue should be looking. one is the culture has been mentioned before. just defending marriage in the culture. doing marriage apologetics per se. i think second part of that philosophically explaining the underlying roots of marriage and its value. and other half of it is living it out. no apologetics is very effective without a living witness, holding everyone in the church to the same standards of sexual morality that we hold those with same sex attractions to. everyone needs to live with fidelity to their vocation and to their, whether it be married. whether be a single life. whether in a religious or priestly vocation. we have need to be showing it is possible to live with fidelity. possible to live in fruitful marriages and hasty is a possible goal. i think in our pc culture that is seen off the table because it is not even possible. until catholics are willing and

others who believe that are willing to stand up and show it is possible it is hard to even engage that part of the argument. another very important aside to be shoring up the limitations of the government in terms of infringing on our religious freedoms. we've seen this so much lately. finalization of the hhs mandate which i'm sure everyone is fam with, attacked religious freedom. this administration is very troubling everything they ever said about religious freedom in terms of arguments. some of their arguments were rejected unanimously by the supreme court they're so extreme. but i'm afraid the president has not gotten memo on that. listening to his comments follow the decision he magnanimously he wouldn't force churches or religious institutions to perform same-sex marriages. thank you very much, mr. president. it is disturbing that he thought perhaps he could do such a thing because he really had no authority to do that. if the first amendment means anything at all he couldn't do that. hardly a gesture of grace onis

part. but, i think, it is very worrisome also he seems to think that's the end of the line. that is not at you will, where the extent of religious freedom is. as we've already seen some ways this has taken place. already we see the marriage industry, you can't be involved in it unless you're willing to cooperate in same-sex marriages. we'll see religious or secular colleges, married housing to same sex married couples. you will of course see the employer problems which we're seeing with hhs mandate. now you have to offer benefits perhaps to same sex spouse even if that would violate your personal beliefs. churches, of course aren't simply just performing marriages. they're counseling people. they're hiring teachers. they're also, performing social services. we have had many instances where a catholic charities run up against same sex adoptions and of course famously been forced out of business in massachusetts because of their unwillingness to perform those.

it becomes even harder when the argument is made, you're giving it to other married couples. why not allow adoption by this married couple? so that is, that is all very troubling. we need to use the time we have even if dominoes are lined up to prepare the defenses of religious freedom for when these dominoes do ultimately fall. one note of positive note we saw recently last week a 10th circuit decision that was absolutely a step in the right direction. a big victory for religious liberty, at least recognizing maybe not big enough victory recognizing that the government shouldn't have the authority to determine what compromises are acceptable for the religion. it is religious believer who determines what violates their faith. not the administration that is a step in absolutely the right direction. we need to keep taking many more. so with that i think we'll go on to the many questions. [applause]

>> we'll give our panelists each, maybe just a couple of minutes to respond to what each of them has been saying. after that with time we have left we'll move on to questions and answers from the audience. >> if i were doing the introductions i would also point out my two friend with me today are people who offered some of the most luminous commentaries on the constitutional. ed from benchmarks and carey in her -- >> benchmark. >> what did i say? >> lincoln said, it's a chestnut horse. a horse chestnut. listen to carey i think of michael novak about the polish optimism and pessimist. the pessimist says it can't get any worse and the optimist says, oh, yes it can.

[laughter] as carey said it is not confined to initiatives. a governor could not confine it to any laws or constitution amendment. ed was really refuting claims about marriage being inherently, marriage is part of family law. family law is retilent of local jurisdiction. john marshal argued a few years ago when if we have a state that dissolves all contracts of marriage without the consent of the parties would that raise an interesting question under the clause. sufficient unto days evil thereof. we don't have to address that question. but we've seen the courts now challenge those laws assigning custody to children when the judges are doing it on the basis of color. we discovered even this thing even local law can run afoul of propositions in the constitution. of course the activists pleading for local jurisdiction on this

matter, discretion among the states are moving into the courts and invoking the full faith and credit clause. they're doing that, they were federalizing the issue of marriage. that issue of come back to later, i too was cheered by the outcome in that case in, in the/10 circuit. by the way the case was written by, the written by tim, who was the solicitor general of colorado during the days of romer, who i was working with romer versus evans. look at the reasoning that our guys had to put in place to win that case, it is reasoning virtually conceived every premise of the other side. you realize, we are really in a very difficult situation. when we were arguing this case the issue of defense of marriage act, we were pointing out that you don't need marriage for love. no one can deny the real love that subsists between parents and children, grandparents and children, siblings.

and we can submit in the nature of things, in the nature of things, none of those loves would be diminished as loves if they are not attended by penetration and reflected in marriage. we don't need marriage for love. but marriage is an comparable framework of commitment about the conditions under which children are generated and raised. so even the child will get a sense that his parents have foregone the freedom to quit their relation with him as they foregone their freedom to commit, to equip their relation with one another. we were warning them if we move away from that natural framework, of the relation begetting, between and man and woman, what confines this relation to a coupling? would people say our love is not confined to a coupling. we're connected with a larger ensemble. we have 500,000 polly amorous groupings living together in this country together now? we can't simply be of one sex.

it may have to be of mixed sexes. we're back to polygamy. the aclu is accepting polygamy. the up shot after this decision today i could marry one of my sons. not clear i could marry both of them. this may be an open question, but we see that there is no, there is no principled barrier any longer. i took bonnie frank at his word. i don't think bonnie frank meant to is did rapt the family but he -- barney frank. there are activists pressing the envelope. what is it your now in a position to say in principle when people come in and say, why isn't it we can't marry the other people we love? why is this confined to a "coupling"? i think we are really past the barriers and just a matter of unfolding i'm afraid the implications.

woodly allen, i'm sorry i can't leave you with something positive, can you accept two negatives? [laughter] >> let me make two comments. on polygamy. oh that is lipperry slope argument. i say, no, polygamy is upslope of same-sex marriage. >> absolutely. >> polygamy has been throughout history a very common, variation of, on monogamous, one male, one female marriage. surely the distinction between two and three is more arbitrary than distinction between male and female. >> absolutely right. >> now, justices obviously are not moved by logic and principled reasoning so maybe that won't happen tomorrow but there is no basis for confining same-sex marriage, if it is accepted, and i'm not going

further. adult incest is another example. secondly, i want to highlight that the parallel, may already be obvious to you between the doma and prop 8 cases. both cases you had supporters of marriage using the ordinary political processes, fighting the good fight. winning. and the other side running to court and, running to, to government leaders and saying please don't enforce this or, or we'll punish you have. and indeed i want to highlight that when doma was enacted in 1996, it went overwhelmingly majorities in both houses of congress. 85-1 in the senate. 34 #-67 in the house. -- 342-67 in the house. supporters of gay rights. vice president joe biden. signed into law by bill clinton. the idea we can now say this is

motivated simply by animus is absurd. >> absolutely right. >> i will take up the polygamy line and suggest that our next bill you can propose professor arkes, is defense of monogamous marriage act. that might be interesting test case. what is the logical basis? we'll see whether the courts are pulling to put their money where their mouth is and actually strike it down. you even had justice sotomayor, on the liberal side of the bench, she was questioning, what is the distinction here now between polygamy, consensual adult incest where you don't have concern about children here, but you just started saying here are two loving adults let them love each other the way they want to, if that is really base serves marriage, that is your mad understanding that is very hard to make these distinctions. one final point on centrality of children to it, it was really telling during the arguments everyone is going how marriage

and children, that is not really be about. how can it just be about children and procreation. it was fascinating to watch the press conferences after the decision, base almost every single person said i'm excited i can marry my partner, this is fundamentally about the children. this is about our children knowing that their parents are married. this is as justice kennedy said, voices of thousands of children in california whose parents are in same sex relationship it now. i think they have it right. they know in fact marriage is about children. that is what makes families different than just two, the two pensioners who want to combine their social security benefits. in fact that has something to do with it. maybe we can hopefully capitalize on natural intention everyone recognizes at some point. >> if i may very briefly. i think it's fair and appropriate as a policy matter to take into account the interest of those kids. there are plenty of other kids who suffer from the collapse of our marriage culture. the numbers dwarf them.

those are kids who are not being taken into account when people, trot out their kids for the camera. >> and also the same problem arose when we did away with polygamy. the question was about children living in polygamous families now. one other thing about, i was talking with a friend, a professor of law. we were going over some of the arguments we'll see as the couple from new york moves to alabama. we are likely to see the drawing out that old argument, interfering with my right to travel because if i can't carry my benefits to arizona you're inhibiting me from, people, well, it will be brought back. but then the of course we run into a deeper argument. that is a right flowing to you through the federal government is something that you can lose when you enter a state. this gets us back to the jeffersonian theory of citizenship. that your rights flow to you not

through the federal government as citizen. your rights of citizenship come only through membership of a state. we can't do that. all the ingredients are there. if they don't want to use qualpro tex, all the ingredients are there to strike it down. only a matter of time and their inclination or when they have the wit to see the implications of their own argument. >> okay. we're, coming close to the end of our hour but if we have the permission of our host we'll take a few questions from the floor. i ask you please phrase your question in the form of a question where possible. i saw your hand first, ma'am. >> this is a very overwhelming discussion. i'm sorry, i just found this -- >> what is your question? >> very overwhelming and i just wanted to ask you where is the hope in this and how do we push back to prevent us going further down that slippery slope?

>> i just got voted the optimist. i think, well, there are a couple of angles of hope. one hope we saw rover sus wade. a lot of statistics looked as grim, certainly trend of elites and number of states that were legalizing abortion. when people started to see, particularly once the culture recognized how devastating abortion was, there is a big push back. we have more young people particularly concerning themselves pro-life than pro-choice that simply current around. we can hope to do the same thing making cultural arguments here and hopefully that's possible. i think our other hope luckily our value and our worth it? dependent on our government. we have a hope that we can all rely on, chosen to be faithful right now. >> hope is a theological virtue

and optimism is maybe a, you know, human delusion. [laughter] look, i think the good news things are so bad, we ought to be awakened to it. look back how no fault divorce crept on to the scene. suddenly it was everywhere. who was paying attention back then. now if you're, if you're awake and conscious and, those of you out in the audience trying to live out your values, beliefs in your lives you're going to be dealing with this issue all the time and you're going to have to prepare yourself, prepare your kids, work with your french and neighbors to make the arguments. so, you know the battle is engaged. >> this is actually, actually this is a sore point with me now. you know, remember dean atchison's old dictum, don't just do something, stand there. this is one of those moments we

have to reject that. i think it is important we do something and get a statute in the works just as, it has been very distressing to me to see friend of ours, who while writing pieces on how the republicans can regroup and they mentioned immigration and taxes and what is notably left out is marriage. and abortion. you say, the cpac was going on. nobody is mentioning we're in the middle of a crisis over marriage. now i'm afraid some of our friend are drifting into the notion that it's not prudent to talk about these things in public. republican will not win with them. this recalls lincoln saying we can't talk about slavery in the churches. it is too divisive. it is too agitating here. that is what people care about but we can't find a place of people to talk about them. the task of statesmanship come to understanding of issues that

are in fact central and as the style of lincoln, give us a way of talking about it. so ordinary people can speak again. we have a, we have a political leadership that teaches, that is legitimate to talk about these things to the public and show you how to do it. >> next question. yes, ma'am? >> hi. thank you so much for taking the time to come and talk to us today. i'm sure you all three have really busy schedules. i was wondering what your response would be to the question, if someone were to ask you, or say that there is no legal or moral precedent to deny marriage to a law-abiding citizen based on the factor that they could not necessarily be good parents? or like raise like the child, is the best environment for the child? #. >> [inaudible] >> well, of course, marriage exists because parents have kids outside or inside marriage.

if you're, if you're suggesting that the alternative to someone being a bad parent within marriage is being a bad parent outside marriage i think all sorts of social science would you are much better to have a marriage there. clearly, i referred before to the breakdown of marriage in this country. we need to rebuild the marriage culture. a lot of that involves helping to teach men and women how to be fathers and mothers and good parents. >> does that get your question, ma'am? yes, sir. >> so, basically a lot of you touched on the collapse of the marriage culture in the past half century to the point where heterosexual union is necessary but not sufficient for traditional marriage. so with that in mind, do you think going forward at the state level with either legislation or constitutional amendments explicit the not only struck turf marriage but purpose and

nature of procreation? that should be explicitly expressed in the language of those amendments or bills? that is my question. >> i don't see a need for that. i think it always understood implicit. if folks don't understand that, these days we need to make that message so they do understand it but i don't think making it a formal part of the law is necessary. >> if i may actually add a follow-up to that, i think a thread running through all three of your comments was, the lack of purchase that this position of the benefits of a traditional marriage culture have for society, that the lack of a purchase that has on someone like justice kennedy, not even addressing the points, not mentioning that there could be a rational basis for that view. what's the deeper reason for that lack of purchase? what are the kind of deeper fundamental divide in people's

positions here? >> i think a lot goes back to our general misunderstanding of the notion of marriage. doesn't necessarily mean we have to institutionalize it in our law in terms of procreation. there are attempts in some states to have covenant marriage category to have states done away with no fault divorce and tried to get the fidelity and permanency of marriage at least worked into law which does serve the purpose of the marriages therefore of providing for the children of that, which are, you know, does do something for that. so i think just, it's, the misunderstanding of if it is just about love and love is just about sex apparently, then it is hard to, explain to someone why marriage would be based on something other than than, two people who feel sexually fulfilled with each other or three. >> [inaudible] the point has been made that the bib lick cable injunction, honor

thy father and thy mother would not refer to the biological father and mother we would talk about a the man who sired us in a rape. the there is moral obligation of parenting. obligations can be elicited only on the person with moral parenting, the one who is there to sustain and support. one of the tests is, marriage. are you really willing to make a commitment. think about this seriously. do you understand that you are forgoing your freedom to quit this association and the children as it suits your convenience? this is a serious matter. and, it is just, this needs to be understood and useful for to us bring it out again. today tocqueville said there is no arranged marriage in america. these are people who can understand the reasons for the attachment and they can understand when they commit themselves to an enduring

attachment to another person, even when looks may alter with age, they realize that there is the nature of a good there that will not atrophy, there something inescapable of moral significance in those creatures we called moral agents who have moral reasons for finding a partner enduringly worth think. it is all there. it has been implicit. it is understood for a long time. maybe necessary for another generation to do the teaching anew. >> christian, if i could briefly respond to the question you posed and borrowing from my colleague yvonne, i see in our culture two very different ways of thinking about the future. the traditional way, deeply religious way that understands we're here on earth and we're embedded in the generations and we're going to hope to make our country more just, make the future better for our kid and grandkids and great grandkids we'll probably never see. much more modern or postmodern view the future is all about my

life. how long i extend it before i off myself and much shorter term, more, greater focus on the self. i don't mean to suggest that correlates entirely with the divide on marriage. i do think that, it says a lot about the collapse of the understanding of what marriage is and, again, i want to emphasize, that the collapse of the marriage culture is not the responsibility of gays and lesbians. >> yes, ma'am. >> hi. [inaudible] >> catch up with the microphone. >> two quick questions. first how will the windsor ruling affect federal funding, especially federal grants to universities if we have any indication of that yet? and then realistically what ability is there for arguments promoting the conjugal understanding of marriage seeking attraction with a society that grants,

contraception and artificial reproduction technologies a given or even a good. . .