>> that caller id if it's put on a white list can then be spoofed as i think we all agree how easy it is to spoof a number. and have the same fingerprint or pattern as other messages. >> how did mr. steyn's license product, i hate to interrupt you, but if i could get conversation between the two of you, mr. steyn, address the airline calling with information that a flight has been delayed in reality how does that work

with your technology spent remember that technology has been deployed for a number of years. so i was the specifically to the canadian calling pattern which for the record i don't have any reason to believe are any different than american. the reality is that the system, the telemarketing system itself will only so begin to monitor and, therefore, take action once the our reports by enough people that say this is an unwanted telemarketer. further, once a call comes in the system will not block that called, being a carrier ourselves we've always viewed as a responsibility to put the two people on the phone, not impede that. but it is to get a moment of pause and give the other party calling, the party to press one for the name and so forth. in the event of delayed flags and things like that -- delayed flights, these things, we've

never seen a complaint like that -- >> so now consumer will call and say the airline called and let me know my flight was late. that is the initial beginning of the block is a critical mass of people calling and saying, hey, these guys are rip off people or they're trying to some exciting. >> they are not objecting to the consumer is not objecting, and a talk about the benefit in that nobody other than the consumers themselves decide what is and what is not an unwanted telemarketer or robocall. >> my point is that number which is welcome and legitimate, and i am properly described on caller id, is basically the identifier, the carrier and the customer and mr. stein's system has to track wanted and unwanted calls. right now there's no need for schemesters to actually pick numbers that consumers would

recognize as the source of messages, informational messages they would like to see. but there's no limitation on a fraudster's ability to use an airline number to fill out the caller id field in the robocalls and messages that they sent -- >> let me address that. so let's assume in canada since 2007 that a fraudster got a hod of united airline's number and started using that. how would it work with your system, mr. stein, if that happened? if they spoofed a legitimate number that no consumer would complain about, that they started using it, how would that work? >> two quick comments. first, the system is quite smart, and over the years we have enhanced it, we build a great many safeguards to prevent

this exact thing from happening. i won't elaborate in full detail on all those, but let's just say that is such a thing were to happen and reports were to start a command, one would assume that at the same time the airline is using that phone number, two and, therefore, a lot of those calls are getting accepted by our customers. so we be seeing going in both direction and the system becomes increasingly skeptical and looks for what distinguishes the two types of calls. and then is able to break them down based on many of the other criteria that are no longer using just say caller i.d. which is the thing it seems to spoof. there are other characteristics and the phone number that are available. >> he wins. >> give me another chance. mr. foss testify this technology is the same technology, the same roots as the technology these scammers are using. and what we just found, particularly in the area of policing tax messages that come

across carrier gateways from the internet is as the carriers become more sophisticated and looking at the finger prints, looking at the volume of calls, the number of identical messages, the fraudsters become increasingly better educated and sophisticated at the same time. so this is a cat and mouse game. you set a threshold, say 10,000 messages a minute or an hour, and any message volume for identical messages above that would get caught. before long the fraudsters set the threshold at 9000 messages. you lower the threshold again, the fraudsters find other messages are going through, they change their threshold to still stay under the limit. the cost of doing this really are almost zero. and so for every action and

every, you know, every time you raise the wall, the bad guys come back at you with a taller ladder. >> i think the point is being made, and for mr. rupy and mr. altschul, the point at is being made is we have the capability of being as sophisticated in terms of technology as the bad guys. and there are a number of different algorithms that could be used to identify that bad guy. that currently american carriers just are not bothering to use. and that is hard for me, i me, mr. foss is on the precipice of hopefully rolling out a product that will show that candidate won't be a decade ahead of us as opposed to merely and what are we up to now, six, seven years? if this guy was going to fault i think mr. stein probably wouldn't be here. so i've got, and mr. rupy, i

will wait for mr. heller to ask questions come back and ask your take on this because it worries me that we are going to say, you know, if we do this to try to catch the bad guys they're just going to do something else, could you imagine the amount of money we could have saved if we just would have given up if we try to interdict drugs was if we go after their plans, they would be both. if we do both they will go over the mexican border. let's not do that because then you'll just go over the mexican border. we just keep trying and i think this is one of the issues we have been kidnapped yet to try hard. >> to be clear, wireless carriers with respect to text messages are doing exactly you've described, and it's been a learning experience. some of the lessons learned, it's basically a spam filter protects messages. our instructional as to how smart the bad guys are.

>> madam chairwoman, thank you. mr. stein, i want to talk a little bit about telemarketing guard. is that the unique system in canada? >> yes. >> are there any other carries that have anything similar to what you have? >> now. we -- no. >> how long has it taken you to develop this particular system? >> we came up with the idea and early 2006. we had it commercially deployed, built, tested, commercially deployed i believe arlie 2007. >> any initial witnesses to the system? >> i wouldn't say they were weaknesses. we learned lots in the initial days but nothing concerning. >> okay. >> [inaudible] >> have you been approached by any other carries, whether in canada or the u.s., to buy

technology? >> a little bit. we participate in the fcc's robocall summit in the fall last year. after that with a couple of calls, some light inquiries, but nothing too greatly. >> so you got beaten up by nomorobo? >> we actually -- in fairness, we didn't submit telemarketing guard to the challenge as we're not eligible for. we presented it at the summit. >> are you aware of any barriers that may prohibit bring this technology from canada to the interstate? >> now i'm not. >> mr. foss, congratulations. >> thank you. >> usage of about 3600 people now that have -- do they buy your product courts do the download your product? how does someone know to get involved with the ftc produced in this case speak with sure, and that's the funny part is it's not even available yet.

it was just the announcement. i set up the website instead it's coming soon. 36 and people said give this to me, whatever is. they don't know how much it's going to be, how was going to work. they just know that there's a problem. so this is basically the press that is generated that directed them to the website. >> when do you think of be readily available? >> by the end of the summer actually. >> you have a program to make sure that the american public are aware of what your product is? >> exactly. after the competition i wound up talking to a bunch of investors. i got enough seed money to go builders and to launch a and address some of these exact concerns to see the best way is to just prove that it will work. one of the things i think mr. stein's product is actually better at than mine because he is, the worst-case and i think in mr. stein's case is that the call gets diverted to voicemail. you know, a lot of these things,

the thinking that when he did before everybody had voiced it was, especially online can is the call will be disconnected. but now if we can divert it to voicemail much like spam does with a spam filter i think everybody would rather have a voicemail box with five or six robocalls than five or six robocalls. >> you mentioned during your testimony that there were some industry players that were concerned with this technology. want to be done to address, what are those concerns and what have you done to address those concerns? >> the main concern is the caller id spoofing to a lot of players feel the caller id is always going to be wrong, so, therefore, we can't stop this problem. but again i see it a bit differently, an and by using the call id whether it is real or not with these calling patterns, the time calling patterns that we can start come even again if it's fake it has meant that the second is the consumer privacy. a lot of people said that this isn't like e-mail because it is in now you can go and analyze the content and in order to do this yet to listen in on

everybody so-called. i don't believe that's correct but i think that using this caller id with a calling patterns, much like the other solutions that are here, some of the reported data, the ftc data, we have a stab at making this, it's not going to be perfect. but even with, certain spam gets through. sometimes real in us getting a spam filter and i think we need to try. i think we need to start somewhere. >> mr. rupy, you said in your testimony that technology is constantly changing. do you believe a solution like this, nomorobo, is a solution that can work? >> senator, that's a fantastic question and i have to say i think it's absolutely fantastic that there are innovators like mr. foss out there who are working to develop these various solutions. and as mr. foss acknowledges there are challenges to some of these technological solutions.

and my point on the technological issue is that, like some issues that arise in this internet space, it is a constantly evolving and moving target. so i think in terms of designing a single technological silver bullet that can fully address the robocall issue, that will be an ongoing challenge. >> one more question if you don't mind. >> tickle the time you would like. >> mr. altschul, government agencies decided there are a number of complaints. tdefined those numbers to be accurate? >> carriers receive complaints, the government agencies at all levels, the federal and state, receive these complaints. so they are accurate, but our gripe is the way they are actually displayed and recorded by the federal communications commission. they divide it across services, and really doesn't provide a

clear picture of what's going on or the magnitude of the problem. >> has the industry had an opportunity to verify the number of sites in complaints? >> i'm not in any way challenging the numbers of how they reported. >> okay. thank you. >> mr. rupy, when the commentaries see mass amounts of calling, short calls and massive quantity, over the transom, what do you do? >> senator, that's aware during my oral testimony and the written testimony several of our mentor companies have these network operation centers, and that our measures that these companies can take to address these mass calling events. and that's where some of these working groups that i mentioned come in --

>> you say they take different measures but can you give me an example of one of, you, you don't have to name the carrier. give me an example of, let's assume one of my carriers, which at&t, let's assume massive amounts come over in a short period of time in a geographically centric area. do you know what they actually do when that happens, if anything? >> senator, i know they take actions. i don't know what those specific actions are, and would be happy to provide that information for the record spent i think i would be important to know. >> sure. and -- >> go ahead. >> just to keep in mind, oftentimes these mass calling events, they are not all directly attributable to robocall in events. so you know, for example, on september 11, we had mass calling events in new york city and washington, d.c. spent i think it's pretty obvious the. obviously, everyone understands that. i'm talking about all of a

sudden it's kansas city, and you know, it's interesting i was on a great program talking about this and they've gone out and then a man on the street into the people and every single person i talked to said they had gotten a call. secluded been a massive amount of calling in the kansas city area about citing. and that's what i'm talking about. there's nothing going on, there's no extraordinary weather events, the plaintiffs i can wear to but maybe 100, 200 people. we're not talking about thousands. i need to do what, if anything, these carriers are doing. if you are an obligation to do something? >> and their certainly taking action on those issues but i think one other point that was raised earlier by the panel, under our current legal framework regardless of whether it's a mass calling event are sort of standard calling volume, we are under a legal obligation

to bury -- to prevent the so-called speak so you say you couldn't legally adopt mr. stein's technology? it connects images to the weather goes to voicemail. >> as i understand mr. stein's and mr. ross' technology, to a certain degree you have these, the decision is removed to a certain degree from the consumer and is made by the carrier to -- >> that is not true. i don't think that is true, mr. stein to the carrier is not making the decision, isn't? >> now. but kerry does not make that decision to i can only speak of course to our system. the system doesn't block a call under any circumstance, other than if the customer were to say here is one given number i don't want, a blacklist available. in the case of telemarketing guard, it impedes the call and asks the caller to press to record the name. but in all of those cases those recorded names, the phone call is made, et cetera, and i'm not

a lawyer so i can't speak to the legality of it. i'm sure we have a lot of them in the room. >> i would really appreciate, mr. rupy, if you take that to the legal staff at the organization. the specifics of both mr. stein and mr. foss' technology, and get back to us with what specific problems from a legal framework you believe that there are. i think if this were offered by a carrier, you know, i'm just shaking my head that american carriers have not tried to adopt some of these technologies. because i think it's such a winner in an open capitalistic competitive market. and by my television ads that i watch, all the carriers are pretty darn competitive right now. i mean, they are desperately not just trying to get new customers, they are trying to

hold onto customers. because communism and other we can take our phone numbers, there is this incredible desire to see if you can get somebody to walk someone else to you. for the life of me i can't figure out why you are not more aggressively going after this very desirable technology on the behalf of consumers. >> we can absolutely provide that information. it just to be clear, our member companies to offer, and i always encourage consumers to reach out to their respective carriers, to see the services that are offering, and the deranged from things like whether it's caller identification to conditional call forwarding to anonymous call blocking. there are tools that the carriers are providing, continuing to develop, and again, we operate under that very strange and obligation -- stringent obligation to complete those calls but it's clear to us that that is something we need to comply with.

>> i don't want anybody to break the law, but i have a feeling we can do this with the technology that is out there. without breaking any law. and maybe even without us having to write any laws, and wouldn't that be special. because it's always nice that we can reach the marketplace solution in the private sector, and i know that i'm getting a nodding head from senator heller right now. it's always better to do it in the marketplace with a competitive solution as it relates to capitalism and that it is for the government to comment with the heavy hand and tried to impose a solution. so i think it's pretty important that we hear from you about what you see the legal missteps would be. since we have an example of technology that's been used in a country that also embraces capitalism. and it seems to be working, and working well for the company. so i would really appreciate you all with that follow-up.

any other questions? >> thank you. madam chairwoman, and thanks for your comments, and the follow-up. and this is for the panel. i guess the bottom line for this particular event, it should be ftc, the sec given enforcement powers or additional enforcement powers, or can this be solved through the private industry itself? mr. rupy. >> senator, i think as senator mccaskill mentioned earlier, this morning, the existing legal framework dealing with robocalls properly targets the bad actors who are engaging in this fraudulent activity. and i think to the extent that we continue to target that enforcement and make that enforcement aggressive against of those actors, that is the ideal solution here. because as i said in my written testimony, our member companies

work with agencies like the ftc to prosecute these -- we want to catch them as much as everyone here in this room. >> i would agree. i think it requires a holistic solution. everybody has to play a role and certainty enforcement agencies have a critical role, as do consumers, as does the industry. one of the things that are industry has begun looking at, which is far from yielding any results is how to utter map and trace these calls and messages when they cross through the internet to traditional carrier networks. as you may know, carrier networks when they were closed use a signaling system called signaling system seven. it was in never a signaling

system a. in a way of setting up and identifying calls for billing, tracing all kinds of things. the internet uses a system that is a protocol. and mapping or being able to marry these two very, very different kinds of protocols is part of the problem right now. that enforcement agencies and everyone is having in trying to trace back to the source of these messages. and it's the technical experts who have begun to work to marry these messaging protocols, are able to solve that problem. we will enable the, you know, great progress in identifying them and stopping these messages at the source. >> [inaudible] and that i live at the. i don't ask one more question for you, mr. altschul.

if you have any response to the ftc of raising the issue of abolishing the commentary exemption. do you have any feel on that? >> in terms of the commentary exemption, senator, i think as senator mccaskill raised in her testimony this morning, we have these issues were have sort of conflicting regulations. one for wireline, one for wireless, and i think to the extent you start expanding the scope of, you know, numerous agencies regulating similar players in the field, that gets to be problematic. second, we fully support, and it sounds, what i thought heard in the earlier testimony is from the ftc that to the extent there's an entity out there engaging in illegal activity, they're going to go after the entity as well they should. we fully support that whether they are a common carrier or

whomever. >> as the ftc's mr. bash testified, there's an existing working relationship between the two agencies in both enforcing the same laws and i think that there's some institutional advantages that each institution has developed in their respective areas. i'm not aware of, that it's a problem that is actually deterred any kind of investigation or enforcement action. >> i want to thank the witnesses. madam chairwoman, thank you for holding this hearing spent i appreciate everyone being here. i will tell you that i know that there's concerns and all the concerns about what can be done are based in going to follow the law and stay true to what your mission is as carriers, whether it be wireless or wired.

i do want you to know that i'm going to follow up in three months and ask to find out what your members are doing in this regard, and what they feel like they can do, and whatever information you can give us in the next three months that would spell out the problems you would have with adopting either the technology that mr. foss is ready to roll out by the of the summer. do you know what it will cost, mr. foss? >> i'm actually hoping to offer it for free. >> okay, am i going to have to look at? >> no. because i figure speakers how are you going to do that? >> i didn't put this in my testimony but this problem doesn't only affect the consumer. it affects businesses. as the other panel talked about, they key facts, the emergency call centers, the fcc put me in touch with the organization that manages a lot of these 911 centers. i think it's over 5000 of them, the do not call list is being implemented.

they asked me, i said to them is that the blacklist, a real-time blacklist, up-to-date list of the numbers you shouldn't be answering, would that be helpful? and they said they'd never even thought about that. it that existed it would be amazing. so i think there's an actual, this data set of the real-time robocall is and the calls that you should pick up on, even think on the consumer side -- site, the business i can anybody was large call centers. thousands of phone lines, and i spoke to some better in financial services, you know, the city banks and the chases of the world. every call that comes in the have to go and scream for fraudsters. so they no before they even send it for screening that they should immediately dump it. i think that there's a real valuable asset there. i think that by doing it for the consumers and offering them, you know, a really good service, a blocking of robocalls, my thesis is that i can make money on the business side.

>> on the business side, okay. you don't need to worry when you roll out. i'll give it a try. >> senator, thank you. >> thank you, mr. stein, coming from canada. and we look forward to follow up to see if we can reach a solution. i do know this, with the technology that is available, if it's just about chasing these guys law enforcement lives around the country, we're never going to get the result that consumers deserve. so i think you'll very much for being here. we appreciate it. >> thank you. [inaudible conversations] >> in a few minutes federal reserve chairman ben bernanke speaks at the national bureau of

economic research in cambridge, massachusetts. and in a little more than one hour, british foreign secretary william hague on the situation in the middle east and north africa. several live events to tell you about today. the center for strategic and international studies looks at the september g20 summit in russia. that's here on c-span2 at 9 a.m. eastern. at 10:00 on our companion network c-span, a wilson center forum on security in africa. the area south of the sahara desert that includes parts of mali, algeria, south sudan. also on c-span, the heritage foundation looks at the post changes the senate filibuster rules. the so-called nuclear option. speakers include former parliamentarian robert dove. you can see that at 12:30 p.m. eastern. >> earlier someone touched upon the idea that women could not

really predict their role in entering into the white house. but i did find one political observer who commented at the 1860 election that mary started with mr. lincoln when he was a poor young man and with no more idea of being called to the presidency and of being a cannibal. [laughter] however, i try and lay out in my book an educated guess that mary lincoln would not have let a little thing like human sacrifice come between her and her goal because she was a very determined woman. she did talk about mr. lincoln's role perhaps of entering the white house. so she was someone who was a true political partner. >> as we continue our conversation on first ladies we'lwith her, historians and aus including patricia brady and catherine clinton about the role of the first lady and how it's changed along with the nation. monday night at nine eastern on c-span. >> now, federal reserve chairman ben bernanke of the national

bureau of economic research conference in cambridge, massachusetts. this is an hour. >> thank you. thank you. thank you, jim. particularly about the part about the bibliography. i'm still working on it. [laughter] well, i would like previous speakers, i would like to thank the national bureau of economic research for organizing this conference in recognition of the federal reserve's tenure which we don't know whether it's exactly 1930, 1940 but we know it's happening around glad to be here and have the opportunity to purchase but in this very interesting conference. in keeping with the spirit of the conference, my remarks today would be primarily startled in nature but i will leave current discussion today's question and answer period and, of course,

next week i have the particular pleasure of testifying before congress. so that will be interesting. [laughter] another opportunity to discuss these matters. so today in my remarks i would like to discuss the evolution over the past 100 years of three key aspects of federal reserve policymaking. the goals of policy, policy framework, and accountability and communication. that changes over time in these three guys provide a useful perspective i believe on how the role and function of the federal reserve has changed since its founding in 1913 as well as some lessons for the present and for the future. i'll pay particular attention to several key episodes in the fed's history, all of which have been referred to it in for his context with the modifier, great. the great experiment of the federal reserve's found, the great depression, the great inflation and subsequent

disinflation, the great moderation and the great recession. in the words of one of the authors of the federal reserve act, robert owen, the federal reserve was established to quote provide a means in which periodic panics would shake the american republic and do what enormous injury shall be stopped. in short, the original goal of the great experiment that was the founding of the fed was the preservation of financial stability. at the time the standard view up and it was they were triggered when the needs of business and agriculture for liquid funds outstripped the available supply. as when seasonal planting or shipments of crops had to be financed, for example, and that panics were further exacerbated by the incentives of banks and private individuals to hoard liquidity during those times. as has been discussed many times today already, the new institution was intended to relieve such stream by providing a quote he lasted currency. that is by providing liquidity is new to individual member banks to the discount window and

the commercial banks in turn would then be able to accommodate their customers. interestingly although congressional advocates hope the creation of the fed would help prevent future panics, they did not fully embrace the idea that the fed should help ongoing panics by serving as lender of last resort as had been recommended by the british economist and writer walter badgett. legislators impose limits on the federal reserve's ability to land in response to end. for example, by denying nonmember banks access to discount window and by restricting the types of collateral that the fed could set. the framework of the federal reserve and employed in its early years to promote financial stability reflected in large measure the influence of the so-called real bills doctrine, as well as the fact that the united states was on the gold standard. in the framework of the real bills doctrine, the federal reserve saw its function as meeting the needs of business for liquidity. consistent with the idea of

providing an elastic currency with the ultimate goal of supporting economic and financial stability. when business activity was increasing, the federal reserve help accommodate the need for credit by supplying liquidity to banks and when business was contracting, and less credit was needed, the fed reduce the amount of liquidity in the system. as i mentioned, the federal reserve pursued this policy approach in the context of the gold standard. federal reserve notes were redeemable in gold on demand, and the fed was required to maintain a gold reserve equal to 40% of its outstanding notes. however, contrary to the principles of an idealized gold standard, the federal reserve often took action to prevent inflows and outflows of gold from being fully translated into changes in the domestic money supply. this practice, together with the size of the u.s. economy, gave the federal reserve considerable autonomy in monetary policy and

in particular about the fed to conduct policy according to the real bills doctrine without much interest. the policy framework of the fed's early years has been much criticized in retrospect. although the gold standard not appear to grade retention u.s. monetary policy in the years after the fed's founding, subject -- subsequent research has highlighted the extent to which the international gold standard served to destabilize the global economy in the late 19th was an early 1930s. likewise, economic historians have pointed out that under the real bills doctrine the fed increased the money supply precisely at those times at which business activity and upward pressures on prices were the strongest. that is, monetary policy was procyclical. does the fed's actions tended to increase rather than decrease the volatility in economic activity and prices. during this early theory the new central bank did make an important addition to its many of policy tools.

initially the fed's main tools with the quality of its lending to the discount window and the interest rate at which it lends ominous the discount rate. early on, however, to generate earnings to finance its operations the federal reserve began purchasing government securities in the open market, what became known as open market operations. in the early 1920s that official discovered that these operations affected the supply and cost of bank reserves, and consequently the terms of which banks extended credit to the customers. subsequently, of course open market operations became a principal monetary policy tool and one that allowed the fed to interact with the broader financial markets and not only with banks. i've discussed the original mandate and the policy framework of the early days of the fed. what about its accountability to the public and its governance? as this audience knows when federal reserve was established in the question of whether should be a private or public

institution was highly contentious. the compromise solution create a hybrid. the system was headed by a governmentally appointed board which initially included the secretary of the treasury and the comptroller of the currency. but the 12 regional reserve banks placed under next of public and private oversight including board members drawn from the private sector, and they were given in single scope to make policy decisions that apply to their own districts. for example, reserve banks were permitted to set their own discount rates subject to a minimum set by the board. by the founders of the federal reserve hope this new institution would provide financial and economic stability to policy framework and institutional structure would prove inadequate to the challenges that the feds would soon face. the great depression was the federal reserve most difficult test. tragically, the fed failed to meet its mandate to maintain

financial stability. in particular although the fed provided substantial liquidity to financial system falling the 19th when stockmarket crash, its response to the subsequent banking panic was limited at best. the widespread bank failures and the collapse of money and credit that ensued were major sources of the economic downturn. appeared to have few that the federal reserve of that era. economists have also identified a number of instances from the late 1920s to the early 1930s when federal reserve officials in the face of a sharp economic contraction and financial upheaval either tightened monetary policy or chose in action. some historians trace these policy mistakes to the early death of benjamin strong, governor of the federal reserve bank of new york, in 1928 which left the decentralized system without an effective leader. whether valid or not this

hypothesis raises the interesting point about intellectual framework and effective leader would have used at the time to develop and justify a more activist monetary policy. the degree to which the gold standard constrained u.s. monetary policy during the early 1930s is debated. but the gold standard philosophy clearly did not encourage the sort of hide expansion and policy that were needed. the same can be said for the real bills doctrine which apparently policymakers to conclude on the basis of low nominal interest rates and low on from the fed that monetary policy was a properly supportive and that further action would be fruitless. historians have noted the prevalence of the time of yet another counterproductive doctrine, the so-called liquidation is to view, that perform a necessary cleansing function. it may be that the federal reserve suffered less from lack of leadership in the 1930s than from lack of intellectual

framework for understanding what was happening and what needed to be done. the fed inadequate policy framework all to my collapse under the weight of economic failures, new ideas and political developments. the international gold standard was abandoned during the 1930s to the real bills doctrine likewise lost prestige after the disaster of the 1930s. for example, the banking act of 1935 constructed the federal reserve to use open market operations with consideration of quote the general credit situation of the country and not just to focus narrowly on short-term liquidity needs. .com is also expanded the fed's ability to provide credit through the discount window of our loans to a broader array of counterparties secured by a broader variety of collateral. the experience of the great depression had major implications to all the aspects of the federal reserve that i'm discussing here. its goals, its policy frameworks and its accountability to the

public. with respect to goals, the high unemployment of the depression and fear that high unemployment would return after world war ii, elevated the maintenance of full employment as a goal of macroeconomic policy. the employment act of 1946 major promotion of employment a general objective of the federal government. although the fed did not have a formal employment goal and the federal reserve form act of 1977, codified maxxum employment along with stable prices, as part of its so-called dual mandate, earlier legislation nudged the central bank in that direction. for example, legislators -- the banking act of 1935 as follows, quote to increase the ability of the banking system and promote stability of employment in business, in so far as is possible within scope of monetary action and credit administration. the policy framework to support

this new approach reflected the developers of macroeconomic theories, including the work of irving fisher, dennis robertson, and, of course, john maynard keynes that laid the foundation for understanding how monetary policy could affect real activity employment and help reduce cyclical fluctuations. at the same time the federal reserve became less focus on its original mandate of preserving financial stability, perhaps in part because it helped, superseded by the accretion of 1930s of the federal deposit insurance corporation and the securities and exchange commission, along with other reforms intended to make the financial system more stable. in the area of governance and accountability to the public, policymakers also recognize the need for reforms to include the structure and its decision-making. the banking act of 1935 simultaneously bolstered the legal independence of the federal reserve and provide for stronger central comes control

by the federal reserve board. in particular the act created the modern configuration of the federal market committee, the fomc, giving the board majority of the votes on the committee water moving the second of the treasury and the comptroller of the currency from the board. in practice, however the treasury canteen cup can still sway over monetary policy after 1933 with one economic historian describing the fed as in the back seat. during world war ii the federal reserve used its tools to support the war financing efforts. however, even after the war federal reserve policy remained subject to considerable treasury influence. it was not until the 1950 what a chord with the treasury that the federal reserve began to recover genuine independence in setting monetary policy. once the federal reserve regain its policy independence its goals centered on the price stability and employment objectives laid out in

employment act of 1946. in the early postwar decades of pages open market operations and the discount rate to influence short-term interest rates are at the federal funds rate gradually emerged as the preferred operating target. low and stable inflation was achieved for most of the 1950s and early 1960s. however, begin in the mid 1960s inflation begin a long time upward, partly because policymakers proved to be too optimistic about the economy's ability to sustain rapid growth without inflation. two mechanisms might have mitigated the damage from that mistake and optimism to first, a stronger policy response to inflation more like that observed in the 1950s certainly would've helped. second, fed policymakers could have reacted by adopting a more realistic assessment of the countries economic potential. instead policymakers chose to

emphasize so-called cost push and structural factors as the source of inflation and saw wage and price them as having become insensitive to economic slack. this perspective which contrasted sharply with milton friedman's famous victim that inflation is always and ever and monetary phenomenon led the fed to support measures such as wage and price controls rather than monetary solutions to address inflation. a further obstacle was the view among many that the gains from low inflation do not justify the cost of achieving it. the consequences of the mantra framework in the 1970s were, as you know, about double digit inflation. moreover, by the end of the decade lack of commitment to controlling inflation including resulted in inflation expectations becoming an anchored with high estimates of trans-inflation embedded in longer-term interest rates. as you know and as we discussed earlier today, under the leadership of the chairman paul

volcker, the federal reserve in 1979 fundamentally change its approach to ensuring the stability. is changed involved an important read thinking on the part of policymakers. by the end of the 1970s federal reserve officials increasingly accepted the view that inflation is a monetary phenomenon, at least in the medium and longer term it became more alert to the risks of optimism about the economy's potential output and have a place renewed emphasis on the distinction between real and that is placing adjusted, and nominal interest rates. the change in policy framework was initially tied to a change in operating procedures that put greater focus on growth and bank reserves, but the critical change, the willingness to respond more vigorously to inflation endured even after the federal reserve resumed the traditional use of the federal funds rate as its policy instrument. the new regime also reflected an improved understanding of the importance of providing a firm

anchor secured by the credibility of the central bank for the private sector's inflation expectations. finally it entailed a changed view about the dual mandate in which policymakers regarded a price to the as helping provide the conditions necessary for sustained maximum employment. volcker successful battle against inflation sets the stage for the so-called great moderation of 1984-2007 during which the fed and should consider the success in achieving the objectives of the dual mandate. financial stability remained the goal of course to the federal reserve monitored threats to the financial sector and responded when the financial system was upset by vince at his 1987 stockmarket crash and the terrorist attacks of 2001. more routinely it shared supervisory duties with of the banking agencies. nevertheless, for the most part

financial stability did not figure, and monetary policy discussions during these years. in retrospect it is clea good tt macroeconomists both inside and outside central banks rely too heavily during the period on trains out of him, in a petition of which is the details of the structure of the financial system can be ignored when analyzing the private behavior of the economy. an important development of the great moderation was the increasing and this is on central banks around the world on communication and transparency as economist and policy makers reach consensus on the value of communication in attaining monetary policy objectives. federal reserve officials like those at other central banks have traditionally been highly guarded in their public pronouncements. they believe, for example, the ability to take markets by surprise was important for influencing financial conditions. us although fed policymakers of

the 1980s and early 1990s have become somewhat more explicit about policy objectives and strategy to the same degree of transparency was not forthcoming on monetary policy decisions and operations. the release of a post statement by the fomc, a practice that began in 1994 was therefore an important watershed. over time the statement was expanded to include more detailed information about the reasons for the policy decision and an indication of the balance of risks. in addition to improving the effectiveness to monetary policy, these developments of conditions also enhance the public's accountability of the federal reserve. accountability is of course essential for policy independence in a democracy. during this period economists found considerable evidence that central banks that are afforded policy independence in pursuit of their mandated objectives deliver better economic outcomes.

one cannot look back today at the great moderation without asking whether the sustained economic stability of that period somehow promoted the excessive risk-taking that followed. the idea that this long period of calm gold investors, financial firms and financial regulators into paying insufficient attention to building risks must have some truth in it. i don't think we should conclude that we should therefore not strive to achieve economic stability. [laughter] rather the rising solution is that even in or perhaps especially in stable and prosperous times monetary policy makers and financial regulators should regard safeguarding financial stability to be the equal importance indeed a necessary prerequisite for maintaining ago economic stability. macroeconomist industries will continue to debate the sources of the remarkable economic performance during the great moderation. my own view is the improvements in monetary policy and monetary

policy communication including of course the better management of inflation and the anchoring of inflation expectations were important reasons for this strong performance. however, we've learned in recent years that what will manage monetary policy may be necessary for economic stability, it is not sufficient. so it's been now some six years or so since the first signs of the financial crisis appeared in the united states, and we are still working to achieve a full recovery from its effects. what lessons should we take from this experience, particularly in the context of a century of the federal reserve history? the financial crisis and the ensuing recession reminded us of a lesson that we learn both in the 19th century and during the depression but had forgotten to some extent, which is that severe financial instability can do great damage to the broader economy. the implication is that a central bank must take into

account risk to financial stability if it is to achieve good macroeconomic performance. today, the federal reserve sees is responsible for the main is a financial stability as coequal with its management for the responsibility, responsible for the management of monetary policy, and women substantial institutional changes in recognition of this change and goals. in a sense for we have come full circle back to the original goal of the federal reserve of preventing financial panics. how should a central bank enhanced financial stability? one means is by assuming the lender of last resort function described 140 years ago under which the central bank uses its power to provide liquidity to these market conditions during periods of panic or incipient panic. the feds many liquidity programs played a central role in containing the crisis of 2008 2008-2009. however, putting out the fire is

not enough. it's also important to foster a financial system that is sufficiently resilient to withstand large financial shocks. toward that end of the federal reserve together with other regulatory agencies and the financial stability oversight council is actively engaged in monitoring financial development and working to strengthen the financial institutions and markets. the reliance on stronger regulation is itself informed by the success of new deal regular toward reforms, but current reform efforts go even further by working to identify and defuse risked not only to individual firms but to the financial system as a whole, an approach known as macroprudential regulations. financial support has also linked monetary policy, but these links are not yet fully understood. here's the fed's evolving strategy is to make monitoring supervision and regulation the first line of defense against systemic risk. to the extent that risks remain,

our, the fomc strives to incorporate this strives to incorporate this risk and cost benefit analysis apply to all monetary policy action. what about the monetary policy framework? in general the federal reserve policy framework today inherits many of the elements put in place during the great moderation. these features include the emphasis on preserving the feds inflation credibility, which is critical for anchoring inflation expectations, and a balanced approach to pursuing both parts of the feds to mandate in the medium term. we've also been getting to increase transparency of monetary policy. for example, the committee's communication framework that includes the statements of its longer-run goals and monetary policy strategy. and that statement the committee indicated that -- 2% as measured by the annual change in the price index of personal consumption expenditures is most consistent over the longer run of the fomc the dual mandate. fomc participants also are five

estimate to the longer run gnome run of unemployment, those as the scrum have a central tendency of 5.2-6%. by helping to anchor longer-term expectations, this transparency gives the federal reserve greater flexibility to respond to short run development. this framework which combined short one policy flexibility, the discipline provided by the announced target, has been described as constrained discretion. other communication innovations include early publications to the minutes of fomc meetings and quarterly post meeting press conference by the chairman. a framework for implementing monetary policy has evolved further in recent years, reflecting both advances in economic thinking and in changing policy environment. notably following the ideas of a large and others the fomc has moved to the framework that ties policy settings more directly to the economic outlook, so-called

forecast approach. in particular the fomc has released more detailed statement following its meetings that have relayed the outlook for policy to prospective economic developments and has introduced regular summaries of the individual economic projections of fomc participants, including for the target federal funds rate. the provision of additional information about policy plans as health policymakers deal with the constrained posed by the lower bound o on the short-term interest rate. in particular by offering guidance about a policy will respond to economic development, the committee has been able to increase policy accommodation, even when the short-term interest rate is near zero and cannot be meaningfully reduced further. the committee has also sought to influence interest rates further out on the yield curve, notably through its securities. other central banks and advanced economies also conferred with effects of lower bound and short-term interest rates have taken similar measures.

in short, the recent crisis was underscored the need both a strength and our mantra policy and financial frameworks and to better integrate. we've made progress on both counts but more needs to be done. in particular the koppelman tarries among regulatory and supervisory policies including macroprudential policy, lender of last resort policy, and standard monetary policy are all increasingly evident. both research and experience are needed to help the fed and other central banks develop comprehensive frameworks that incorporate all of these elements. the broader conclusion is what might be described as the overriding lesson of the federal reserve history, the central banking doctrine and practice are never static. we and other central banks around the world will have to continue to work hard to adapt to events, new ideas, and to changes in the economic and financial environment. thank you.

[applause] >> thank you very much. let me just remind the audience that we will have, there are index cards available. we've collected some from people. we will have folks walking through the aisles, if you would like to try to cement a question, please write the question and we will bring some of those up so we can ask a weekend. so chairman, you indicated your willingness to talk a bit about current situation as well as the 100 your history. so i thought i would like to start by just asking you a little bit about the last six weeks. last month -- [laughter] last month you laid out a contingent plan for reducing the pace of asset purchases. a number of pundits have criticized this step, said it was premature for you to discuss

the future contingencies at this point. with the benefit of hindsight at this point, would you do anything differently in that regard if you had that step to take again? >> well, thank you for that question. [laughter] well as i said in my remarks, i am a very big believer, federal reserve is a big believer in transference and communication. i think transparency of central thing is kind of like truth telling in everyday life. you've got to be consistent but you can't beat opportunistic about it. i think if you think about the recent development and information that we provided to the public about our thinking, i guess i would ask you to consider the counterfactual if we hadn't said anything. the information we provided about, for example, a contingent data dependent plans for the asset purchase program were actually pretty close to our understanding of what mark -- markets expected for the program. but suppose we said nothing and

that time had passed and the market perception that drifted away from our own thinking and her own expectations from policy. in addition during that time, again in the counterfactual but we don't provide information, it's very likely that more highly leveraged risk-taking positions might build up reflecting again some expectation of an infinite, infinite asset purchase program. ..

>> and the release of the minutes last month. the market seems to have interpreted the combination of those two pieces of information as hawkish news. would that be the right interpretation to put on those releases? [laughter] >> so let me start with basics here. [laughter] the federal reserve, notwithstanding that not everybody likes it, i think it's good has a dual mandate. the dual mandate is to pursue maximum employment and price stability. currently, we have an unemployment rate of 7.6% which i think, if anything, overstates the health of our labor markets given participation rates and many other indicators of underemployment and long-term unemployment. so we're not there, obviously, on the maximum employment part of the mandate. on price stability inflation is now about 1% which is below our 2% objective.

so both sides of our mandate, both the employment side and the inflation side are saying that we need to be more accommodative. moreover, the other portion of macroeconomic policy, fiscal policy is now actually quite restrictive. cbo estimates that current federal fiscal policy is subtracting one and a half percentage points or so from the growth of the u.s. economy this year. so you put that all together, and i think you can only conclude that highly a accommodative monetary policy for the foreseeable future is what's needed in the u.s. economy. now, how does that relate to recent communications? i think the issue has to do with not so much with the overall accommodation, but rather with the mix of instruments being used to provide that accommodation. the fed has two instruments that we've been using in the context of interest rates close to the

zero lower bough. the first, asset purchases, we have thought about and i've frequently described as providing near-term momentum to the economy. in other words, we have said that we are trying to achieve a substantial improvement in the outlook for the labor market in a context of price stability. we've made progress on that, but we still have further to go. but again, that's the objective of the asset purchases is to provide near-term momentum to try to get the economy moving forward more quickly. the second tool that we have is our rate policy, short-term interest rates and associated with that is the forward guidance that we provided to the public about our expectations for when rates might change. and in particular we said that we will not raise interest rates until, at least until unemployment hits 6.5% as long as inflation is well behaved. again, i think as i've said before that that 6.5% is a

threshold, not a trigger. there will not be an automatic increase in interest rates when unemployment hits 6.5%. instead that'll be a time to think about the situation anew. and given, as i said, the weakness of the labor market, the fact that the unemployment rate probably understates the weakness of the labor market, given where inflation is, i would suspect that it may be well sometime after we hit 6.5% before rates reach any significant level. so, again, the overall message is accommodation. there is some perspective, gradual and possible change in the mix of instruments, but that shouldn't be confused with the overall thrust of policy which is highly accommodative. >> you know, in that vein could you comment a bit on the fed's outlook for the economy? because there are many who would argue the fed is actually optimistic at this point relative to many in the private

sector. >> i think we're somewhat optimistic. some of the material we've published, the projections and so on are a little more optimistic than some private sector forecasters. but i think a fair viewing of the economy would suggest that there are some positive features out there, some positive developments, but there are also some significant risks that we have to continue to pay close anticipation to. on the positive -- attention to. on the positive styled, i think -- side, i think you would want to start with the housing sector which, of course, has been a major drag for quite a few years and only in the last year or so has it turned around and shown some strength which has implications both for construction, for related industries and also for house prices which affect household balance sheets. automobiles are also strong, so i take that as evidence as alan blinder said earlier that monetary policy is working, because those with are -- those are two of the main channels for which monetary policy affects

the economy. i think a second positive factor i would point to is the state of the american household. while there are still, obviously, many great difficulties, households in the united states have deleveraged quite a bit. wealth is up with house prices and equity prices and other as is the prices having increased. employment gains mean more income, and sentiment is, accordingly, much higher. so i think we have a somewhat stronger household sector going forward. and finally i would just note -- maybe not finally, but i would note that the fact that our economy has come, you know, continued to grow and continued to produce jobs in the face of very strong fiscal headwinds is somewhat encouraging, i think. and there are other factors as well including reduced fiscal restriction at the state ask and local level -- state and local level, a relatively strong banking system which is providing more credit and a

variety of other factors. so there are some things i think that make the outlook look more positive. but there are also some risks which i think are very important for us as policymakers to look at. first, it's still early to say that we have weathered the fiscal restraint. i think it's very difficult to know how long the lags are between congressional decisions and actual spending and production decisions. so we're going to continue to watch and see whether growth is resilient going forward for the rest of the year. again, our projections are that there'll be some pickup in growth, but that does depend on overcoming the remainder of the fiscal headwinds. a second point which is worth stressing, and i see my good friend jim bullard is here, is the very low inflation rate. we are all very much committed to defending our inflation target from below as well as

from above. low inflation, i know everyone -- it's hard to explain to your uncle, i know -- [laughter] but low inflation is not good for the economy because very low inflation increases the risks of deflation which can cause an economy to stagnate. it raises the real cost of investing, and the evidence is that falling in low inflation can be very bad for an economy. so the federal reserve is trying to keep inflation close to 2%. we think that there are some transitory factors at work which have brought inflation down a bit more than is fundamentally the case in some sense. we expect inflation to come back up. but if that's not the case, i think we have to say that that would be a good reason to remain accommodative and to try to achieve that objective. and i guess the final thing i would say in terms of risks, of

course, is that we have seen some tightening of financial conditions and that if, as i've said and as i said in my press conference and other places that if financial cases were to tighten to the extent that they jeopardize the achievement of our inflation and employment objectives, then we would have to push back against that. so i think there are some risks now that we have to pay attention to, but i think it's also the case that there are some positive factors that, with some luck, will generate somewhat faster growth and continued improvement in labor market conditions for the remainder of this year and into next year. >> i have a question that comes back to the issues around communication and messaging that you talked about. the fed has introduced a number of new communication tools over the course of your tenure. are these changes all permanent, are there some elements of these new tool and communication strategies which are

extraordinary policy that reflect the extraordinary times we're in and, in particular dealing with the zero lower bound? >> well, i think that most of the things that we've done will likely be permanent. not, of course, a future committee might decide to make changes to our projections or changes to the way we structure our minutes or other things that could certainly happen. i think that, you know, the definition of price stability and the longer-run policy strategy i'm hopeful that that had been a long lasting innovation. the communications that are specifically related to the zero lower bound are particularly the forward guidance where we have tried to provide not targets, not objectives, but rather guide posts to help the markets understand and the public understand, you know, when we expect policy to begin to change.

it may be that when we leave the zero lower bound and when the economy is in a more normal configuration that that kind of guidance won't be necessary anymore because as was the case prior to the crisis, the markets can just look at the behavior of the fed and, essentially, extrapolate that behavior to understand what the fed is likely to do as the economy evolves. that being said, in may be is circumstances -- there may be circumstances where this kind of guidance is helpful, and i just note that we're seeing -- the federal reserve, by the way, was not the first to use this kind of guidance. the bank of japan, the bank of canada have experimented with these types of ideas as well, and i think it's becoming a, an international practice that to various degrees in various places, but i suspect that we'll

see its use in some context at least going forward. but i don't think it is necessarily a permanent part of federal reserve policy precisely because we will be moving away from the zero lower bound and, i hope, you know, at a reasonable period of time we'll be in a more monetary environment. >> on that international theme, you talked about the tripartheid roles of macroprudential regulation, lender of last resort and we look around the globe, the regulatory policies are in some cases done by an organization which is not the central bank. do you see there as being a strong case for bringing that role inside the central bank, or can you see circumstances in which it works to have the macro prudential part in a distinct organization? >> well, different, different countries have different kinds of financial structures as jean claude was saying, europe and the u.s. are different in many ways, etc. but as you look around the

world, the trend now, of course, is for financial regulatory activities, financial oversight activities to move back into central banks. i mean, that's happening in europe, that's happening in the u.k., it's happening in the united states. and i think there's good reason for that. one very simple reason is that central banks tend to have the kind of expertise in financial markets and so on that gives them a comparative advantage in addressing some of these issues. there's the fact that the central bank is the lender of last resort which there's a complimentarity between that and supervision of individual firms. and then i think generally that there is a macroprudential innovation now that there is much more attention being paid to the broader financial system as opposed to the stability of individual institutions alone.

we do both. we pay attention, of course, to individual institutions, but we also try to think about the stability of the financial system as a whole. and i think the central bank is uniquely equipped to have that breadth of vision and to think about how that stability of the financial system relates to its other functions, particularly as you mentioned, leonard, last resort and monetary policy. so i think there's a good case for it. there are different institutional arrangements that can be worked out in the united states, of course, the fed has got authority over bank holding companies and systemically important firms which means we have a pretty good insight into the largest, most systemic firms. but we share supervisory authorities in both banking and financial markets with a range of other agencies and, of course, we work collaboratively with those agencies, with each agency developing its

comparative advantage in a particular part of the system that it's assigned. >> you know, a number of years ago you referred to a savings glut, and today there are many who think there is a shortage of safe assets in the global economy. is that a view that you would agree with? and if you do, is it something that the fed should or can do anything about? >> >> well, on the saving glut i would like just to mention that there were a number of speakers today who talked about going back to carmen reinhart who talked about the current account and its role in precipitating the crisis. and be this was one of the things that was a theme of my commentary before the crisis which was the idea that the capital inflows that we were seeing related, of course, to our large trade deficit, but also to the international demand for dollar reserves was, in fact, a potentially destabilizing factor and certainly was, in the any case, making financial conditions

easier than they otherwise would have been. and done more recent work with co-authors at the federal reserve hooking at the european/u.s. relationship. each though there was a money more balanced trade between europe and the u.s., there are large gross inflows of financial flows from europe to the united states which, again, were a demand for safe assets, if you will, which at the time there being an insufficiency of safe assets in the view of many people that wall street was in some sense trying to construct safe assets through securitization and tranching. and we know that that didn't work out so well. i think that, you know, there are some issues with safe assets in that besides collateral, you know, we have potentially increased liquidity requirements, increased margin

requirements, and that may create some pressure on the supply of safe assets. at the same time, you know, we're having sovereign debt issues in some parts of the world which reduces the supply of safe assets. so i think that's an interesting and important question and one that we have discussed at the federal reserve. i would say, however, that i do not think that our asset purchase p programs are having a significant effect on that supply/demand balance, and the reason is the very simple point that when we buy assets and our total purchases, by the way, are a pretty small share of the global amount of safe assets, but anyway, when we buy safe assets, we, of course, pay for them with bank assets which is one that's even more liquid. so i don't think they're significantly affecting the net supply of safe assets. but it is an issue and one that we've looked at as we've thought about, for example, margining and liquidity policy.

>> let me ask about the design of creative policies over the last few years. you know, in the last, say, five years the fed has navigated a minefield of taking actions that were at the edge of traditional fed policy sometimes generating questions about fed independence and challenges to fed indimension and, of course, central bank independence is a topic that many of the audience members study and work on. can i ask where you think the greatest threat comes from? is it from the innovative policies on the macroprudential side and the dealing with individual financial institutions or the aggregate financial sector, or do you think it's from the innovative policies on what i'd call the traditional monetary policy side dealing with the stimulus-type role? >> well, that's kind of a political economy question. i'm not sure i can do it justice. let me just say a preliminary

thing which is i don't think that the central bank should be equally independent in all of its functions. there are good reasons to have independence in monetary policy making subject to a mandate or subject to objectives set by the democratic parliament or legislature. and we understand those, those reasons having to do with avoiding short run political intervention in monetary policy and the like. but in many of its other activities, you know, for example, as a bank regulator while we believe that bank regulators should be independent to make their own judgments about the quality of banks, i don't think the fed can presume to be any more or less independent in that function than is the occ or some other bank regulator. it's just another aspect of our activities. in our provision of payment services, there probably is no real case for independence, and it's entirely appropriate for the congress to ask questions about, you know, what we're

charging for those services and how we're providing them and so on. so i think it depends very much on the, on the aspect of the particular activity that the central bank is involved in so independence is a subtle concept. i think what it means varies according to the particular activity or particular function. there's always -- so, again, so if we're worried about independence, the place where all central banks worry about independence is mostly on the monetary policy side. and there i think the best we can do is to do our very best to meet the mandate that congress has given us. if we don't meet that mandate, then they would have -- or if we don't meet it and can't show why we didn't meet it at least, they would have reasonable basis to ask why. so i think in the long run the best thing we can do to maintain

monetary policy independence is to show that we will take all reasonable measures to meet the objectives that the congress has set for us and, of course, that's what we intend to do. >> okay. shifting from the domestic pressures to the international pressures, some have argued that in the last few years the policies at the fed and those of some of the european central bank have risked igniting a currency war of sorts. i'm curious as to whether you view that as, you know, an inappropriate argument that's simply wrong or whether there's some validity to the worry, but it simply was a cost that had to be borne as a consequence of other objectives that the fed was trying to achieve. >> well, i gave some remarks on this at a london event for mervyn king's retirement. and i, and appropriate of today's discussion i used historical example. i made the distinction of during the 1930s during the great

depression as countries left the gold standard, their currencies temporarily depreciated relative to other countries, and they had a temporary trade advantage because of that. but over time as all the countries left the gold standard, exchange rates kind of normalized, kind of went back to where today started from. but nevertheless, the whole world was, nevertheless, much better off because there was a global monetary, expansion which was desperately needed at that time in the 1930s. so that was a possum gain. -- positive sum gain. it was a situation in which everyone gains because the benefits, in that particular context, the benefits of growth-enhancing domestic policies spilled over into other economies. i contrasted that with the smoot

holly tariff which was more of a zero sum game or even negative sum because what was going on there was each country was trying to divert trade in its own favor at the expense of its own trading partners. and as that activity continued and as reprisals and payback continued, actually, it destroyed the global trade pattern and was very costly to everybody. so what has this got to do with your question, i'm sure you're wondering. [laughter] what it has to do with today is that it's one thing to use trade or other kinds of interventions to divert, to artificially weaken your currency or otherwise to divert exports to your own producers at the expense of other, other countries. that's a very different thing from a situation where countries

are using monetary policy appropriately to achieve domestic growth, domestic reflation and that growth spills over and helps the economies of other countries as well. so i think that's very much the difference, that the exchange rate effects and the currency effects are really secondary. what's important is that each country provide the necessary monetary accommodation or fiscal accommodation to achieve, to achieve its potential output. and this, i should say this view is not just my own. i mean, this is a view that's been adopted by the g7 and the g20 as a reasonable way of thinking about policy if different countries. in different countries. so in doing accommodative

monetary policy in the united states, again, we are very much consistent with that g20 perspective, and i guess i would close this answer by saying if you look at the dollar, it's not exactly falling recently. it seems to be doing okay. so i don't think we are trying to divert exports away from anybody else. what we're trying to do is achieve domestic growth using the tools that we have. >> okay. this next question's going to take you back to, in some sense, the historical perspective of your talk. and i guess it really has two components to it. the first is over the first hundred years of the federal reserve, do you believe that on balance the fed has given too little weight to issues of regulation and financial stability relative to other objectives, and the second part of the question is that in looking at the lessons over this period are there -- there tends to be a focus on issues associated with the great depression if looking at the early -- in looking at the early years of the fed. do you think that there are

other important periods in, say, the first 50 years of the fed that can convey important lessons for thinking about current policy? >> sure, there are many interesting episodes. on the financial stability, um, the fed, of course, was founded, as i mentioned, the fed was founded for the purpose of preserving financial stability. it had some success early on. then, of course, the great depression came, and for various reasons stigma was mentioned earlier, but i think there were other reasons as well including a lack of sufficiently aggressive policy on the part of the federal reserve, the fed didn't meet its financial stability mandate during the '30s. and i think that was, obviously, the most e agreement juice example of failure on that particular front. now, less attention to financial stability during the period from 1934 until 1980 or so would be sort of understandable because,

because of structural changes and regulatory changes. that was, of course, a very calm period in u.s. financial markets, and as a result, the attention to financial stability became less over time. as chairman volcker reminded us earlier, though, it's not just recently that we've seen financial stability issues, the mexican debt crisis, latin american debt crisis, the crises of the 1990s, the wall street success -- stock market crash and other events should have reminded us and did remind us that financial instability remains a concern, remains a problem. what we lack, what didn't happen fortunately, of course, is that between 1934 and 2007 there was no financial collapse of a

magnitude that had serious negative implications for the u.s. economy. now that we have seen that and as i've mentioned in my remarks, that, i think, is a very important lesson, and the federal reserve and other central banks have accordingly elevated financial stability, increased the resources we put into helping to preserve financial stability and greatly increased the emphasis we put on that particular objective. so i think there was a long period where the fed didn't pay much attention to it, but it was kind of an stent related to the fact -- an accident related to the fact that we did have a very calm financial environment for a hong time. we now know, of course, that financial stability is extremely important even in advanced industrial countries like the united states, and i suspect we won't forget that lesson for quite a while. >> again, this is another question which must come from one of our economic historians. the passage of the federal reserve act in 1912 was a substantial political

achievement. given the political tone in washington today, if the federal reserve act had to be enacted, how do you think it would differ from the existing legislation, and could it be passed? [laughter] >> well, i'll tell you one thing, there'd be more than one federal reserve bank in the whole western part of the united states. [laughter] that's my answer. [laughter] [applause] >> okay. on that note my last question is a legacy question. at some point -- and i'm not going to ask you when you think this might be -- your time has chair of the federal reserve will conclude. now, i happen to know and some people here probably do that you already have a legacy that i believe no other federal reserve chairman has which is that there is an interchange on i-95 in dylan, south carolina, which is named the bernanke interchange. [laughter] and i will challenge anyone even in the economic history group to find another interchange on the interstate highway system named after a federal reserve

governor. but all seriously, as you think about the legacy that you will have as a chairman of the fed, what would you hope the high points of that would be, and where would you like to see people focusing on the contributions? >> well, um, of course, that's going to be for others to determine. i guess what i would hope to be able to say is several things. first, i came into the federal reserve as a governor now some 11 years ago, quite a long time, with a lot of interest in communication and transparency. and i think, you know, in the last 11 years or eight years, however you want to count, the federal reserve has made significant strides in that area. including, for example, as i mentioned, the press conference,

the stating of a numerical objective for medium-term inflation and ore communications -- other communications innovations as well. so that's something that, i think, is quite -- has changed over the last decade. for better or worse, of course, i was at the fed during the crisis and the aftermath. we have, you know, the future again will judge the response to that. but what is certainly true is that the federal reserve as an institution has changed very sharply in terms of its structure and the resources being devoted to financial stability questions. and i would say that this relates both to the actions we took at the the height of the crisis which i viewed as bringing the lend or of last resort wisdom back into the modern context, but also the work we're doing now to try to reduce the risk that another financial crisis will hit

someday. that includes our monitoring, our oversight of systemically important firms, our stress tests which i think is an important development in financial regulation and more generally our macroprudential approach to financial stability which, again, means we look not only at individual firms as important as that is, but we also try to identify risks and vulnerabilities to the financial system more broadly. in monetary policy, you know, we've confronted the zero lower bound. again, people will have to judge whether we confronted it successfully, but we've used new policies to do that. and i think we have, in fact, changed to some extent our approach to one that is more tied to the forecast and tries to lay out in more detail how monetary policy will react over time to changing economic conditions. so there are some changes in monetary policy. but finally, i think the federal

reserve is a remarkable institution. it has a superb staff, a great deal of expertise, and i hope that during the time that i've been there that we have succeeded in preserving those strengths and adding to those strengths, increasing the amount of expertise we have in critical areas like some of the financial stability areas, increasing interdisciplinary cooperation and work and just making the institution stronger as an institution going forward. because i think one of the lessons, i mean, we had a very fascinating day today talking about a hundred years of the federal reserve. it's a central institution in the united states. it has a very, very important role in the economy and in the lives of ordinary americans, and it's critical that it be a strong, well-managed,

well-staffed institution, and these internal management issues which are pretty invisible, i think, to outsiders are very important because they are the factors that determine how strong an institution this will be over the next hundred years. >> all right. chairman bernanke, thank you very much for joining us today. >> thank you. [applause] [applause] >> several live events to tell

you about today. the center for strategic and international studies looks ahead to september's g20 summit in russia. that's here on c-span2 at 9 a.m. eastern. at 10:00 on our companion network, c-span, a wilson certain forum on security in africa's sahel, the air south of the sahara desert that includes parts of mali, south sudan and mauritania. also on c-span, the heritage foundation looks at proposed changes to senate filibuster rules, the so-called nuclear option. speakers include former parliamentarian robert dove. you can see that at 12:30 p.m. eastern. >> the problem was that darwin dead not understand, and that's his blunder, that he did not understand that with such a theory natural selection could never have really worked. because, you know, imagine you have a population of a million white cats and one black cat,

and suppose that being a black cat does provide you with some big advantage, yes? but in this blending theory, you know, you mix things like gin and tonic, the black cat mates with a white cat, you get a gray cat. the gray cat mates with another white cat, you get the pealer shade of -- paler shade of agree cat. and this thing just gets diluted and diluted, that black advantage, you know, will disappear and never appear again. >> on "after words," astrophysicist mario livio explores the work of five scientists and the mistakes each one made saturday at 10 p.m. eastern, part of booktv this weekend on c-span2. >> with as we mentioned a few minutes ago, one of the events we're covering today is a forum on security in africa's sahel, an area south of the sahara desert. up next, more about the situation in africa and the middle east from british foreign

secretary william hague. we'll show you as much of this as we can until our live coverage of the g20 summit preview. >> statement. the secretary of state for foreign and commonwealth affairs. secretary william hague. >> mr. speaker, with permission, i will update the house on the u.k.'s response to events in the middle east and north africa. members on all sides will be concerned about the situation in egypt. our embassy in cairo is offering assistance to british nationals, and we advise against all nonessential travel to egypt outside the red sea resorts. i made clear last week that the united kingdom does not support be military interventions into democratic politics. although we recognize that many egyptians welcome the action that was taken. i've been in close contact with the acting egyptian foreign minister, and i have emphasized the importance of an urgent return to democratic processes and expressed our deep concern at the deaths of over 50

protesters. the egyptian authorities have announced an interim prime minister and a timetable for new elections. this process should be inclusive, in our view, open to all parties and lead to free and fair elections. this should, therefore, mean the release of political leaders and journalists, agreement on a new constitution and the checks and balances of a democratic system and urgent steps to reformer egypt's economy. two years ago the egyptian people demanded a real democratic voice and jobs, not corruption, in the economy. so far their leaders have failed too deliver this. -- to deliver this. but the hunger and aspiration for a better egypt is as strong and urgent as ever. it is vital for their own country and the region that all sides rise above self-interest and work towards an open democratic and reforming egypt. there's no alternative to the long, painstaking work of making a success of the transitions in egypt, tunisia, libya and yemen.

that is why, for example, i announced to the house yesterday in a written statement that the u.k. will train 2,000 libyan armed forces personnel in basic infantry skills. this is part of a broader effort with the u.s., italy and france agreed at the g8 to help the libyan government disarm and integrate militias and improve security. democratic change is a process, not an event. and these countries will see setbacks as well as successes. but we should not lose faith for the people of the region, the vast majority of whom seek prosperity and dig dignity for r countries. we must, therefore, provide patient, long-term support be to governments and civil society in the region as we are doing through the partnership we're promoting during our g8 presidency and the u.k./arab partnership initiative which supports women's participation, electoral reform, economic development and the building of democratic institutions. achieving lasting, positive change will be the work of a generation. this dose hand in hand with

our -- goes hand in hand with our support to the middle east peace process. i pay tribute to secretary kerry for tire he isly preparing the ground for return to negotiations. my honorable friend and i have both visited israeli and palestinian leaders in recent weeks to urge them to enter negotiations. we are ready to work with the european union and arab nations and offer practical support, and i call on israelis and palestinians to show the courage that is necessary. this may be the last opportunity to achieve a two-state solution. and this also requires progress on gaza. the status quo there is not sustainable. all sides need to implement a ceasefire agreement. this includes a permanent end to rocket attacks and an easing of israeli restrictions. we will also make every effort to persuade iran to negotiate an end to the crisis over its nuclear program. we look to a new government in iran to give a comprehensive response to the e3 mrs. 3's

broke fur a confidence- for a confidence-building measure. we will respond in good faith to positive action by iran. we are realize to improve our relations on a step-by-step basis, but no one should doubt our resolve to prevent nuclear proliferation. mr. speaker, the middle east is vital to our national interests and security. it would be a major strategic error for our country or our allies to turn away from the region. this includes the conflict in syria where the death toll is mounting, extremism and sectarianism growing, and the risk of a total collapse of the country is ever present. the assad regime has ramped up its military assault using air strikes, scud missiles and artillery. as many as 13,000 syrian civilians have been killed since my last statement on the 20th of may, and u.n. figures for the total number of deaths will soon exceed 900,000 people -- 100,000 people. there are four and a quarter million internally displaced people inside syria and 1.7

million refugees are placing an immense strain on the stability and economies of neighboring countries. by the end of the year, ten million people could be in need of assistance, almost half the population of syria. we judge that iran is providing personnel, equipment, weapons and financial assistance to the assad regime which is also being supported by thousands of hezbollah fighters from lebanon. we call on syria to allow the u.n. unfettered access to investigate incidents of chemical weapons use in syria. those responsible for any attacks should be held to account. we have passed evidence of the use of sir run in syria. faced with this growing and protracted crisis to which there is no end in sight, we have three objectives; to promote a political solution in syria, to help save lives and to protect the national security of the united kingdom.

first, a political transition in syria remains the best hope of ending the violence. i attended meetings of the core group of the friends of syria on the 22nd of may and doha on the 22nd of june. we agreed to increase practical support to the opposition and to channel that support through the national coalition. we all want a political solution, but that will not be possible if legitimate opposition can be obliterated. on the 17th of june, the g8 including russia reaffirmed support for a second conference in geneva leading to the creation of a transitional governing body with full executive powers in syria. since may the national coalition has expanded its membership significantly to include other opposition groups and the moderate armed opposition. it as pledged to increase the provision of services in opposition-held areas and to bulled up local governance structures. on saturday the coalition elected a new president, ahmed jaba, we will work with him to help the sur yang opposition --

syrian opposition promote its vision of a free syria that defends the right of all syrians. the regime offensive of recent weeks has made it even harder to bring a geneva conference together, but we will continue our diplomacy with the u.s., russia, arab nations and the u.n. to bring about a conference while preparing for the risks if the conflict worsens. so, second, we are working to save lives. we've already provided more than 12 million pounds in nonlethal assistance to the local councils and civil society. we've provided armored vehicles, body armor, generators, communications equipment and other nonlethal equipment as well as training for human rights activists to document human rights violations. we will provide a further 20 million pounds in nonlethal assistance in the coming months which we have already announced including communications support and training for the national coalition. we're exploring the possibility of helping to establish civilian policing structures in opposition-held areas and the ply of protective equipment --

supply of protective equipment against chemical and biological weapons use. this week we will again deploy u.k. experts to syria's borders to train health professionals and human rights defenders to document evidence of rape and sexual violence. as i explained to the house in march, we are providing technical assistance for the protection of civilians. this includes providing advice and training on how to maintain security in areas no longer controlled by the regime as well as advice on coordination between civilian and military councils on how to protect civilians and minimize the risk to them and how to maintain security during a transition. on the question of any future lethal support that is arming the opposition or intervening militarily ourselves, the government's position has not changed. no decision has been made, and any decision would be put to the house on a substantive motion. we have doubled the united king come's -- kingdom's humanitarian assistance to 348 million pounds over the next two years.

this includes 50 million pounds for syrian refugees in host communities in jordan, 50 million pounds for lebanon which the international development secretary announced on monday while in the region, and i condemn yesterday's bomb attack in beirut and call on all lebanese parties to work together to recyst any efforts -- resist any efforts to undermine lebanon's hard-won peace. the longer the syria conflict continues, the more important it becomes to provide stabilization and development support where we're able to do so as well as urgent humanitarian assistance. the u.k. will continue to lead efforts to improve the effectiveness of the international humanitarian response. last week the development secretary hosted a meeting with like-minded states and the heads of key agencies, and we'll also host a pratt event -- separate event to plan international support to syria after a transition. third and finally, we're determined to protect british national security against risks posed by groups in syria that are affiliated or aligned to

al-qaeda including the al-nusra front and al-qaeda in iraq that are taking advantage of ungoverned space created by the conflict. we judge that there are now over 100 u.k.-linked individuals of concern who have traveled to syria, some individuals returning to the u.k. could pose a long-term terrorist threat. the most important step to tackle the terrorism threat is to end the conflict and secure a transition to a new, legitimate government in syria. but extremists should be in no doubt of the action we're prepared to take to protect our national security. our intelligence agencies and police are working to identify and disrupt potential threats. the police have the power to examine be and detain individuals at the u.k. border, to investigate any concerns of terrorism involvement. u.k. nationals have concerns seeking to travel from the u.k. can have their passports refused or withdrawn, and foreign nationals resident in the u.k. can have their lee to re-- leave

to remain revoked. mr. speaker, international diplomacy has failed so far to resolve the crisis in syria. the u.k. will continue to play a leading role in promoting a political solution even though we may have to persist over many months in saving lives where we can be proud of the contribution our country makes and in safeguarding our national security at all times. and we will continue to help countries in the middle east and north africa to make a success of their transitions keeping faith with its peoples, protecting our interests as the u.k. and trying to widen international peace and security. >> mr. douglas alexander. >> thank you, mr. speaker. can i thank the foreign secretary for his statement on for advanced sight of it. let me turn, first, to events of egypt. while the events of the past few weeks have been a major setback, they need not represent anker

irreversible train. so the priority must now be a return in egypt to civilian rule through a credible transition process that results in swift, fair and free elections. i welcome the recent statement by the interim president setting a deadline for elections to be held before february 2014. however, recent reports suggest that not all parties have accepted this process, including recent statements from the muslim brotherhood apparently refusing to take part. therefore, does the foreign secretary degree with me that it is vital that the -- agree with me that the process must be inclusive and representative if it's to be seen to be legitimate? mr. speaker, recent reports of the arrest and imprisonment of political activists, representatives and journalists in egypt are deeply concerning, including reports today about egypt's prosecutor's office issuing warrants for a number of people affiliated with the muslim brotherhood. so will the foreign secretary

almost make clear the british government's position on political prisoners in egypt. mr. speaker, egypt's long-term future will be secured not simply by an end to violation, but also by the start of economic recovery. the foreign secretary spoke of the partnership in his remarks, but can he tell the house specifically how much of the 38 billion dollars originally intended from that fund as cited in his answer to me in october 2011 has actually now been allocated? and if he can't give this figure this afternoon, could he place a note in the library of the house setting out the allocation figures. let me turn to the ongoing crisis in syria. i welcome, of course, the confirmation in the uplift in the u.k.'s commitment to help relieve the crisis, but the situation is nonetheless deteriorating. only this morning the intelligence and security committee published a report which expresses, and i quote: serious concern about al-qaeda's elements gaining access to the vast stockpiles of

chemical weapons within syria. it is, therefore, a matter of real regret that the recent g8 summit in northern ireland hosted by the united kingdom failed to deliver the break true that we all wanted -- breakthrough we all wanted to see. we all hoped that a firm date would be set for the start of geneva ii, but even that was missing from the final communique. so could the foreign secretary today set out a little more specifically what he judges the prospects for geneva ii actually being convened in the weeks and months ahead. can i welcome the commitment that the prime minister intends to recall pardon mement and -- parliament and call for a vote on any substantive motion if any decision is taken to send military equipment to the syrian opposition. can i ask the secretary about jordan? it seemed a curious omission from his statement. jordan has been a longstanding ally of the united kingdom. i'm aware that humanitarian support is being provided, but what consideration is being

given within government as to what other practical assistance and support can be provided to jordan beyond humanitarian support given the very real strain that is being felt by that country given the extraordinary generosity that it's shown in relation to the crisis? let me turn briefly to middle east peace process. we welcome, of course, the recent efforts by u.s. secretary of state john kerry to reinvigorate the stalled talks. on departing from israel last week after the last of his five visits alone this year, secretary kerry spoke of important though not irreversible progress that has already been made. so we welcome the foreign secretary's statement of support more for this process, but what specific steps the british government taking to help insure negotiations are begun as part of secretary of state kerry's efforts? these negotiations take place at a time of great upheaval and uncertainty in the wider region. we welcome the election of the president, but there are key steps he just mow be -- must now

be prepared to take. i would echo the sentiments expressed by the foreign secretary. a nuclear-armed iran is not simply a threat to israel, but to all nations, so the talks that have regrettably so far not yielded sufficient progress. unpress kepted uncertainty across the middle east and north africa. this transformative time poses fundamental questions not just for the foreign secretary, but for policymakers across the region. turned, therefore, add to the urgency of efforts being made to try and resolve the ongoing and parent apparently intractable conflicts that have for too long defined the region. >> secretary william hague. >> request i'm grateful to the right honorable gentleman, and i think on most if not all of these subjects there is very strong agreement on the floor of the house. i absolutely agree with the way

he put the opposition's attitude on egypt and that what has happened may be a setback for democracy but needn't be an irreversible trend. i think that is absolutely right. um, the -- he's right to point out that the parties in egypt, some of the parties have not agreed to the timetable of constitutional declaration, parliamentary and presidential elections set out by the new president, and, in fact, worryingly, most of them have not agreed including the national salvation front who are one of the prime movers behind last week's events. though there's widespread objection to the details of this announcement, in this cannot we are solve -- cannot be resolved in any other way than an inclusive, legitimate process inside egypt as he has said. to we call on all parties to do that. it would be a terrible mistake for the authorities in egypt to act in a way which drives the

muslim brotherhood or any orr legitimate -- other legitimate parties out of democratic politics in egypt. that is the mistake that must be avoided at all costs. it would also be a mistake for the muslim brotherhood to now refuse under all circumstances to take part in democratic politics other future months and can years. and so i think in all nations who hold dear the stability and future of egypt as we do, we have to encourage people to resolve these differences and counsel against making those mistakes whether it be in the muslim brotherhood or in the new authorities. part of that is releasing prisoners, i absolutely agree about that. i have made that point to the foreign minister, the acting foreign minister of egypt, and my honorable friend has been pursuing it with the egyptian ambassador here in london just this morning. they should be released unless in some cases there are criminal charges to be allayed against

them. but the holding of prisoners for political purposes after these events doesn't help the process we've just been speaking about. he asked about the partnership, and i'd be very happy to provide to him or in the library more details. the $38 billion was not a fund, it is the total financing from all global institutions available to the countries of the region. if and when pursuing economic policies that give them access to that, egypt one of the problems of the outgoing government in egypt was that they didn't agree on imf program and, therefore, didn't win international financial support. the part of the partnership that a involves grants, if you like, that involves funds that can be given away is much smaller than that. we are, we have been determine canned during our presence in the g8 the make them make a tangible difference, and this year the dove y'all partnership transition fund has started to

deliver practical support. and there are projects of over $100 million that have been approved this year. these principally support the development of small and medium-sized enterprises. so this is the part that is a fund, but the potential international financing is vastly greater. and if the right economic reforms are undertaken. i welcome what he has said about iran. again, i think there's strong agreement across the house in support for a further round of e3 +3 negotiations with a new government in iran. also strong agreement on the middle east peace process. we, i set out in the house before that we have to be ready in the u.k. and in other european countries to once negotiations get going to offer incentives or even disincentives at times during those negotiations for israelis and palestinians to try to make it a success. working with the united states. but first, we have to get the

negotiations going. and we have been urging israeli and palestinian leaders to take the opportunity of working with john kerry on this, stressing that there is no alternative to that as a way. there is no one else other than the united states is going to be able to bring the necessary authority to this, to bring israel to the necessary agreements, to enter negotiations and make a success of them. and so working with john kerry is essential. we await further be announcements in the coming weeks. on syria, on a tate for geneva, there is no date at the moment. after the g8 a further meeting was held between the u.s., russia and the u.n. in geneva on the 25th of june, a trilateral meeting. that, again, did not produce a date. and the fundamental problem here is that while the regime is

engaged in military offensives as it is in homs now, the regime does not have an incentive to come to meaningful negotiations, nor is the opposition in a frame of mind to come to negotiations. so those military offensives are making it harder for either party to come to yes knee v.a -- geneva. and finally jordan, jordan was not an omission, i referred to humanitarian assistance. but i've also referred in the house in the past to the other assistance we're giving jordan. we have sent military equipment to help the jordanian armed forces operate on the border, collecting refugees, bringing them to refugee camps. we have one and a half million pounds going to jordan to our arab partnership fund to support civil society, and we are in regular touch with jordan. i spoke with the jordanian foreign minister earlier this week particularly to thank him

for jordan's assistance for the mutual assistance treaty but have also made clear to him that we are happy to give further assistance from the u.k. if the jordanians ask for it. >> sir peter tapsell. >> on egypt may i acquaint my right honorable friend with the news that when i arrived as a national serviceman in the charming town of sirs be 64 years ago, its townspeople were busy rioting against the -- [inaudible] party. in 64 years from now, i have little doubt that the egyptian people will still be rioting. so may i make the constructive suggestion to the foreign secretary that there's little that he can do to help except by not sending in british troops to restore order.