>> as i mentioned, we have a 180 site network in the commonwealth of virginia and with technology

it doesn't have to be a traditional referra referral arh is than the western half of the commonwealth of virginia. ibos who with her preponderance of sites in far southwest virginia primarily because that's, lisa we start that was a rural area and a lot of the grant funding and our legislative partners were in southwest virginia. we have sites in the middle of the chesapeake bay and on easteron theeastern shore of vis well. so technology while this is not about technology it is really important to choose technologies that are interoperable. that has been our guiding force is to choose things that work with one another. plug-and-play. there is a team of health alliance, equipment manufacturers that have pledged to great interoperable devices. we have desktop videoconferencing, mobile videoconferencing carts, fixed via conferencing and even ipad and other tablet devices. we've use robotic technologies as well. as far as our dashboard, we have supported more than 33,000 patients, patient encounters.

and when the first order a program we didn't connect to a lot of sites. you can see our volumes were rather low. we had a dip which i think is very interesting between 2011-2012 when one of our fellows went into private practice of telepsychiatry. she took a fair amount of business. i say it is workforce development and she is serving patients in virginia so that's a good thing. we are marching back up again. more than 40 specialties because they cannot program. and a message i want to share with you which were very proud of, we have saved virginia patients more than 7.9 million miles of driving for access to health care. that's a lot of dollars and transportation costs for our medicaid program and for patients as well. so our program is need-based and metrics driven. you've heard about clinical data been very important in evaluation. just some quick examples. high risk o.b.'s telemedicine. we reduce be delivered by 25% in

a network. that translates into healthier babies, healthier mothers, lower cost for the medicaid program and for the life of care for children. when the telescope program. these are just two of the 40 different specialties. hrsa funded grant program as well connecting rural community hospitals to improve access to the use of tpa, a clotbusting medication and we've increased the use of tpa from zero to 17% of patients that show up in those hospitals. huge outcomes and benefits to patients. i mentioned remote patient monitoring and home telehealth. this is effective tool and post-affordable care act very important for hospitals around the country because there are penalties for readmissions that hospitals are facing. this is exactly is tool to reduce reignition, reduce er visits and there's a lot of saving that show a tremendous reduction in emergency visits and re- hospitalizations.

so we believe telehealth should be both a state and federally based market driven service line. our commonwealth of virginia has been incredible supportive of telehealth since really the inception of her program but in particular under governor mark warner's administration -- became a year from senator warner's office? senator warner when he was governor bluecoat and telemedicine for medicaid beneficiaries. urban and rural medicaid beneficiaries are not eligible to receive telemedicine services anywhere in the commonwealth of virginia. we -- anybody here from cms? we have negotiated in our dual enrolled contract, which is medicaid and medicare patients, with 77,000 covered in virginia who have an expansive of telehealth services including urban medicare beneficiaries because they're covered under medicaid in virginia, why not under medicare? we hope to have that announcement shortly. virginia department of health

has been for a supportive and sr consult origination site and the funded programs. our state systems of task force has embraced telehealth. tobacco commission has funded telehealth programs in southside and southwest virginia. our joint commission on health care which is a virginia legislative body in the workforce analysis and really created a roadmap for what ultimately became a virginia made it the past in 2010 from the virginia general a cibecue mandate third party payment of telemedicine services, and we are very grateful for that. our virginia health reform initiative and health benefits a change all include telemedicine. we're a pretty progressive state when it comes to telemedicine. i mentioned the virginia health workforce development authority initiative, a hrsa funded grant to train health professionals in telehealth. we would not be where we are without the federal government. we have received grant funding from hrsa, from u.s. department of agriculture, usda -- anyone here from usda? they funded rural phone service.

we have relied on that for the procurement of equipment remotely. nih has funding. commerce, art, all federal agencies have some involvement. sherilyn doctorow seeking agencies and departments. there are at least 16 agencies with some involvement in telehealth. indian health service, the va, department of defense and huge shut up to tracy in iom. that was just awesome force. -- for us. one of the things we think we need more than anything else as we are trying to advance telehealth nationwide is to improve medicare reimbursement of health services. it's still low. and 2011, cms reported less than $6 million in reimbursements for telehealth services, telemedicine services nationwide. that is in very much. one of the challenges are some of the limitations in the region in sites, the road requirement for telemedicine and even the

definition of rural. i'm thrilled that the 2014 cms physician proposed payment rule has an expansion in the rural definition which currently is now only non-metropolitan statistical area. there's a road requirement for acos. is changing definition of rural limits sustainability models and more importantly access to care for vulnerable seniors. also the role definition is very poorly off-line with specialty workforce shortages. there are many issues that need to be addressed. reimbursement being one. credentialing and privileging. cms issued a new regulation two years ago. we have to beware of hipaa. very important. licensure portability is a challenge. medical malpractice is a cellist the typical cross state borders we need to be aware of the malpractice cap or nine caps and other states. we can't buy equipment for a referring site because it might be referred as a referral.

telecommunications is very important. a wonderful program for rural health care support mechanism that provides discounts for rural providers. integration with emr's. neal touched on the. health information exchange. wouldn't it be nice to call the continuity of care document when we see a patient? we are all moving for towards hiv spirit standard interoperability and a plea for an agency of climate related to policy. late opportunities, black elected women, legislative women have model legislation in the states and now 19 states plus the district of climate have passed a mandate. congressman harper's telehealth enhancement act of 2013 about to be introduced. the veterans act to expand the one state license model at the va. the telemedicine for medicare act, nunez-alone to expand licensure across state lines for medicare beneficiaries and whatever can be done or

elimination of the role definition eventually under cms. so i just want to give an example of some of the areas that are considered urban areas by the current cms definition to scott county virginia far southwest virginia, not counting is one federally qualified health center in the middle of the mountains. it's an urban area. kyles county, virginia, under the appalachian county. that's the county as a critical access hospital but it's considered an urban area by cms. washington county, there's the mountains. that's an urban area by cms definition. and the grand canyon. thank you for your attention. we look forward to all of you continuing to be champions for telehealth, and i will make myself available at any time. thank you. >> thanks, karen. finally reall with her from john jesser, who is a vice president, provided an engagement strategy for wellpoint.

wellpoint being not only our partner in today's program, but the outfit that is charged john with finding ways to improve care and improve affordability, and improve consumer experience and access. pretty big job for a company that insures one out of every nine americans. telehealth's one major part of the portfolio that john has developed in response to that charge. and he has well points live health online project, which is designed to improve the connection among doctors and hospitals and consumers and their health plan. we've asked him to does all of it about those efforts today. john, thanks for coming with the. >> good afternoon, everybody. tell you a little bit about us. in to mention some of the key points, so from a health plan perspective, you may not know

this but your health plans are often looking for ways to make health care more affordable, to improve access to care, and also to improve the consumer experts. not something health insurance companies use to historical be known for but it really is important, especially in the advent of the oncoming of exchanges were consumers will choose a health plan one by one. we've been fortunate at wellpoint to have a family of blue cross affiliates across the country that came to attract a lot of the best and brightest ideas in the market that we get to take a look at. i was fortunate about four years ago to run into company in boston called american well, and american well was found by two physicians. it's a technology company. it build an online clear platform -- care platform that really redefined telehealth and telemedicine and all the ways we been talking about. so i'll share that with you and help you understand why. so we worked with american health and rebuild this product called myself online.

the question is then, what is live health online? so it's you, friday night, you're at home, you don't feel well. today give a couple of options. he go to an emergency room, it's going to cost a lot of money. used it a couple of hours and wait. you can find an urgent care center. if there happens to be one around this open. that's still going to cost you north of about 120 bucks. maybe you live near a cvs or a walgreens or another retail chain that has retail clinics. there's another option. you can see a nurse practitioner. you may wait for an hour. you've got to drive there. those are really your options today, or do nothing. what live health online has done is we are introducing a fourth option. you can open up your laptop with a webcam or your mobile device, tablet or telephone, cell phone rather, whether it's android or

apple, and have near immediate access to a board-certified primary care doctor on demand from the comfort of wherever you are, your home, your hotel, where ever you are. and right now, that this is priced at about $49. so affordability, it improves the portal options consumers have. it gives you more access to care, and improves the consumer experience. people value their time more than anything. clearly, the dr. kent put hands on your patient and draw blood, so there are some limitations to what can be seen. but there's an awful things that people would feel a lot better if they could just talk to a doctor. same scenario happens when it's monday at tinian. you're at work and you don't feel well, and oftentimes you're going to have a hard time getting into your doctor that they were even the next day. so the ability to go to a quiet room have access to a webcam and

have a consult with a physician who, in many states, based on information you exchange with them, and live real-time audio and video can be used for them to write a prescription to help you feel better. and you'll be electronically sent to the pharmacy that you choose. the payment is done by credit card. if you happen to have and some are one of the other wellpoint, health plans, it may be integrated and that claim will be submitted and you only be charged your co-pay. no paperwork involved. sound too good to be true? it really is happening. we are live now in ohio and in california. and we will be, i'll show you a matter soon as where we are going but we are introducing this a national employers. i know many of you in the federal employees plan, saying win is going to come to us, so that's also on the list. but anyone can use this as a consumer. so the website is live health

online.com. it's that simple. out talk to you more about that in a minute, but why does that matter in this discussion? because you hear a lot about, there's been so much wonderful work done in telemedicine, bringing people access to rural areas to urban doctors and improving access to care. the barrier to that is unique grants, you need money, you have to put expensive equipment in one side and expensive equipment and another. people still have to try. this whole idea of reaching sites, all that goes away with a new technology that is coming. so thanks to people like steve jobs at apple, high-definition video compression, high speed internet, the bandwidth keeps improving. many of you have used this time for skype. if you think about those technologies, or that technology in a secure structure, hit a compliant manner, built for

health care, that enables people no longer to need grants to a lot of expensive equipment round. you can think about a medicaid plan, but a public library and put in a bag in the room and you suddenly have a virtual clinic. you want to attach some biometric devices, a stethoscope and some other things, even have a nurse there, you can even expand further. i want to watch every couple of couple of slides and give you more insight. i mentioned this, this is meeting consumers wherever they are, whether you're in a hotel, at home or work. it addresses convenience. prevention, there are many people because of barriers to transportation and care they just don't get seen. there are costs care savings. at that press point -- price point when you avoid an urgent care visits, you are actually saving money. and the patient enjoys the experience. these are some of the points

that we give our salespeople when it out talking to employers. there some other solutions out there, some of them are purely telephonic. they're not as robust. we make sure that they know the strength of what would your with online. i'll let you read that on your own for the sake of time. this is really the key screen. this is a home screen when you login. it matches you up with a state or in this case the district of columbia, with where you live, and we'll show you doctors that are licensed in that area. right now the model is if you will, and urgent care in a cloud. so this is primary care, urgent care, the kinds of things that can be treated but it's not dermatology yet, but i'll tell you, think about things like behavioral health. you know, it's fascinating how the mine against work when you start thinking about. two years ago i had people telling me, who would ever take care like this? six months ago i had the ceo of

a major academic medical center say, i don't think anyone under 30 is going to come into the doctor anymore. summer in between here and there is the truth, but the ability to see the doctors up front, read about them, find out what they went to medical school, find out if they speak different like witches, and choose, that's very important to the consumer experience. there are solutions where you dial an 800 number and someone has a doctor call you back who you've never heard of. we are trying to achieve something that's really better than that. the website is just like google -- not google, amazon or anywhere that you shop online. you go online and register but it costs nothing and it takes just a couple of minutes. then you have it whenever you need it. again, i mentioned both ios and android platform coming next month. we are testing those final testing stages right now. i think that's going to be very powerful because and i had is

really one of the simplest videoconferencing devices. you wouldn't have to teach her mother how to configure a webcam or anything. you turn it on and it's ready to go. this is the method this is important. there are asters in some states, none in others. some states are red to let me tell you nine seconds with issue is. rules with medical boards, pharmacy boards and even state regs around telehealth have so many different definitions, it's almost impossible to decipher what is allowed and what's not. we take it very seriously because if we're going to go into a market and have doctors practicing this way, we don't want to put those doctors in a position to jeopardize their license. so many of these rules have terms like originating site which applies to the old technology but not to the new. what i would ask this group to stay tuned in to think about and help with all the smart people at this table is, let's come up

with a modern definition of telehealth. that doesn't talk about a region inside and the important thing is, and we're working with the american academy of family practice and organized medicine, and a doctor through live interactive technology gain enough information to examine a patient? if so, that should be how we define a. what are those things around the need to be there that are important? we have that information. we will share with you address. then does that doctor in the judgment have enough information to write a prescription? not for narcotics, not for viagra, that for non-controlled medications that are going to help resolve that patient's problem. if so, let's let the doctor used the judgment to do that. that's what we are seeking and that's what we are involved in a lot of this activity regarding. my time is a. thank you very much. we will be talking later. >> thank you so much, john.

one of the nice aspects of our format is if you're going to go second bite of the apple, if you can get the first bite at the apple when we get into the questions and answers. as i mentioned, there is a green card in your materials. you can write a question on and someone will pluck it from your fingers and bring it forward for a response by our panel, or we have some microphones there and there, on either side of the room. is to come to the microphone try to keep your question as brief as you can so we can get through as many as we possibly can. and identify yourself. let me start us off if i can. john made repeated references to something that was mentioned earlier as well, and that is originating site.

and i wonder if i could ask whoever feels the urge on our panel to tell us a little bit more tangible in how is telehealth reimbursed now under medicare? and under medicaid, if there isn't an answer to that, or as it is with most other aspects with medicaid, 51 different answers. >> so for medicare there's a specific number of original size, office of practitioner, of clinic, community health center, hospital. under medicare. for the reimbursement then there's only a set number of types of providers that can be reversed under medicare. then for the region inside, medicare put a limit in terms of location and that's where perl is the nonmetropolitan

statistical area definition of rural. and again, that is a challenge for us to the home is not the region inside under medicare. under medicaid it's also the safe -- it's also safe to make that decision. 50 states could make 50 different definitions, right, gary? in virginia, is primary clinics and hospitals, community health centers, community mental health centers. so again, not the home, although we've gotten approval to be patient monitoring in the home. and then the private payers, we haven't really tested the home with private payers get in our program but certainly i see virginia is one of the states covered under your collaboration. so certainly at least for your program the home is an eligible site. not under medicare. >> we made a bold move in being the first internationally to commit to reimbursing for the online care visits that i just described. the reason was, i spent a lot of time with doctors over the years

and they said why don't you pay for telephonic -- pay us for telephonic care? there's a disincentive that makes us want to bring the child in office because that's the only way we can get paid. quite honestly is the answer is rational. we don't know what happens on the phone. did you talk with two minutes? did utah for 20 minutes? how much cognitive thinking was involved? if they were to say we'll pay for telephonic visits, what does that mean? so with the kind of technology i described, when there's a documentation of the patient's complaint, what the issue is, the doctor has a history to review that, the doctor and patient have a live video interaction, the doctor creates a medical record from that. if there's a prescription writ, written, it's done through the prescribing and document editor permanent record. some of the things that happen in office visit are built into the technology that we felt comfortable saying okay, that's a visit.

whether it's in the building or not, the same room, we really don't care and that is a code for the. it's 99444, for the coding geeks out there and that's online care. so that makes sense to cover telemedicine are my private their standpoint and we've gotten national employers to agree. >> one other thing, skilled nursing facilities and dialysis facilities are eligible and we build codes with a modifier is how it's done under medicare. >> here's my quick answer to that. technology eliminates both time and distance to the point where we need to stop thinking about this, everything being done remotely. it doesn't matter if the patient is here and the clinician is in india for that matter. if you get enough of the right correct information. endoscopic surgery right within the operating room is telemedicine.

the image goes all the way inside the patient's physician who is viewing it on the screen no more than five feet. what's the difference? okay, there is no guess the short answer. so there are limits and number of studies, i never -- through a patchwork of crazy quilt stuff, first hcfa and then cms around medicaid, medicare and the private insurers are scratching their heads trying to figure out how do we make sense of this nationally. and the short answer is, we've got to get a handle on the. i think john's suggestion that we start to deal with what it is an begin paying for is the only rational one. and we've got to do with licensure as a part of that, and stop the fence me in practice of state-by-state licensure, which has zero to do with science or health or the human body. and everything to do with business practices and states by

physicians. it is time to stop that. [applause] >> i don't want to draw on either the questioner who is waiting for your applause line, but getting back to that for a second, medicare differentiates one place from another, and we know that the payments vary substantially from one market to another. what rate applies when you're in one county and your patient is in another county? isn't the originating site again, or is that not a consideration? >> that has been a consideration in terms of the actual rate. that code with a modifier, it's on par for medicare. the same is true for private pay as well. that's part of our mandate with

parity legislation. legislation. >> and it doesn't make any difference in medicare, for example, if you're in upstate new york or manhattan, presumably the rate for a particular service or different? >> whatever it would've been under, the university of virginia's billing -- building a telemedicine company they would be the same if we did the face-to-face for hospitals. >> i think that concept outside of service code will become obsolete. as neal was thing, it had to do with how much resources were used. so if it was inpatient, it was a hospital, there was a load there for overhead. and it was outpatient and then there's, when getting don't always come with this amount of whether it's a hotel, home or town hall. in a quiet room? i don't think you -- i don't think it will service that you can come up with enough service goes. that will be for another day. >> all right. you've been very patient. please identify himself and ask your question.

>> acknowledging neal's last point, i think this question is more geared towards the other type of telemedicine, not an endoscopic procedure but more of a remote site. karen, i notice that in this life you talk about come to the good process and outcome measures, reduced delivery and disappointments which all good. and i'm wondering about one other piece of data which is the effect of telehealth on the total cost of care. specifically what sort of david do you have even now a forthcoming that we described in that latter part of the definition of telehealth a that sort of effect you have on lowering the care? and i simply john's example that he did the analysis, the folks at wellpoint decided this was going to be better for patients, on the wise, lower our costs as well. so i'm wondering where you think there's a point of commission return where, you know, the needs of the patient are such

weather really isn't an improvement in quality and lower cost, and you need to target telehealth in a certain way, or how do you for your patient to purchase it in that program? >> i will take a first swing at this, thank you. so let me just say this to you. it makes sense even if it was breakeven. if it did nothing to the cause of your butt improved affordability, improved the consumer -- sorry, didn't improve affordability but let's say it improve experience and wide access to care. r, it would need to beugh. funded to grow. there is an affordability at play here. one of the, blue cross and minnesota to stay with their own employees, and after each online care visit they would be asked the question. if this was not available what would you have done? so we quantified that, they did come and we ran it across our numbers. some people would have went to the er, a small percentage. a large chunk would have went to

an urgent care. some would have waited a day and gone to the office. some would have done nothing. so new costs were incurred for people of my never done anything. net net when you add it all up on effort you are saving anywhere, essence go from 45 to $100 for every online care visit of avoidable of the costs. that's just for primary care. so that makes it make sense. it also makes us a target, to your question, let's look at frequent flyers in the er that are going to the er for non-emergencies. let's at least reach out and make them aware there's another solution. this is really all about marketing and creating consumer demand but if you look at amazon, the original days of amazon.com, it was very flat for five years. nobody knew about it. then it went like that. it's going to be the consumer who decides. we want to make sure we get in front of the people who need it the most. >> i'm not a health economist

but i will do we've tried to get a lot of this data. so we can extrapolate the cost of your if we reduce the preterm delivery and stays in icu or reduce hospitalization days for patients with strokes but it's the haters themselves about that data. we tried recently to gather data for a proposal on high-risk obstetric telemedicine. it was for difficult to get the cost of get even from our medicaid program on babies who didn't get hospitalized at a hospital because the it ended up being born in the community at turn. and attaching infant numbers to them of the. those are very, very difficult for us as a hospital system and not being a payer to get but we're trying our darndest. that are i think ata did a study to see the tremendous cost savings that's associated. but for us as a health care system it's hard to gather that data just because of the mix of

patients and payers and hospitals. >> one more piece to factor in. for an employer, its productivity. there are teachers in teachers unions, and they have to take four hours or half a day of their pdo if they go to the doctor. so if the teacher doesn't want to use a precious half a day of their vacation time to go to the doctor. so they're gone. on average, people are gone 90 minutes to do is to try to get to a doctor. so an employer, we are commencing this study as would roll this out in such a big way with some smart people, some actuaries, and we will be able to come back in a year and have some very sound data. >> for miles saved come to the that's 7.9 million miles. >> is difficult to the art enough folks have longitudinally done those kinds of studies the there are some anecdotal studies and it's great to see the insurers and we're finally started to get some of that

data, but, frankly, the industry has fallen short in that department. we've not committed enough resources to it. that said, we also knew in the back of our mind that the congressional budget office was not necessary going to consider any of that forward thinking or forward leaning information. what does telehealth do down the road to save medicare, medicaid or private insurance? that's a major legislative or congressional fight that's also looming in the background and has for 20 years, and it's something that affects health care broadly. is how does ceo going to consider all that when it comes to scoring -- cdo. but with got to go to act together. >> go right ahead. laura wilson with the department of health and human services. mr. neuberger had mentioned the role of telehealth and telemedicine in disasters. i was wondering if you could speak more to that role and maybe to barriers speak with the

are good examples and that in many conferences and there's language in popo, the disaster first act from for five years ago, post-katrina there's examples from within katrina where, say, for example, clinics in new orleans and many unheralded ways and some hospitals who had some of the early in what to the call, no, no. longer exist recommend development grants, community government bob -- block grants have you some of the for telehealth like activities a nicely preserved their systems while all else went down. the tornadoes most recently in the midwest, a year ago, there's some very good examples of this ancient program that has been when when my slides, and others, that have gone in and done some really good remote planning and disaster this isn't the a disaster for 18 years ago i first started to become involved we did they consult as i think to russia from the office building following the revolution when "the new york times" reported had gotten a

shot at senator rockefeller southern talk to the new time supporter. he was lincoln hospital, and this the 20 years ago. long history of nasa using it in instances all over the world. and somalia, and bosnia, herzegovina come in almost every deployment, the haitian earthquake and others. there's a whole discipline to my former partners big into this stuff involving usaid, state department and the first multilateral organizations and overseas governments around just this issue. >> the commonwealth of virginia has invested emergency preparedness dollars in telehealth and reconnect all the hospitals, probably almost every hospital in virginia is connected. we test regulate for disaster preparedness so we can communicate and manage and triage together. you think about it also, look at

the data that can be mined in terms of the surveillance. pharmacy utilization in terms of identification of outbreaks, anthrax. other outbreaks. >> disease surveillance is the low-hanging fruit in many ways were both held telehealth and electronic else records and interoperable health records because you don't have some of the same basis and other issues that you otherwise faced with competing interests in very slow patients around disease surveillance, and community care records and that sort of thing. so that's a really good place to start when there's a common level set of expectations and people's interests and groups interested in things. >> yes, go ahead. >> hello. i'm pediatric hematologist oncologist by training.

as a pediatrician i was thinking about the point about prescribing antibiotics for an ear infection that i did not should examine. so clearly there are going to be examples where you're going to miss medical problems through telemedicine that you might not miss if you actually examined the patient. so do you envision a separate standard of care in terms of malpractice for telemedicine interaction as posted one where you actually see the patient? has that been a problem in virginia? >> files are, okay. make sure that i clarify first of all that i'm not a physician, but i'll tell you that our goal here is, the point is to allow the doctor to use their clinical judgment based on the amount of information they can obtained from the patient through that interaction. if they don't believe that they can adequately diagnose and in section and they not write an antibiotic, then that's exactly what they should do.

so the technology simply now enables that person to get in front of the doctor, for many things, that her symptoms based that can be described and diagnosed by listening to the patient, seeing the patient, and really it's up to the practicing doctor and the malpractice standard has not changed. what i will tell you is there's also, most of us that work with computers, i would imagine that's most in this room, don't often have live webcams in our workplace at the desk. so there is now responding to the call center interesting and fascinating designed kiosk, and with some in the slide that we will take a look at that you can put in the workplace with the digital owner scope and the digital stethoscope and a digital turn the scope and some additional peripheral that will give the doctor more information. think about an employer that could not afford worksite clinic because the cost of employing a doctor and nurse and all that,

now if they set up a quiet room with some basic technology, and the internet, they have a nurse or a medical assistant take files and do some things to expand with the doctor country. so truly a matter of what can the doctor obtain and what are accountable within the licensed intriguing. >> in our network and our mock him and i'm a pediatrician as well, our model we use video, stethoscopes. says a slightly different model but i think your model so it works well for triage, but we don't establish a separate standard of care. we want our physicians to feel comfortable that they have enough information and to be able to manage a patient as well as they would in own offices. and if not, then the patient has to be seen. >> in no way is this designed to replace the primary care doctor. i want to there are physicians who take calls today, and they take phone calls and they write

antibiotics without having physically examined the patient. that goes on. for whatever the standard today, we're not going to change. >> so from a policy perspective, in terms of the technology, the quality is job one. your clinician. that's what we all care about, do no harm, make things better which is the case, in some cases like a mental health care they think that oddly it's more receptive and it can be better with some consults. but there's a role for the food and drug administration and it will be in this, an ongoing discussion for the last year around remote or mobile and wireless guidance or various technology and what buckets to fall into for purposes of approval processes and that's a really good discussion point at which to enter, and all of the groups, himss, all of them are actively engaged in how do we sort of ferret out those issues, and how does i'll relate to the quality reporting and other metrics?

>> there are three pediatricians here, okay? i'm the pediatric cardiologist, okay? so the question i have is isn't is just simply replacing as you said a physician taking calls like they used to before it went to nursing centers, and a way to get the physician or an entity reimbursed for that call as opposed to when you took a call and i took a call? we were not reimbursed for it. >> but is it so much better to be able to see the images? our colleague in pennsylvania as a clinic and there's a huge difference in terms of what a physician can evaluate over the telephone. a pictures worth a thousand words but i also want to give a shout out to the american telemedicine association which is practicing guidelines, including primary care urgent care. those guidelines will be out later this year. at their practice guidelines in a number of different specialties. i would say we're improving the standard of care in many committees. out give you an example but in our network, no names because of

hip-hop by the patient was being treated in local mini for singles not getting better. and asked for an emergency telemedicine consults and a treatise on dermatologist and a program and it was necrotizing fisheries or flesh eating strep, not shingles. so suddenly the access to the specialty service was life-saving. that's the case across the country in terms of the use of telemedicine. >> can ask forbearance as close to microphones. where the segue to a question on the card that is on point. and actually if you follow also to the previous question about whether there our data on cost. are there studies that are available yet on whether it's a population health basis or anything else that describes the impact of telemedicine on outcomes with in other words, are people getting better on average? or is it just the individual

incident? are we imposing holy standards by anecdotes at this point? >> there are studies, many. >> okay. and -- [laughter] >> just got to the end of my -- >> yes, there are studies. i think post affordable care act there are a lot of studies, environment has changed but the art studies -- people doing very careful studies on these issues. >> many of them are documented in the journal which is an arm i guess, has been for 15, 20 years and there are many good peer-reviewed quality related outcomes like studies that show the benefits of there is disciplines and subspecialties. >> in the iom summer report, there's a whole chapter on current evidence-based.

>> actually, thank you for bringing that up. one of the reasons why i wanted to get to the question is, in that summary there was, at least some of the participants, some question about how robust the evidence base was. is that still a fair concern? was that one of the major takeaways that we needed to do more, or are we at a position where we can make that? >> yes. [laughter] >> there's a very cover into discussion about evidence-based that was very well done, and it just points to the fact that many, many tests have been done but there is room for more to be done in terms of more robust, larger studies -- >> and economic analysis as well. >> there's a role for research and the quality under high-tech

funds for these sorts of things, whether or not it's on point in terms of telemedicine, a lot has to do with other things and other directives, kinds of things that should not take place for the office of technology and science policy in the white house, and through cms in terms of just energizing that evidence base, has to be done. >> left arm is holding us he can keep the laptop there. i think this lady was at the microphone first. spent good afternoon. i'm the executive director for the board of medicine in the district of columbia. thank you to all the panelists for an informed presentation. this question is for mr. neuberger. unity comment about state licensure. i'm a great proponent of telemedicine, and just want to explore with your recommendation for how licensure should be handled for physicians, and then probably more importantly, the

disciplinary aspect of the states actually control and regulate those who may not be licensed in their state but have performed poor outcomes in the state. those issues to be handled? >> okay, so there it is, at least, or the was, i don't have to know the current status of a. some progress with at least one of the councils of the committee of the american medical association to at least explore the whole notion of the interstate nursing licensing compact, which has not been widely adopted that has been by what, maybe 12, 15 states in the last several years? allows reciprocity and interchange of nurses licenses and things. i think w we've got to at least commune, get more real about going down that road so that there is that sort of eager reciprocity or some sort of centralized system to start to

approach it. it's just been too long. and in terms of disciplinary actions, i have not, maybe a da and na and others have thought more about that, karen and others, but it can be done. they can be handled. >> that's the challenging part. i think most people believe that a doctor license in colorado should be able to get a license and the district of columbia or maryland but i think there any issues with the licensing. but you only have a control over the provider and lessen their license in your state. and each state has different laws and rules around discipline. so the challenge is, it's not a big deal because pretty much it standardize now. but the discipline part is the issue, and i would say that state courts really are not in the business of necessary making money. it's really to protect the public. and so from that aspect that's a

we looked at. at. >> i didn't mean they were making money. i mean they are protecting the making of money, in some ways. like in places like california that have quote to many clinicians but not enough to recognize, not enough to be distributed right kind of earl and some intercity urban areas and things. so it could be viewed that those laws are archaic. their way out of date. they stem from the '40s and 50s. they were a construct a state medical associations. i used to work for one in wisconsin an they fell out of te back side of medical associations, and that has to all be reviewed, including the disciplinary part of it spent i think that's where we need to se help because i think state boards are on board. they understand the importance of telemedicine, technology getting access to give. that issue though is that we are in a position where we have to be able to address those complaints and we can only do that and have control over the person who is licens licensed ir

state. so that's the challenging part. whoever comes up with that will be great. >> gentlemen with laptop. >> i'm working on a mobile app t for emergency and icing health care providers to embrace new technology and some were not there, wondering what demographics of doctors such have you seen embracing telehealth? who are the early adopters? >> telehealth is such a broad term, so let me speak -- speak to primate and i think karen or others can speak to specialties. in primary care this is a fascinating time for doctors, working with a group in indiana, american health network, and they have over 200 doctors in a primary care doctors around the state. their experience has been that the average length of career for the working mom, for working parents, physician is about 10 years. after having a second, maybe a

third child, because of the limitations of coming to the practice and of those hours, there's a physician shortage in health care reform will bring more and more people trying to get appointments with the same doctors here yet we have these highly trained and able physician parents who are no longer in the workforce because of brick and mortar time distance. so this is a group is very interested in practicing evenings, after the kids are in bed, maybe weekend, tapping into that, a physician with, let's say, for example, a physician with a disability who has trouble getting from room to room in the exam, in the office but is an outstanding physician. physicians who maybe think about retirement or lifestyle and don't want to have a staff and office and all that expense and overhead. so telehealth for primary care allows you to tap the physician supply that is dormant and available, along with other

great physicians who just like the idea. >> dr. rheuban may want to comment that behavioral health, mental health has been surprisingly robust. we of charge like this, don't we? through ata that show the adoption rates and the uptake rates which we can get for your off-line, i can bring the. but correctional health, big, big, big and was one of the things in the state corrections programs. somewhat oddly. primary care as john said. eicu, so parents, as karen said, newborns and others can monitor into the nicu for the adult icu kind of monitoring, that sort of thing. there's a bunch of specialties and subspecialties that are just kind of taken off the remote monitoring for cardiac patients. what else, karen? >> i'd like to address the greater versus non-greater physician or other health professionals. the adoption rate has been phenomenal across the spectrum quite frankly. with as many gray-haired

physicians who participate and don't say no to us. but i will say it's the younger generation for whom it is secondhand. but the good news is with the proliferation of advanced technologies and with hd videoconferencing, being there is like living there. for those of us who were driving all over our state designations, it's a whole lot better for us sort of gray-haired physicians who travel and content by videoconferencing as well. i think it's an option that is pretty uniform, may be driven more by the younger generation is much more creative in developing the apps as well, such as yourself. >> other questions? in this very large stack that have to do with payments. we've talked a little bit about that. and one question has added -- at its base the question of whether changes in payments, particularly moving towards capitated payments would free up

some of the restrictions that we've heard today that flow from the lack of reimbursement for a particular service for a particular profession. >> i'd like to make a comment. it would be great if we talk about with the accountable care organizations that are not allowed -- we need other changes. so yes, i think a captive model is a great idea but we still have some ways to give. >> you are talking about the medicare. what about private which is almost as numerous. debate reimburses telehealth? >> i don't know that. >> the pilots had every sort of thing you can imagine going on, as far as i know, in terms of both telehealth and disease monitoring technologies. medicare model homes, all of it. and the thing is, the question,

or point, it may be that the ground is changing out from under us. not be incrementally done thanks to senators conrad and stevens and rockefeller, and whole bunch of members for giving us that for. the ground is shifting, and so we can't let this train passes by without consideration of capitated care, and all of the various shared savings models that are being so actively pursued, but within the affordable health care and in the private sector. doesn't matter what you think about the affordable health care. it's happening in the public and private sector. >> we look at telehealth as really a power tool to the physician in an aco or in a capitated environment. it's just a matter of getting the money right. this album with what the aco patients and medical home means,

and heand a health plan for rolg out patient centered primary care model across the country, but what it means is now when the doctor this type at the end of the night athletica some to eat dinner, they are still worried about where these patients are going to end up. before it didn't matter to them. if they wind up in the er or the urgent care, and he didn't need to be, is taking thousands of dollars out of the risk share or not they're responsible total cost of care, they are concerned. so knowing that they had let's say a service to refer to when they finally wanted to go home where they would be board certified doctors syncopation, not threatening to take them away, and they would be able to see a chart in the morning is really a very helpful thing. and then those practices that do want to provide that care around the clock, they no longer have to say, with six locations and this one is open until 11, everyone has to drive there.

vacancy, we are available online until 11, or 24/7 another able to capture revenue for those people that will wander into er or urgent care or to a retail clinic and keep it in their practice. so it really provides a lot of flexibility for that kind of position. >> the other capitated model is managed care under medicaid. very low-hanging fruit and very easy to do the management of medicaid is the medicaid program of each state does endorse telemedicine, that's a managed care model and it works very, very well in a capitated mom. >> let me add one other thing about high-tech in the government if i could. high-tech does a lot of good things. 33.5 billion over 10 years for medicare and medicaid adoption of meaningful users of three stages of adoption of health information technology. for no good reason, but for the speed with which it was done and the lack of funding and all the rest, there were some groups

that got frankly kind of left out on the outside looking in. and so the question becomes from a policy perspective is a more complicated when it comes to continuity of care around issues, richard berner are some i saw from the association of home care, you know, home care and were messengers on outside looking in in terms of high-tech. as his behavioral health, as our emergency medical providers. okay, and a couple other categories, nurse practitioners and some others. and telemedicine to a degree because it's not really mentioned, or that talked about in high-tech but is more so in the accountable correct. so those are just some things that go to the issue of, you know, a climate of all the incentives and the various reimbursement and other models, as will look at all these very small is for continuity and to see whether we're pulling on the same side of the wagon on behalf of these organizations. and the goal of having the

careful through these systems and things. >> i apologize to those of you who put your questions on cards. we're not going to get to all of them. so if it's something that cannot wait, you better go to a microphone sometime in the next 15 minutes. what types of health care services, the question asked, our least amenable to telehealth? and do you think that would change with new technology? >> or is everything amenable? >> if you look at our model, our height chart i had earlier, the number one service requested for us his behavioral health, tele- mental health services to more than 53% have been in the behavioral health sphere but we have 40 specialties to participate. if you had to physically touch the patient, you have to feel a nodule, they have done some research on virtual gloves. that's really not proliferator yet in the general practice. so if the patient needs to be

touched, and, frankly, if they need surgery, we have some are products of your examples, a in general you need to see a surgeon in a hospital. especially surgeon that you need. so while there is robotic surgery, it's not mainstream for everything that we do connecting remote hospitals to hubs. so if you have to feel it, probably best to just actually travel. the other, some of our specialists request the first encounter the face-to-face in the office and follow-up visits. it just depends on the subspecialty and the comfort level of the provider. but 40 of our different subspecialties participate in telemedicine. >> does any of you foresee their coming a day when the consumer may pay a penalty or a premium fee to actually visit a doctor as compared to telehealth? you want to talk to a teller, is that right? you will pay a premium. what do you think?

spent i don't see it that way. i see these as a series of tools that enable health care and the changing, morphing, advancing goals of health care and other physicians, nurses who provide much of the care, the hands-on care, and allied health practitioners. ..

>> okay, there you are. let me just say as we move into these last few minutes, i'd appreciate it if as you listen to the question and response, you plucked the blue evaluation form out of your packet and fill it out while we're listening. yes, go right ahead. >> hi. my name is candace, i'm an intern with the aba commissioner on aging. has any thought been given to those older americans, especially those who live in rural areas who may not have access to a best buy or an apple store to purchase these materials such as a computer or a laptop? will they be completely excluded from telehealth or telemedicine because of their lack of technology? >> so chapter 11 of the broadband plan for the federal communications commission about two years ago discusses this and related issues at some length. and, you know, sort of the need

to level the playing field in terms of rural, older populations who for a lot of reasons can't get good care; not enough technical support, as you mentioned, today don't have access to broadband and computers and all the rest or may not be technology savvy and that sort of thing. and so, you know, historically there's been a real, you know, studies have shown that rural underserved minority disparate populations are far less in terms of users. however, there is some good news, and that is somewhat odd -- maybe not oddly, mobile telephony is a leapfrogging technology that obviates at least some of those problems i just mentioned like broadband, hard-wired communications through fiber or t1 or whatever connections out into rural areas. and we see this around the world in developing countries, in africa and asia. tremendous explosion, there are

like billions of handsets, you know? there's like two or three for everybody on the planet or something in wireless mobile technologies. and so that may be an instance where the technology actually offers a really good solution to the problem you describe, which is that sort of access. and everybody's got smartphones now, right? or they want to have, you know, or increasingly. >> i'd like to add, though, there are some terrific programs in remote patient monitoring, bonnie britton develops in rural north carolina for medicaid patients and subsequently with the biden health care system. she used algorithms to identify the most at-risk patients, and then in cooperation with the hospital and the nurse, send the patient home with technology, train them on how to use it and actually, they took the most vulnerable patients and had the best outcomes. so we shouldn't give up on those patients, and i think as the affordable care act and the

implementation happens with the penalties for readmission, hospital systems are incented to embrace these technologies for those most vulnerable patients, and i think you'll see more projects certainly going forward in the future. >> and that did not go lost on the provisions of high-tech, it requires one of many reports back to the house and senate committees about that issue. so staff in the room, hold the various agencies' feet to the fire. the office of national coordinator for h.i.t. and others, her saw and the rest, when it comes to reporting. they've all been so busy standing up tease huge meaningful use and related kinds of efforts, you know, it's all hands on deck that today haven't had a chance. but they are now. and there's rural efforts, as was mentioned, not only driven by hrsa, but also at the veterans health administration, there's a lot of money for rural

veterans, as was mentioned. so, you know, the agencies are well aware of all of that, and and it's a matter of resources and focus and attention, i think, also. >> for those of you who don't have an acronym list in front of you, high-tech in this context is not an adjective, it's a noun. it's a piece of legislation that was part of the stimulus package. actually, let me try to follow up on this question, because we have several cards asking about different aspects of the fcc's involvement in this issue. how persistent is the lack of a durable broadband availability in rural areas these days? is it still as big a problem as it was two or three years ago? >> you know, i think not. there's not as much.

there's, like, seven billion out of the stimulus act that was made available through, as karen mentioned, the rural utility service. not through the distance learning and links program, but for broadband into rural areas, like five billion there and through the commerce department, national institute for standards and technologies, total of 7.2 billion, i think. that coupled with investments by a, the and, the -- at&t, verizon and some of the other big carriers in the tens of billions is starting to cause better penetration of broadband wired and wireless out into those rural areas. so it is definitely, i think, getting better. it's hard to get good maps of all of that. we've done some conferences on just that issue as it relates to rural, and much of it tends to be anecdotal, but the companies tend to know, and the fcc is

definitely working in that direction. many of their policies, many of their programs are designed for exactly that issue. >> well, we also have the cable industry also passes something like 93% of homes -- 97% of homes -- enter yeah, absolutely. >> and we have had no problem going anywhere, including the second highest mountain in virginia. within four month we had a very big pipe to the top of that mountain, and that was supported by the public support mechanism, so i urge you for those of you interested in exploring further, that's been a fabulous resource for our program. >> and was one of senator rockefeller's provisions. 1996, created that program. it was ineffective for a lot of years. they did as much as they could administratively over the years without a reauthorization of the act to make it more effect so

that more of that 400 million per year that gets collect inside a few cents on your phone bill does get used for that connect program and the other fcc rural connect it programs. it's starting to have an impact. >> we've got be a question that i think everybody's going to want to weigh in on. i'm certainly interested in the view of all of your, all of our panelists. and it's maybe the simplest question that we have heard all day. who are the winners and losers if telehealth becomes widespread? >> patients, the winner. >> that would be the winner part, right? >> actually, i don't see any losers. and it all depends on favorable public policy, right? everybody's a winner, quite frankly. once our mandate passed in virginia, suddenly all the health care systems became engaged in telehealth. so i didn't see any losers, just

come onboard, you know? >> it's one of the rare things that besee where the patient wins -- we see where the patient wins, the physicians win, the employers win. so i suppose you can say when the internet came about who were the losers, and it might have been the printing presses, some of the print. so maybe it's the petroleum companies because of the taking people off the road to get health care. you know, there's always some loser, but we move on. [laughter] >> eight million miles worth, right? >> you know, it's a win/win, and it's fun to work on these issues for these very reason. and as dr. rheuban and john both alluded to, for my part i've never met a member of congress either side of the aisle, either house -- and i've met a lot around these issues -- that didn't think it was a good idea. not much could be said about almost any oh issue in

washington these days, correct me if i'm wrong, but this is one that is almost a no-brainer in terms of -- which is, causes us so much angst in the field as to why it hasn't sort of happened faster, you know? sort of on the regulatory and legislative side and things, because -- and, anyway -- >> sherilyn, you have a loser? >> no losers. >> i guess how disgustingly positive -- [laughter] as a way of ending this discussion. well, i have to say this gives the lie to the idea that it's bad luck to attend an alliance program on friday the 13th. i think this is one of the most lively and informed discussions that we've had on almost any topic in a long time. and i'd like to thank our colleagues at wellpoint for helping us put this program together, i'd like to thank you for being such a good audience

and providing us with lots of good questions and ask you to help me thank our panel for one of the best ones we've had in a long time. [applause] [inaudible conversations] >> fifteen years ago booktv made its debut on c-span2. >> love, death and money. these are the three main human concerns. we're all keen students of love, we are fascinated by every aspect of the matter in theory

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weekdays featuring live coverage of the u.s. senate. on weeknights watch key public policy events, and every weekend the latest nonfiction authors and books on booktv. you can see past programs and get our schedules at our web site, and you can join in the conversation on social media sites. [inaudible conversations] >> and we're life this morning at the economic club here this washington, d.c. where treasury secretary jack lew is about to speak on the state of the u.s. economy. he's also expected to touch on the obama administration's proposals to improve economic growth and some of the fiscal challenges the white house is facing with congress. be now, after his remarks the club's president, david rubenstein, will ask the treasury secretary a few questions. live coverage here on c-span2.

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[inaudible conversations] >> i have your attention, please? thank you very much. we're very honored today to have the 76th secretary of the treasury, jack lew. jack has come to this job with more experience in government than probably anybody else who's ever served as secretary of the treasury. in the obama administration he started out as tenty secretary of state for -- deputy secretary of state for management and resources, then became white house chief of staff before becoming secretary of the treasury. in the clinton administration, he also served as director of the office of management and budget and also a special assistant to the president of the united states. he also has experience in the

legislative branch. he served for eight years on capitol hill working for tip o'neill, the last three years as senior domestic policy adviser to speaker o'neill. the secretary also has extensive experience in the private sector, and before joining the obama administration he served as the chief operating officer of nyu and as a senior officer at citicorp eastern investments division. he's also a lawyer who practiced law in washington for a number of years before going into goth. jack is graduate of harvard college and georgetown law school. so it's my pleasure to introduce the 76th secretary of the treasury, jack lew. [applause] >> thank you, david, for that very kind introduction, and thank you to the economic club for having me here this morning. i want to begin by joining all americans in saying that our

thoughts and prayers are with those who were affected by yesterday's tragedy at the washington navy yard. to those who lost a loved one, i offer my deep condolences, extend my gratitude to the local authorities, federal law enforcement and medical teams who responded so quickly and skillfully to the events as they unfolded yesterday. now, i'd like to start by talking about current economic conditions and challenges. i'd also like to speak about what's at stake for our economy over the next few weeks. as we meet here this morning, it's important to remember that five years ago this month our financial system was in the throes of a devastating crisis. the crisis exposed fundamental weaknesses in our economy that had been building for some time, and it helped trigger the worst recession since the great depression. in the months before president obama was sworn into office, we were shedding more than 800,000 jobs a month, and our economy was shrinking at an 8.3% annual

rate. the president moved immediately to stop the recession and began to lay a foundation for long-term economic growth. he took action to repair our aging roads, bridges and highways, to invest in education so that more young people could graduate high school and go to college, to fix a health care system that was not working. to reshape the financial system so it did a better job of protecting consumers and investors and to lock in lower taxes for 98% of all americans. he took steps to make it easier for entrepreneurs and businesses to innovate, grow and hire. since 2009 our economy has been expanding. private employers have added seven and a half million jobs over the past 42 months, businesses have added more than two million jobs over the last year. manufacturing's expanding while the housing market continues to improve, posting gains in sales prices and residential construction. because of the policies that we put in place, our deficit has fallen faster than at any point

since the demobilization after world war ii. and it should continue to decline relative to gdp over the ten-year budget forecast. because of the resiliency of our people, our businesses and our economy, we're in a much stronger position today than many imagined just a few years ago. but we're not yet where we want to be. too many americans cannot find work, growth is not fast enough, and the very definition of what it means to be middle class is being undercut by trends in our economy that must be addressed. these trends, like the increase in income and equality and the decline in upward possibly did not happen overnight, and it's going to require work and focus to reverse themment but we cannot do that, we cannot focus on what's important if some in washington continue to create uncertainty about whether our political system can meet its basic responsibilities and avoid creating self-inflicted wounds to the economy. i know from my conversations with business with leaders that

this is a concern for many of you. that's why it's important for congress to work with the president to replace the senseless, across the board legislation known as sequestration to strengthen our economy. that's why it's also important that congress move as soon as possible to raise the debt ceiling and eliminate any uncertainty about america's ability to pay its bills. as many of you know, we will soon be able to finance the government if congress fails to raise the debt ceiling. raising the debt limit is congress' responsibility because congress and congress alone is empowered to set the maximum amount the goth can borrow -- the government can borrow. it's important to note, as aye done before, that the debt limit has nothing to do with new spending. it has to do with spending that congress has already approved and bills that have already been incurred. failing to raise the debt limit would not make these bills disappear. we reach thed the debt limit in may. since that time treasury has used or what are called extraordinary measures to avoid

defaulting on our obligations. i notified congress in august that these extraordinary measures would be exhausted by the middle of october. if congress fails to act and those measures are exhausted, we will have to use what cash balances we have on hand to fund the operations of a nearly $4 trillion government. at this point meeting our nation's financial obligations including social security and medicare benefits, payments to our military and veterans and contracts with private suppliers will be put at risk. some in congress seem to think they can keep us from failing to pay our nation's bills by simply raising the debt ceiling right before the moment our cash balance is depleted. this is misguided for several reasons. for one, it's just not possible for the u.s. treasury to know with precision when the moment will be, because outgoing payments and incoming receipts vary significantly from day-to-day. operating on a small cash balance creates the real danger that on a day that we anticipate having a positive cash balance, we actually will have a negative one. at the same time, we're relying

on investors from all over world to continue to hold u.s. bonds. every thursday we roll over approximately $100 billion in u.s. bills. if u.s. bondholders decided that they wanted to be repaid rather than continuing to roll over their investments, we could unexpectedly dissipate our entire cash balance. the point is, trying to time a debt limit increase to the last minute could be very dangerous. make no mistake, if congress does not act and the u.s. suddenly cannot pay its bills, the repercussions could be serious. the impact on families and businesses could be significant. investors losing confidence in the full faith and credit of the united states could cause damage to our economy. failure to raise the debt limit or even an extended debate on the merits of doing so like we experienced in 2011 is a self-inflicted wound that can do harm to our economy right at a moment when the recovery is strengthening. no credible economist or business leader thinks that

defaulting on the full faith and credit of the united states is good for job creation or economic growth. they understand the congress choosing not to pay the government's bills is unacceptable and could hurt our economy. consider the words of another treasury secretary, james baker, who served under president reagan. faced with a threat to our nation's credit, secretary baker told congress, and i quote: a failure to pay what is already due will cause certain and serious harm to our credit, financial markets and our citizens. of course, failing to meet our financial obligations should be an unthinkable event. never in our history has the united states defaulted on our obligations. congress has always lived up to its responsibility to protect the nation's credit. those in congress who think default is an option claim that it's possible to protect our economy by simply paying only the interest on our debts while stopping or delaying payments on a number of other legal commitments. there is no way of knowing the irrevocable damage such an

approach would have on our economy and financial markets. as administrations of both political parties have previously determined, these prioritization proposals are unworkable. they represent an irresponsible retrite from a core -- retreat from a core american value. regardless of president and party, congress has always honored all of our commitments. we cannot afford for congress to gamble with the full faith and credit of the united states of america. at the same time, we should with never be put in a position where we have to pick and choose which commitments of our nation's we will meet. how can the united states choose whether to send social security checks to seniors or pay veterans -- benefits to our veterans? how can the united states choose whether to provide children with food assistance or meet our obligation to med providers? -- medicare providers? as a matter of fact, up until very recently congress typically raised the debt ceiling on a routine basis. that ceiling was raised 18 times under president reagan who had a

democratic house of representatives during his entire eight-year term. it was raised six times under president clinton who had a republican house of representatives for six of his eight years and eight times under president george w. bush who had a democratic house of representatives for the last two years of his eight-year term. during that period, many of the debt limit increases were passed as stand-alone bills. there were a handful of times where debt limit was embedded in congressional legislation dealing with broader fiscal challenges. but the threat of default was never a bargaining chip in those negotiations. that all changed two years ago when the issue of raising the debt ceiling turned into a high stakes political drama. we saw for the first time a debate take place over whether the united states should voluntarily default on its obligations. some actually argued that default was a viable outcome. there were, in fact, members of congress willing to default on our full faith and credit rather than reach a good faith

compromise. americans do not want to relive what happened in 2011, that drawn-out debt ceiling dispute and brinksmanship led to business uncertainty, a drop in consumer confidence and the first-ever downgrade of our nation's aaa credit rating. the resulting drop in financial markets undercut economic growth for months, anxiety spread across the country and around the world as congress delayed action until the very last moment. i want to repeat what the president has already made clear. he will not negotiate over the debt ceiling. he will not accept measures that would tie a debt limit increase to funding or delaying the affordable care act which was passed by congress and upheld by the supreme court. the time to make policy is before, not after, we have made commitments. this is a stand that democratic and republican presidents must take to make clear that under no circumstances will the united states fail to pay our bills. now, the president is willing to negotiate over the future direction of fiscal policy. that's why he proposed a budget that reflects the difficult

choices that he believes we need to make as a country. within that budget, the president included reforms to entitlement programs and the tax system that would spur economic growth and cut our deficit, and he made it absolutely clear that he's ready to sit down with republicans and democrats to find common ground. elected leaders have a responsibility to make our economy stronger, not to create manufactured crises that inflict damage. the very last thing we need now is a fight over whether we raise the debt ceiling. we face be serious challenges both domestically and internationally that require our full attention and not when we know the kind of damage that a financial and economic crisis can cause. the truth is, congress can get this done. the time to do it is now. thank you very much, and i look forward to the conversation we're about to have. [applause]

>> so, as i pointed out at the beginning, you have served as deputy secretary of state in this administration, head of omb, white house chief of staff and now secretary of treasury. why have you had a hard time holding a a job in this administration? [laughter] does the president not like you? how come he keeps moving you around? >> my wife has teased me if i would just keep one job for longer, we could reduce unemployment in this country. you know, the truth of the matter is you come into an administration to serve, and you serve in the role where the president thinks that you can make the most difference. it's been my honor to serve two presidents, andi haven't developed the ability to say no. >> actually you've served two presidents and maybe a future president, you worked for hillary clinton who may run, we don't know. of those three, who were the smartest? [laughter] >> you know, when you line up three of the smartest people i've ever known, choosing

between one and another would be a foolhardy proposition. >> okay. [laughter] so on the debt limit, let's talk about that, be very serious. you have said around, you have about $50 billion of cash that you'll probably have around middle of october, something like that. so that's not enough to really make the government function effectively. so your message today is that let's not wait until the end of period of time when the debt limit extension is absolutely necessary to be extended, let's resolve it now, and let's not wait million the last minute because we have so many only gates that we can't let people wonder what's going to happen. so are you engaged in negotiations now with the speaker or others in the senate? and what is going on? is the president thinking of calling people to the wows and trying to get -- to the white house and trying to get some negotiations going on? >> just to be clear about the deadline first. there is an extraordinary desire

in washington with precision when the last minute to act is. the debt limit is something that is i said trinsicly impossible to give that information about. as i said in my remarks, your revenues and expenditures fluctuate from day-to-day. be anything, as i watch the daily cash balances, things have moved a little bit in the wrong direction since i sent the letter. not dramatically, but tomorrow they could move in the right direction. what you can't do is take the risk that you will not have the ability to pay our bills on a day when an interest payment is due, when a social security check is due. which is why i've said it's urgent for congress to act as quickly as possible, certainly by the middle of october. you know, we have engaged in the discussions over fiscal policy, the white house and the congress, extends thively over -- extensively over the last several years. the president has made clear through his conversations over the years with the speaker, through the conversations he's had with a wide group of senators and congressmen that he

on fiscal policy is anxious to find the sensible middle ground. the problem is we've yet to find republicans who are willing to sit down and have the conversation about a balanced package with revenues, revenue reform which raises revenue and entitlement reform. the debt limit is a different question. i really do believe the world changed in 2011. it cannot be an acceptable notioning that you negotiate -- notion that you negotiate where one part of one side believes that default is actually an option. that was never the case before. you cannot let 50-100 members of one body introduce the idea that the united states cannot pay its bills. so you can't even entertain that as a notion. future presidents, democrat or republican, cannot be in the position where they're compelled to accept unacceptable policy year after year because there's a faction that thinks default is an option. congress just needs to act. >> all right, but they're not acting, so you're the leader of the executive branch.

what are you doing about it? are you corralling them? are you threatening them? what can you do to get something done? >> look, i think that the reality is that it's not what i say that matters, it's what the facts are that matterrings. the facts are that in the middle of october we're at risk of the united states for the first time in history not being able to pay all of its bills on time. that's a burden congress bears, and congress, i think, will step up and deal with it. i can't tell you exactly what the path is. it's not particularly helpful for any white house to dictate the specific steps that congress needs to take. i think if you look at the conversations going on right now, it's clear that there is concern about both funding the government and meeting our obligations to be able to pay our bills by with extending the debt limit. i think this focus on the last minute has for a while given congress the idea that it had a little more time. i hope i've dispelled that

notion, because it's a dangerous notion. thinking you have more time raises the risk of an unintended consequence. i don't believe the responsible leaders in the congress believe that default's any more of an option than i do. >> so do you think the president should call the congressional leaders to the white house and just say we're not leaving until we get something done? why don't you use that technique? >> you know, the practice of calling leaders to the white house is something we spent a fair amount of time doing in 2011. i don't recall that it necessarily was the fastest path to a finish line. i think, you know, this is something that the leaders of congress, democrats and republicans, are talking about. they have talked about the funding bill to keep the government operating after october 1st, and, you know, i think that if you look at the debate over the debt limit, you know, there's a kind of notion in part of house of republican

caucus that can be used as a lever to force major policy change like the delay of the affordable care act. that's just not reality, and they're going to have to start dealing in reality. >> so you pointed out in your opening remarks that under tip o'neill when he was speaker and ronald reagan was president, i think you said 16 times the debt limit -- >> i think 17. >> 17? was increased. so you were involved in those negotiations. did you ever say let's not extend the debt limit? did you do that in those days? you never did that. >> you know, the 1980s, when we lived true them, seemed like the most partisan era in history, and now it's almost romantically bipartisan. [laughter] i just read chris matthews' new book on the relationship between president reagan and speaker o'neill, it brought a lot of those memories back. you know, one of the things about mr. o'neill's leadership was that he actually believed in letting a majority work its will. there were moments when house democrats did not want him to

give president reagan a chance to have a vote, and things passed with a mixture of democratic and republican votes, and it felt at the moment as though maybe the democratic leadership had lost control of the house. but he believed the worst thing you could do was just to throw grit in the system and cause the whole enterprise of government to break. >> right. >> i think we're dealing with a different approach at least on the part of some members of the house now, and if they give back a little bit to letting the majority work its will, this kind of problem would be a lot easier to solve. >> so today you would say we have to deal with the debt limit issue, and you've dealt with that, you've talked about that, and you're hoping that something will break atom soipt -- at some point, and you'll have the negotiations. let's also talk about the continuing resolution of spending. right now on october 1 we will run out of money, but we need new appropriation bills for a continuing resolution to fund the next b years of the federal

government. what do you see as happening there? do you see negotiations occurring on that? is that more likely to get negotiated out than the debt limit or where do you think that's going? >> there are conversations going on between the senate democratic leaders, the house republican leaders. the president's made clear the kind of frame that he is using as he think abouts -- think abouts about it. he has made it clear that we cannot have a solution that fixes the problems that sequestration has caused in defense but not non-defense be, we cannot have a solution that abandons our foundation to a better economic future, education, infrastructure, and research and development. and i think we have to give the leaders some time to work through a solution here. i want to underscore something i said in my remarks, because i think people really need to understand. the president has always been open to finding the sensible middle ground and negotiating or finding a path to an agreement on fiscal policy.

it is not popular in the democratic caucus when he put a budget out at the beginning of this year that essentially reiterated the offer he made to speaker boehner last december. it had entitlement savings, it had a tax reform plan that had additional revenue not all of which is popular even on the democratic side of the aisle. it was meant as a basis to form a conversation and an ultimate agreement with a balanced approach. across-the-board consistents in sequestration were never meant to be policy, they were put in place, as you recall, to have the supercommittee fear sequestration so they could reach a difficult decision. it didn't work. so we now have these across the board cuts in place. if you look at where we are short term, most economists think we've done more deficit reduction in these few be years tan is good for the economy, and in the medium and long term we don't have the structural changes to put us on the right trajectory going forward. president put out a budget that would replace the across the

board cuts with sensible, balanced approaches. you know, i try to always be an optimist. i've probably been more optimistic than most -- it's getting harder and harder to remain my traditional optimism, but i'm still hopeful that common sense will rule out. i do think that the idea of reaching agreement on fiscal policy is entirely different than the idea of using the debt limit as a kind of lever to force another side into just capitulating. >> on sequestration, when you were the head of omb, you were involved in legislation that led to sequestration, some have called you the father because you proposed this, and i think some people on the republican side have actually said it was your idea. would you like to clarify where that idea came from? >> i don't seek authorship of credit for something i've said many, many time is the a very bad policy. you've got to go back to 2011. we were engaged in a very difficult set of negotiations.

we were headed for a fiscal crisis. there was a debt limit, a deadline impose toed, impending at the time where it was highly credible and believed by most in the world that there was a chance the united states would actually go over that cliff. we tried every way to reach agreement first on a substantive basis. we made some progress but got close to the finish line, and it didn't work. it then was fess to figure out -- necessary to figure out how do you bridge the gap? our preference would have been to have some kind of an enforcement mechanism that put revenues and spending both at risk if congress failed to act. that was unacceptable to republicans. in a world where you could not have balance between revenues and spending, the only thing that's worked in modern times was making defense and nondefense equally exposed to risk. that was the formula that

graham-rudman-hollings put in place, it led to the 1990 budget agreement because people feared that kind of a cut so much that they kind of camped out at an drew cans air force base, and -- andrews air force base, and they reached an agreement. coming out of those conversations, that was the last option to avoid a disaster, and it was put in place not to take effect. it was put in place so that congress' supercommittee would have the incentive to act. there were a lot of ideas swirling around. i actually believe there was a republican budget proposal that incorporated that idea earlier in the year. the fact of the matter is nobody should claim authorship over something that was at the time described by all parties as an unthinkably bad policy. >> okay. so make sure we, before we leave this summit. right now -- subject. are there any negotiations going on between the administration and congress on the debt limit and on the continuing resolution

between the administration and congress? is there anything going on right now, secret negotiations you can now tell us? >> there are none, there will be no negotiations over the debt limit. >> no negotiations. >> the president's been very clear on the debt limit. i've, i'm discussing the debt limit with everybody. i talk to the committees of congress on a regular basis, i'm going to do so again this week. i'm doing so here today. there's a need for a clear understanding. everyone has to have accurate information about what the schedule and consequences are and what's knowable and what's not knowable. but the president's made clear we can't be negotiating with the threat of default. on the spending bills, i think there are the normal kinds of conversations going on. you know, unfortunately, they tend to not come together until the very last minute, and i will leave it to my friend and successor at the office of management and budget, sylvia bear welshing to handle that. >> one story that is circulating

in washington is the discussion that the house might propose a debt limit extension but attach to it a defunding of obamacare and send that to the senate and let the senate decide what it wants to do. have you had any comment about that? ..

a minority in one house dictate to others, you know, in the senate and the white house the only path that's acceptable and i think, you know, the reality is, that's not going to happen. the sooner they understand that the better. i heard comments in the last few days, i read even in an editorial in the "wall street journal" this morning there is kind of a growing awareness that, in some ways is very obvious, that i learned this in the 19 '80s. you can not control both houses of congress and the white house with 50 to 100 votes in the house. >> so if people around the world are watching what you say and buyers of treasury bills and depending how our economy is faring would you fair to say that you are optimistic this will get resolved in time, pessimistic, cautious, what would you describe as your feeling? >> i'm anxious, cautious and anxious. i think, you know, i take

comfort for the fact that i don't think there are any responsible leaders who think default is an acceptable option. i'm nervous by the desire to drive this to the last minute when the last minute is inherently unknowable and the risk of makeing a mistake could be catastrophic. i also worry about frankly the time it takes for the kind of congressional process to work these days. you know, if you have to march up the mountain three or four times before you can get to the top, you have to leave enough time to come up and down and we're getting very close to these deadlines and i think that there's a need to get going. >> sometimes people say that on capitol hill that the treasury has ways to manuever more than they say publicly, so you say now the deadline is middle of october but if you need ad couple more weeks you could manuever things around. is that unfair, untrue? >> once you hit the end of extraordinary measures your

borrowing authority is gone. you have no more ability to borrow. you're then left with cash. as any small business person knows if you're operating your business relying on cash in the cash box to pay your daily bills, if your revenue is not adequate on a given day and you empty the cash box, you can't pay all your bills when the cash box is empty. i can't say with precision when that is but i can tell you i can't refill the cash box once we've lost our ability to use extraordinary measures. that is going to happen in mid-october. a 4 trillion-dollar enterprise which is what the federal government is almost, just under $4 trillion, $50 billion sounds like a lot of money but we have individual days when our net negative cash flow is $50 billion and that doesn't matter if things are operating normally and you have net positive days later in the week and later in the month and it answer it out. but if you can't borrow to get from here to there for the first

time in american history you're left with the inability to pay all your bills. you run out of extraordinary measures at some point. >> let me shift to another subject, tax reform. the chairs of the ways and means committee, the chair of the senate finance committee not too long ago, talking about a need for tax reform and their desire to get it done, but do you see any evidence will get done this year and are you working on tax reform? >> i am working on tax reform. the president tried a few weeks ago to breathe a little life in the tax reform debate by thinking about business tax reform first. the challenge in doing comprehensive tax reform it is tied up with the whole fiscal policy debate. we do not believe you can do all of tax reform, individual and business tax reform, unless you have an agreement where your revenue level is as part of a broader fiscal frame. when you look at business tax reform, our goal is to reduce

the tax rate on the corporate side to that we're now we have one of the highest statutory tax rates in the world. it is a disincentive for businesses to organize in the united states. we would like for a whole host of reasons to bring down the statutory tax rate. we like to do it by eliminating deductions and credits and leveling the playing field. it is very hard to get that rate to even 28%. there is debate between folks whether you can get to 25. i have yet seen ways to pay to get to 25 but we have a structure to get to 2. if we have a convergence of ideas about the importance of lowering the business tax rate, the importance of getting rid of distorting effect of special credits and deductions, we even have a way of reaching across to the pass-throughs that file as individuals by saying, if you can deduct the first million dollars of business expenses, instead of taking over time as

depreciation, deduct it. that is benefit whether you file as a corporation or a pass-through. there is awful lot i think we have convergence if not total agreement on. then tax reform has the effect of throwing off some one-time savings. as you make these savings there's a bump in revenue. if you were to cut your tax rates forever, and that bump disappears you're no longer revenue neutral. so there has been a question, what could you do about those one-time savings ? the president made a suggestion. why don't we see if we agree on things we agree on? there is broad bipartisan agreement that infrastructure in this country needs attention. i think there is broad bipartisan agreement we have problems in training and education that need attention. if we could take one-time savings, do something good for the economy, good for business, lower tax rates for businesses, make it easier for businesses to invest, that would be a big

accomplishment. so i think there's ideas there where you still could see progress this year. >> but do you think you could get corporate tax reform done without getting individual tax reform done? don't you have to do both and is it possible just to do one? >> it is certainly possible. the argument has been made that you shouldn't, not that you can't and the president suggested, he would be delighted if we could have agreement on a fiscal frame so we could do, you know, tax reform on both side. in the absence of a fiscal agreement, you can not rewrite the tax code one time in a generation and leave for later the discussion of how revenue fits into a fiscal solution. so, you know, we're happy to do either. we're happy to do comprehensive tax reform with a revenue target that's part of a fiscal frame. we're happy to work on business tax reform that uses one-time savings to help build a foundation for economic growth in this country. that leaves you paths i still think are possible to cross.

i know both chairman of the house ways and means committee, the chairman of the senate finance committee are very determined to move forward with this. i talk to each of them regularly. we're providing technical support as all parties are thinking through this. you know, there's multiple paths that we could make progress on and i'm hopeful we will. >> were you surprised that larry summers withdrew and the president asked you for a recommendation and when do you think we'll have a decision from the president on the new chairman of the fed, all three of those questions? >> david, i have kept my advice on the fed where it belongs in the oval office and i will stick with that policy. >> all right. can you tell us when you think maybe we'll have a decision? >> i'm not really going to add anything to it. >> will you tell us how you got your signature? very often, it has been commented when you were being confirmed that you have an unusual signature for secretary of treasury. have you changed that on the new dollar bills that will be coming out with your signature or sticking with the same signature. >> i've been working on my

penmanship for 40 years. i think it's a lifelong under takeing. >> so no change, okay. we're up on the fifth anniversary of the financial crisis. as you pointed out, and when you say the chance of our going through another crisis like that has been removed by dodd-frank or do you think there's a chance something as severe as that could happen again? >> you know, i think as we, as we all think about the fifth anniversary of the financial crisis and how far we've come we have to start by saying how much we've done since the financial crisis as a country, as a people, as a economy. a lot of healing has taken place. we've seen economic growth i described in my opening remarks. we've seen repair to our financial system where we have better capitalized banks, we have financial system where large institutions have to have plans for how to resolve themselves and not turn to taxpayers for support if they hit hard times. we're seeing movement to deal

with some of the new and troublesome developments in the financial system like shadow banking. we're not done yet. we still have quite a bit of work to do this year. i have put an enormous amount of my time as treasury secretary into convening the regulators and impressing on them that by the end of this year, the major components of the dodd-frank bill have to be completed, including the volcker rule. and i think that when we're done, we will have accomplished the most significant reform of the financial system in 75 years and, you know, unfortunately, or for natalie we won't know with 100% clarity unless and until there's a financial crisis whether we've done enough. i believe that we've taken the steps that we need to take in enacting a law that says too big to fail is over. we're in the process of taking the necessary steps to implement that law.

as i said on a number of occasions when we're done we have to take stock and we have to look at the world as it exists the end of this year, the beginning of next year, then each year after that, each month after that, really on an on going basis and saying, is the financial system the same as it was? has it changed? is it evolving? do we have the visibility into it? do we have the supervision? do we have the right regulatory structure? one of props that happened between the 1930s and this financial crisis there frankly was not that ongoing vigilance to ask, do we have tools we need today? not the tools we needed before? so i think the system is much, much safer. i'm committed to being in a place where we can say we ended too big to fail. i can't say there won't be bumps in the road. every economy has bumps in the road. the question is, can you manage with it, can you deal with it, and can you protect the taxpayer

from being responsible and protect the economy from having the kind of secondary and ongoing shocks that caused the kind of recession we saw in 2008-2009. we've made, great, great progress. >> the legislation was controversial at time and maybe it is still controversial. when all is said and done will the federal government make money on the tarp investments or will it lose money. >> we already turned the corner on the bank investments. so, i must say that as a hugely important accomplishment. when that was enacted people were saying, there are hundreds of billions of dollars that will never be recovered. they have now been recovered. one of the challenges with the american, people right now is that they're looking at the damage that the economic crisis caused and a lot of that damage hasn't been healed. you still have a lot of people who can't find jobs. you still have businesses that are nervous and we still have work to do not just to get

repaid for the investments we made to save the financial system but to deal with some of the core problems in our economy. in just these last few days, last week, a new study came out that showed that, you know, we've had a substantial growth in income as we've come out of the recession but it's highly concentrated. it mostly went to the top 1% and frankly went to the top 10% of the top 1%. i think american working families struggling to making it into the middle class are asking, what are we doing to fix this economy so they can send their kids to school, so they can have jobs that are solid ways to build a stable family? and that is what the president has been focusing on. we need to get beyond these kinds of discussions like we were talking about in the first part of our conversation about economic brinkmanship and get on with the business of really building the architecture for

strong, growing economy. >> so you worked with as i said president clinton and president obama. what is their difference in working style? does one like memos better than the other? does one like discussions better than the other? can you give insights how it is to talk to them about economic matters? >> as you know from your experience in the white house, david, it is extraordinary to have the privilege to walk into the oval office to speak candidly to a highly informed, highly-intelligent president who presses you to the limit of your knowledge and wants to make the right decision after taking account of all the thinking that he can. obviously no two people are wired the same. you know, both president obama, president clinton are readers. it is sometimes a little daunting because they both read more late at night than i do, because i need to sleep a little bit more. you're always like a little worried they read something that you didn't read and i read a lot

there's, there's, you know, it's interesting how, i really could not say more about how much intellect each brings to what they do but they have different styles of thinking. and, president clinton tends to grind away at the detail in a way that is extraordinary and his recall is extraordinary. president obama has a lot of that but he had to take a step back and ask strategic questions to avoid getting you pulled into the level of detail where you might lose track of how the pieces fit together. you know, just been an extraordinary experience to work for two people who bring just extraordinary intellectual capability to the eve al office. >> when you become secretary of treasury i assume former secretaries of treasury like to call you to say, do this or don't do that? have you gotten wonderful words of advice from many of your predecessors? >> i do talk to a number of my

predecessors periodically. in many of these senior jobs in government people don't fully understand the way divisions present themselves and how you have to think about them if they haven't been there before. you know, i think there's a huge benefit listening to people who have experience. i value the time that they're willing to spend with me. >> so one of your predecessors tried to resolve a dispute with a dueling. alexander hamilton. that didn't work out successfully for him. that is not something you ever considered with members of congress or anything like that, right? [laughter] >> i think it is safe to say i'm staying on new york side of new jersey if i ever get that invitation. >> okay. when you deal with foreign ministers of finance overseas, are they worried about our debt limit problem and do they call you and say what are you guys doing in washington, when are you going to resolve this because our economy is dependent on what you're doing? >> i talk to finance ministers

very regularly and i think they reflect some of the view in the business community that nobody could do this again. nobody could go back to august 2011 and create the kind of chaos we saw. i think that as we become more anxious that congress is driving this to the edge, they will become more anxious and, i think the world counts on the united states to play a leadership role not just in specific issues but in terms of demonstrating how democratic governance works. so it was very destablizing in 2011 when it looking like the center wasn't holding in the american political system. it would be pretty destablizing if we got there again. >> the u.s. economy this year you think will probably grow, our gdp will be 2.2, 2.3% or something like that? >> i stay away from specific point estimates. i'm pretty bullish on the american economy. if you look at where we've come

from, where we are, we end this year with an awful lot of headwind dying down. we've absorbed the end of the payroll tax cut. the impact of sequestration is negative but it is being absorbed. we end the year and go into next year without those kinds of drag being put on the economy. we would be growing half to a percent greater if not for all that drag. so you look at the u.s. economy, you look at the energy revolution we've had, the attractiveness of investing in the united states, there are a lot of things that are poised to do better in this economy. the reason i've been dwelling on the decisions we have to make here in washington is because i've come to washington to make things better, not to commit self-inflicted wounds. we need to make sure washington doesn't stand in the way of an economy that is poised to grow. >> are you worried about the european economy? are you worried about the

chinese economy? >> i worry about a lot of things. you know, i spend a lot of time looking at the european and chinese economies. together, the three, u.s., europe and china are the three largest economies in the world. a year ago you couldn't get through the first hour of a morning without geting a update on where the european economy was. there was an impending sense that this crisis in europe could pull down the united states economy and cause a recession even. i think they made a lot of progress since then. they're not completely out of woods. they have have a lot more to do. they are going to have some countries that need to have the arrangements that they have worked out reevaluated in the coming months. they still have work to do in their banking system to make sure they're better capitalized. but they're in a much better place than they were a year ago. they seemed to be turning the corner someplaces that they didn't think they would come out of recession this year. and you know, i think it is way, way, way too soon to say it's

all healed but it is certainly better by a long shot than it was a year ago. china is fascinating. china went through a long period of double-digit growth and there's going to be a decline to a more sustainable rate of growth. they have got to make some tough decisions internally in order to make sure that they level off at a level of growth that works for china's economy and china's social stability. you know, they i think know that they have to move towards more market-oriented policies that the distorting effect of subsidies and support for state-owned enterprises has really hurt the ability for long-term growth to be where they want it to be. they will face a lot of split tough political decisions when they face their meetings in a couple week. they need to move in constructive direction. in conversations with china you increasingly have the sense you're pushing on an open door

that we think is in their best interest, they understand is in their best interest and they have political hurdles but, jury is still out and they have some very important discussions coming up. >> every treasury secretary is trained to say or not say something about the dollar. so what can you say about the dollar? i assume you favor a strong dollar? what can you say about the dollar? >> being trained to say something you think a lot about is probably one of the hardest parts of the job but i'm sticking to the policy to say nothing. >> you're trained to say nothing about tapering as well? >> i focus on the core economy and we're doing everything we can to make sure there is core economic growth in the united states. >> okay. why would somebody leave the chief of staff of the white house where you're the center of all the power of everything to be treasury secretary? others have done it of course. but i'm just curious, what was your thinking? >> well, first of all very few people do it for very long periods of time because it is

probably the hardest job after being president. secondly the president asks you to serve in the position where he thinks you can make the greatest contribution when you're given the honor of being asked to be treasury secretary. it is pretty hard to say no. >> okay. so you have served in many of these government positions. is there any other government position you want to serve in or you're very happy with what you have now? >> as many great american leaders said, citizen is the highest office we can all hold. >> okay. jack, i would like to thank you very much for giving insights and showing us the deficit and debt problems we have to deal with. >> thank you, david. [applause]

[inaudible conversations] >> if you missed any of this conversation with the nation's treasury secretary it is available to watch in its entirety at a our website. go to c-span.org. in about 50 minutes we'll have live coverage of the u.s. senate here on c-span2.

they will pick up where they left off yesterday after recessing unexpectedly because of the washington navy yard shooting. senators will start the day with general speeches. they will also vote today on judicial nominations and continue work on an energy efficiency bill. the senate will recess after those judicial votes at about 12:30 eastern for the weekly party lunch meetings. you can watch live coverage of the senate when they gavel in at 10:00 eastern on c-span2. we'll take you live at 1:00 eastern to the national press club where oklahoma governor mary fallin will be speaking. she is the chair of the national governors association. she will talk about her initiative on education and job train. now former treasury secretary henry paulson and former congressman barney frank look back at the 2008 financial crisis. both of them worked on the dodd-frank law creating new banking regulations. "wall street journal's" david wessel monitored the hour-long conversation at the council on foreign relations

here in washington, d.c. >> good afternoon. lyme david wessel from "the wall street journal" i'm honored to be sitting here with barney frank of dodd-frank and hank paulson of hank, the new documentary. two rock stars of the financial crisis. welcome to today's council on foreign relations meeting. this is part of the council's history-makers series which features individuals who make a unique contribution in critical junctures in u.s. foreign policy or noteworthy period of u.s. history which i think the crisis qualifies. this is made possible by the continued generosity of hbo. let us start with a question on the mind of a lot of people in the public. when you look at the entire picture, the number of prosecutions, the sec charges, executive compensation, the public statements of contrition or lack thereof from the leaders

of wall street, do you think that the people who were responsible for the decisions that led to this devastating crisis have been held fully accountable? >> well, i sure know that's question on the public's mind and i'm going to say something that may not resonate a lot publicly but, if you accept my explanation of the crisis, which the excesses had been building for years, that a giant credit bubble burst, that a, that a definition of a bubble is something that the market never fully understands until it bursts, and my explanation that every financial crisis in history has its roots in flawed government policies, and then when it bursts it manifests itself into the financial system

no matter how it is structured, then you may accept my answer which is, the banks made a lot of mistakes that there's nothing wrong, we should focus on the mistakes and correct those mistakes, but that the men who are running these banks and people who are running these banks, men and women who are working in these banks were dealing with a 100 year storm, something the likes of which they had never seen before. the country would have to go back to the great depression to see something like that. they were not trying to blow their entities up. now, so i'm assuming that given all the investigations that have gone on that it would, when people broke the law they are being held accountable but i understand that view out there exists. >> well, first our jurisdictions

mine at committee and hank's at treasury, he is not the justice department, i wasn't the judiciary committee. we had a very important job which was, a, prevent things from falling apart totally in 2008 and then trying hard to keep them from reoccurring. i don't speak with direct involvement there. secondly i want to say, i want to talk to some of my liberal friend about this, one of the reasons we had a pass a lot of new laws a lot of stuff that was bad wasn't illegal. i want to talk to liberals in particular, a central element in due process is you do not criminally prosecute someone unless he or she had good reason to know that conduct was illegal and there were ambiguities. people said, prosecute even if you don't win. earl warren would not let us do that. that is a big part of the problem. >> still around, earl warren? >> i do, said wouldn't have. i do think this.

that's a major reason you had to prove beyond a reasonable doubt people did think knowing they were against the law. and i, that doesn't mean ignorance of the law doesn't absolve them that, it was illegal. on the other hand i have to say attitudenally i'm very disappointed in them. i think they're acting, many of them, we hurt their feelings. if you look at the law, if you look at what we did, we didn't stop them to do a lot of things. if people want psychic income from the government and a lot of these guys are still making a lot of money, how can you say such rude things about us. >> as a former banker i was disgusted by a lot of the things i saw, you know. disgusted by the mistakes that were made, behaviors, and so on but you can be disgusted, you can be disappointed but you can still take the basic view that

barney and i have taken, athlete i'm assuming that the legal system, you know, is working. >> barney frank, lehman brothers, hank paulson said a number of times he tried to save it. he couldn't. they didn't have the legal authority to do it because they were in such bad shape. you once had a great line where you said that was national free market day, the day that lehman went down. do you accept that there was nothing that the treasury -- >> i do based on this i had a very close working relationship with the secretary. by the way, what happened to bipartisanship, where did it go? in december of 2008 it was alive and well. republican president in midst of election come to democratic congress and says you guys work that out with paulson and bernanke. we were working closely then. democratic campaign fund-raiser that the lehman went under. i came to hate friday afternoons

5:00. the phone would ring and he would call me up about a new disaster after the most of the markets were closed. we were talking about lehman brothers. i knew he was doing everything possible to keep it going and i went home and i remember i said to jim, my husband then, we were dating, barclays bank will buy lehman brothers. paulson told me that. then the fsa, turns out what they were doing pulled the plug. i know he tried very hard to do that. my comment was, a lot of my conservative friend let them go bankrupt. you should not have done bear stearns. let them fall. lehman was allowed to fall. the consequences were so terrible the consensus came you couldn't have that happen again. one day of lehman was national free market day. >> david, the other thing which barney allowed me to tell the story in the prologue that has just come out with the reissue of "on the brink", it wasn't too

long that lehman went down, excuse me, that bear stearns went down, that the markets, again with bear stearns, bear stearns had only been saved because a buyer in the form of jpmorgan emerged and, we had to had, the fed assisted that buyer but we had learned at that time we didn't have the necessary authorities to save a failing investment bank without a buyer. so ben bernanke and i went and talked with barney when he chaired the house financial services committee. we explained we didn't have the powers, the emergency powers we had for commercial banks, we didn't have these for investment banks to wind them down and keep them outside of the, to wind them down outside of the bankruptcy process and barney explained what we knew was true after he explained it, that we weren't going to be able to get

those authorities from congress. the only chance of getting them was to say, we'll have a huge crisis if we don't get them because maybe lehman would fail and that would brought it on us. they actually ended up enacting those authorities as part of dodd-frank. >> let my say by the way, i have to again make a factual point, opposition was coming much more from the republicans than democrats. a strong wing of the republicans particularly on financial services committee, who said, let it happen. i realized i didn't fully answer your question. hank convinced me and ben bernanke if an institution did fail they had one of two choices. they could either pay all of the debts or none of the debts. neither one was acceptable. lehman paid none of the debts bad stuff in the economy. aig paid all the debts. everybody is in a bad mood. what we did in the bill what we did in the bill was give them the authority when an institution failed, first of all to put the institution out of business.

let's be very clear. we had death panels, we had death panels in 2010 but they were for big banks, not old i had ladies. they were not in the health care bill, they were in our bill. they were put out of business. the authorities can step in and pay only as much of the debt they think is necessary to avoid further contagion recovering from -- that was a, that was in the bill. it was in the bill because hank and ben bernanke had asked us to put it there. he had absolutely right. he had no legal authority. it was either all or nothing. we said do as much as you have to and no more. >> so -- >> say even on lehman we didn't even have all because we couldn't guaranty or put in capital. aig the fed was able to make a loan because it was secured by the insurance company. >> that was another thing though but the fed did, apparently herbert hoover had signed a bill giving the fed the power

essentially to give money toy wp the economy going. sectio13.3. that w repealed. so you don't have that unrestricted power anymore. >> a number of people, bob diamond, former ceo of barclays to elizabeth warren, senator from massachusetts, we did a lot of nice things with dodd-frank and glad banks have more capital but we haven't solved the problem of too big to fail. do you think we solved it? >> well, here's what i will say. i have no doubt too big to fail has to end. we have, we have, this is not the thing that i'm most concerned about because as a result of dodd-frank regulators now have the tools to manage the failure of any large financial institution. and to keep it out of bankruptcy. so, what i've said is, too big to fail is a misnomer anyway because it's, it's not just

size, it is complexity, it is interconnectiveness. number one. i go on to say that, that no bank is too big to liquidate. almost any bank of size is too big to liquidate immediately in the middle of a crisis. >> if we have another global one, is the system set up to handle a global collapse? >> in terms of what we can deal inside the u.s. the regulators now have the authorities i wish we had then and much better tools to work with. if you're asking me whether those tools have been refined globally, i would say the answer is, there is more that needs to be done. financial markets are global. they're integrated. they're not regulated nationally. i don't think we can ever get there. we can do a better job of harmonizing it. we don't have a perfect regulatory system in the u.s. we have five different regulators

now arguing and fighting with each other. it is even more problematic globally but, so is it perfect? no, but, dodd-frank, you know, as required, you know the living wills, the plans to liquidate these large institutions, it has given regulators the authority to do so and i think the reason that, that the things we did, one of the reasons, a lot of reasons, the things we did were unpopular but one of the reasons they're unpopular is that as barney says you should not, if an institution fails they shouldn't be propped up in their current form. that's what we were forced to do without that. >> let me say, i, here's the way the bill clearly works. an institution, it is true that there are institutions that are too big to fail and ignore the consequences. that means there are institutions which if they fail and can not pay their debts that will have the negative knock-on

effects. what is different is, you can no longer legally, known in the federal government, not fed or secretary of treasury can do what is was done to aig. no one can advance a institution which can not pay its debts and keep it alive. people are fired. the shareholders are gone, the board of directors is dissolved. the fdic takes it over as the revolver although it was odd semantic thing in financial terms. resolve became dissolve. i don't know why it became resolve. secretary of treasury may find there is not enough assets in the bank and not enough mon from shareholders to pay all the debts but the secretary of the treasury in the law is mandated to recover any penny by assessing financial institutions over 50 billion. so my question to people is what do they think is going to go wrong? one group says, oh, you know what? if a major financial institution

was in trouble there would be overwhelming political pressure not to put it out of business but to keep it going. in what country? in america with george bush and barack obama, and all the congressional leadership and everybody else we were barely able to get the tarp through. the notion that american, the american public would demand we go to the rescue after big bank and keep it going is fantasy. now the one plausible thing, diamond had a column you showed it to me, what about internationally? we can control an american bank. what if a bank somewhere else with a lot of branches that still has to be addressed. last question, what about a global failure, massive failure. our scheme would have worked in 2008. what if they all fail? remember in 2008 lehman was in trouble. lehman went under. aig was in trouble, a couple others were but goldman and wells fargo and jpmorgan chase, hank had to force them to take the money. they didn't need the money. he had to insist they take it so not to stigmatize the others that needed it. so, yes, it could be if there

was a massive drop, my only answer, going too long, i want to quote -- he was once asked what is your plan in the soviet union invades israel. he said for some things you can not plan. >> when hank paulson asked me to do this you're not going to get a word in edgewise with barney on the thing. he said, don't worry, i'm really aggressive. [laughing] >> i would say to me, where politics could enter in and so i agree with barney, we've got a lot of tools we need and on top of that the banks are better capitalized, better regulated and so on. and as you know my focus is on other issues, not that the big banks aren't a problem, not that we don't have more to deal with the big banks but i'm much more focused on fannie and freddie and the shadow banking markets and so on. but i do want to say we will know how these things work when we have a crisis and when the people are sitting in the seats

use the authorities because again the place where politics could come in, okay, is partly my making because the things we did were so unpopular, really unpopular, i mean that there were polls when i left office that showed torture scored higher, more favorable than the tarp. i mean it was, it is funny now. at the time i did -- >> you were not up for re-election. >> those that voted for it were a little bit more concerned about the polls than i was. and so i was plenty concerned. the deal is, i think, i think regulators got the tools they need, but as i said, and they have got emergency authorities to guaranty liabilities, put in capital, everything that i think they need but if, i think there may be pressure to liquidate

these banks and not prop them up too quickly. >> the opposite of what the people say. one sentence, because the question is what if too many of them fail? we can't guaranty no one would fail but hank's outline shows if one does fail the others will be in much stronger condition. that is likelihood of their being blown over by this wind is diminished because of fact they had to strengthen themselves. >> if you could have added one more title to dodd-frank what would it have been? >> i would have, would have merged the sec and the cftc. no national universe but the other problem is the cf. c is the farmers, the sec is the east coast and west coast financial committee. it would be politically difficult. you would have shays rebellion break out. >> you wouldn't have rebellion in west coast and east coast. it would have been people in

congress. >> no rational way, the cftc when it was started dealt with corn and pork, et cetera. then what happened was the financial derivatives came to the fore and that is what caused confusion. before you had financial derivatives, i propose ad solution at one point, we should give the cftc jurisdiction over everything edible you and the sec everything else but the agriculture people wouldn't give it up. >> fannie and freddie, you mentioned fannie and freddie, big piece of unfished business. we basically now nationalized mortgage market. what should we do? what are the principles we should do? >> let's get to that i want to say the first thing that barney and i members, you know, democrats and republicans worked on getting done was these extraordinaire authorities for freddie and fannie and i think they haven't got as much attention as they might have

because we acted before they became unglued. these organizations were totality nine times larger than lehman brothers. market sometimes auctioning $20 billion of securities. if you had one of those auctions gone bad and people start the dumping these securities it would have been terrible. can you imagine what mortgage prices, where home prices would have gone and number of defaults we would have had if those institutions were put into conservatorship. i think they're about as effective as anything we did during the crisis. so that is the biggest untold story. i'm very concerned because right now you know, roughly, 90%, maybe not quite, roughly 90% of the mortgages in america, residential mortgages have some kind of government support. so i argue that that means that government subsidies are setting

the price and terms, not, not the private marketplace. my thought is, i'm no longer treasury secretary. i don't have to come up with a specific proposal. but what i do say is come up with principles. and i do like, you know, the corker-warner bill but we could have anything that really shrunk their mission, you know. i'm not someone that says they shouldn't exist but i would phase them out and whatever, and then have some clear roadmap for what will succeed them. i think anything we do should have private market participants should be at risk. any government guaranty should be very explicit. the government should be paid for that guaranty. and price should be sufficient that there's room for a private mortgage market. and then i would limit the

mission in terms of either the size of qualifying mortgages, you know, the income of the borrower or first-time homeowners, all of the above. >> mr. frank, they're doing all the things that you always wanted them to do, right? they're making homeownership available? >> i've been very skeptical of homeownership. i have agree completely with what hank said. this argument, you liberals let them run out of control. i have to make a factual point. from 1995, 1994 the congress passed something called the homeowners equity protection act that said to the federal reserve, please regulate mortgages and don't let mortgages be given out improperly. alan greenspan now acknowledges that he rejected that authority. said it was an intrusion into the market. he later testified he now believes he made a mistake because he didn't think this would go out of control. from '95 to 2006 i was in the minority. republicans controlled the congress. i was originally too sanguine about freddie mac and fannie

mae. i became persuaded things needed to be changed. as hank said in the book, he became treasury secretary in 2006. we became the majority. we began working together. the first legislation reining in fannie mae and freddie mac was in 2007 when i was chairman and chris dodd. in solution i agree very of with him. i don't think the hybrid, public shareholder mission is too much tension there. here is the free policy debate. some of the free market purists believe, pull out all together. people in the housing business say if you want 30-year fixed-rate mortgages to be available there has to be government guaranty. but the government should not be guarantying credit risk. there should be an availability for people to buy some kind of interest rate risk if they're going to commit for 30 years. price kind of to clear. so that's what we're talking about. that is what corker wants to do. my piece of this, this is what i always felt i think people

oversold the importance of homeownership to people. i want to see affordable housing trust fund we put into our bill funded. what i believe we need to do, first of all you shut down mortgages that shouldn't exist. we should, bill outlaws, financial reform bill outlaws bad mortgages and you replace that with decent, affordable rental housing. >> do you think bush and obama administration did as much as they could have to help people underwater and in danger of foreclosure? >> no. but here's part of the problem. it was not either the bush administration or the obama administration. it was none of the above administration. this is the first time since the great depression that we had a serious problem to deal with during a presidential transition. even though they moved it from march 4th, to january 20th, hank and i talked about this. remember this clearly the first 350 billion of the t.a.r.p. went out without much about mortgages. we argued about that. it was one of our few differences. hank said to me, i can draw another 350.

if obama okays it, i will ask for it. i asked the obama administration to okay it. they said we're not in charge. they're in charge and neither bush nor obama frankly was ready to get engaged. hank was ready to do it. obama administration said we have only one president at a time. i got in trouble i said that overestimated number of presidents we had in december. we lost an opportunity. i honestly believe that i hope political scientists will study this. this is the first case there was negative impact of a transition since the new deal. >> i would say one thing though in all seriousness. i think george bush was a great president during this period and the way he, he dealt with me. the fact that he didn't worry about public sentiment. he was determined to do what was right. and i do think that we had, we

could spend a lot of time talking about housing finance. it was one of my regrets i wasn't able to cop up with a way to limit the amount of foreclosures although i do think the fannie and freddie action we took did more than anything else that was done. i regret that it eluded the obama administration also. i think the level, as i look back at it now, despite some of the angst i felt during that transition, as i look back at it now, the policy continuity was extraordinary because, because president obama picked tim geithner. ben bernanke was still there. barney was still there. chris dodd was still there. he picked tim geithner. geithner had worked hand-in-glove with us in designing these programs. so this capital market

stabilization programs they needed, they had the programs they needed. it was in place when they got there. they managed them well. there was pressure, i have no doubt there was pressure because every new president, there's pressure from the base to get rid of what the other guys have done, disavow it, but they basically kept the perhaps, they managed them well. so that part -- >> i agree. bush did deserve a lot of credit for defying some of his own idealogues giving hank the authority to do it. we have one difference of opinion. we had written into the t.a.r.p. bill -- >> 50 billion. >> mortgage relief. hank, correct me, he believed there was such an urgency to get the first money out that you couldn't wait for some of that. he did say to me, he was willing to ask for the second tranche of money and that would have been used for mortgage -- remember here is the problem with mortgage relief. the problem had to come from somewhere. a group of people owned another

group of people money. we couldn't wave a magic wand to forgive it. that's where the transition fell through. there was a -- i have to be critical of the secretary of hud, john donovan who he generally admired. we did take a billion dollars of the tarp money and say, use that to relief the mortgage distress of people who have been long-term unemployed. he got so bureaucratically involved only half of that was spent. i was frustrated we started to give authority that wasn't used. >> let me ask one final question before we turn to the audience. the fed, how much, or has the very public and contentious fight over who should succeed ben bernanke, larry summers's withdrawal how much has it hurt the fed or hurt the country. >> the fed got hurt, i remember when green gene was chairman, i was kind of a dissenter from the current consensus that everything he did was wonderful although he did a very good job. i found myself in the last years

being a defender of the fed against a left-right coalition. but i tell you the moment, it was really a moment when this began to go sour. one reason we couldn't consolidate authorities in regulation you couldn't either give power to the fed or take it away. they might have been the logical one people got upset. if you took it away, greenspan and others always said we can't do monetary policy without some insight. but here's the moment. people i hope go back and look at this. when it came out that aig which had been the recipient of $165 billion in what looked at the time like free money although since been paid back, when it came out that they had given very large bonuses to people, the pitchforks were out in the streets. i have mean there was a white heat of anger. i actually feared at that time that we were going to lose a capacity for coherent governance. the fed, you go back, i'm sure this is the case. you look at the post, that is when the fed got demonized. fed first gave money to the peop and then they gave all

these bonuses. chris dodd who put a bill in to try to restrict the bonuses got into political trouble because he had constitutionally not tried to lift them retroactively. people said you can't take it away retroactively. they blamed him for the bonuses. yeah the fed was weakened. but i don't think last thing was added to it. i think from the reaction they bore the major political blame unfairly for the bailouts. >> do you think the fed has been hurt by all this. >> by? >> by the storm over who should replace ben bernanke? >> well i agree with barney that it has been accentuateed by, in the fire and storm of unpopularity of the actions that we all had to take and the fed took which were very unpopular and the american people never understood, never understood, we did these to prevent a disaster, something barney and i both understood. we could have had something that

rivaled the great depression. barney was the first one that explained it to me. the first time i heard the word, not being a law student, counter factual. you will never prove a counter factual. you will never get credit for disaster you avoided. i agree with him, legal though they were, upset a lot of people. it infuriated the american public. but this last thing to get to your specific question, i hate it, i just hate the political turmoil we've seen and the politics around the appointment of the next chairman of the fed. i don't like the way this has been handled. i just, i would like to have a decision made quickly. you know, we've got good people. larry summers is a very good man. he's highly regarded. he's very able. i don't, you know, janet yellen, outstanding. don kohn outstanding. there are, the key thing is, you

know, we've got some good candidates. this is a very important decision. president obama's got to make. i have always argued that one of the, president bush made some very important decisions. i think picking ben bernanke was a very good one and -- >> absolutely. >> very important one. i think this one is important. and one of the things that really bothers me about washington is sometimes when people disagree with policy they go after you then on all kind of other issues and personal eyes it and so on. anyway i'm saddened by it. >> one of the most saddening things about -- i'm critical of the committee. apparently we hurt their feelings. what you've seen -- >> financial community. >> bankers and investment people, the fed has been under very unfair assault, irresponsible assault. people complaining when the fed stepped in with a swap to help

europe from avoiding disasters. and the role of the, what's happened is, most idealogical people, some on the left, you but even more on the right, have now turned on the fed. i think the failure of the financial community which knows better to defend the fed against the kind of irresponsible attacks son the institution is very, very discouraging and it ultimately coming back to hurt them of the they may think somebody else is going to do it. i think they have the responsibility to not to allow the fed to be as attacked and i think damaged as it's been. >> you may be right. i agree with everything you said but i'm wondering if right now the finance committee speaking up for the fed would help or hurt them? >> in this case it will. here's what they say. >> yeah. >> i don't mean, i don't want to make big public speeches but they want them to say, yes, congressman x, here is your $5,000, but would you please

ease up on the fed. that would be very -- >> [laughter] >> pragmatic recommendation, sir for reform. i will now turn to questions. here's the rules. you can ask a question. a question ends in a question mark. no speeches. these guys make the speeches. wait for the mic and speak into clearly. say who you are because this is on c-span and everything and, keep your questions short. and i have an ipad here and apparently there are some corporate members of the council on foreign relations who may have a yes. can we get a mic in the front here. there's a woman in the front. >> i work for the naval postgraduate school. i've been struggling since we fell apart to understand how it happened. i never studied economics but the thing that puzzled me, no one was concerned as it appeared giving loans to people that had no money and that the assumption was they were going to have it for a few months or whatever and then sell it and the price would

go up i just thought was nuts. why didn't anybody raise that question? >> one, people did. by the way, here's what happened. 50 years ago most people who borrowed money were going to have to pay back the person who lent it. thanks to liquidity coming from nonbank sources, and from information technology, you were able to get into securitization. this is one difference i have with the way they're administering the bill now. so people began to make loans, sell the loans, and not have any further responsibility and the lender borrower discipline slipped. now one substitute to that was supposed to be the rating agencies. then which no one has a done a worst job in my memory. and so that is essentially what happened. there was this, people gave loans, who shouldn't have gotten loans because the worry that they wouldn't be repaid was a problem. now, one of the things we put into the bill, this is my one

criticism of the administration's implementation, we put in the requirement for risk retention. that the idea would be that if you made mortgage loans, the person who bought those up and securitized them, sold them to general public had to retain some of the risk. to get 60 votes in the senate we had to agree to exception to that for really good loans. the regulators to my dismay, i coauthor ad article with sheila bair about this collapsed those two categories. there are some loans we did ban, we banned them the other thing if you make a loan for mortgages you don't have to have this risk retention. that's my most serious complaint. >> i would just, because i agree with everything barney said, i will add two additional things. the first is, ever since world war ii the plethora of policies we've had in the u.s., not just fannie or freddie but the home

mortgage interest rate deduction, fha programs. >> va. >> va, all the different, tended to promote homeownership. as barney said you can have too much of anything, a good thing. so home, residential home prices tended to go up in the united states. so all the models, everything people looked at, didn't see a big drop in residential mortgages. if you were an investor and you own ad residential mortgage the biggest risk historically was not you would get your money back, get it back too soon. rates would drop, people would prepay. the other thing i will say that disappointed me in terms of dodd-frank and the way that was watered down, the regulators allowed allowed this exception if a mortgage was a qualified mortgage. the new consumer finance protection bureau originally had regulations that said the buyer had to be able to afford the home and put 20% down.

okay. there was huge resistance. so, you know, and, affordability is important. that is ability to pay but willingness to pay is also important what we learned. the only way you get at willingness to pay is 20% down. so even on that this new consumer finance protection bureau, to my judgment bowed to political pressure and -- you. >> both think that the cfpb has weakened it? >> not just the cfpb, it was everybody else as well. there was joint pressure-- by the way i don't think it has to be 20% down. >> something. >> something. mortgages so bad you can't make them. that is in the law. you can't make them. there were supposed to be two others. average mortgage where there was risk retention of securitized. then a small number of really good mortgages. i didn't even, in our bill we didn't even have the last exception but a couple of senators wanted it. one thing about the filibuster rule, that 60-vote rule gives

every senator a gun. you want 60, you will give me this. so what the regulators did, cfpb disappointed me on this but everybody else did. you had this coalition, banks, realtors, the poor people's advocates, liberals i am critical of them for this because hank is right. that, only solace i have is, statutory authority is still there. i hope within a few years they will reconsider that. >> take the mic down the middle. gentleman here on the left. then we go one to the back. >> there is huge lobbying. >> guy in the green. >> is there, you mentioned earlier that there's still a lot to be done abroad. is there or should there be a contingency plan in case now very big chinese banks would run into trouble or even fail? >> contingency plan for what? >> he said should there be contingency plan if one of the big chinese banks fail?

that would be popular. [laughing] >> but what barney said, there are some things it is very hard to plan for. but, there is certainly, you know, we did contingency planning when i was secretary treasury. i'm sure they do contingency planning for stress tests for big global banks failing and for crises starting other places. now even, our financial crisis i maintain was not a u.s. financial crisis. it was a u.s.-european. the european banks had at least a big of a problem. they didn't deal with it the way we dealt wit. so you look at ours in terms of the timeliness and effectiveness i think it was better in terms of getting capital. but yes, i'm sure regulators have contingency problems for things that happen globally. but as barney answered to david's questions, we don't have control in terms of what foreign

countries do. we have to coordinate. >> can i ask hank a question? is it the case that might be less likely given the fact that the chinese government would be less constrained by public opinion and a major bank was threatened and they could step in and stop the bleeding earlier and easier than we could? >> yeah, i didn't deal with a specific there. that is why i got a specific question i dealt with it generally. that is why i didn't want to specifically get into china but yeah, frankly i'm not predicting that likelihood and al i would say all over the over the world, europeans started off, the germans were bailing out bun desbanks over the weaken and no one noticed it. the crisis didn't start, in the u.s. there historically was much less political, you know, concern about, about bailouts.

and in the u.s., that, too big to fail became an step back. we've had crises a long time and regularly. most of them are imaginable. okay, most of them are imaginable. it was only when we didn't have the authorities we needed and this was just an extraordinary test, that the american public was hurt. >> bob winter. i have two in a sense related questions. you spoke about the lack of criminality enforcement and i understand the positions that you both enunsy eighted. i wonder if you could address the same question from the point of view of regulatory authority and the ability of the regulators to step in and to take action against individuals, executives and board members who engaged in conduct? >> that is very important

distinction because they have argued, oh, we can't, the argument that we don't want to put another big company out of business is a, valid, but b, no excuse. they should go after, by the way going after individuals is a deterrent. fining the company doesn't bother anybody. >> no. >> i agree. here's one, let me say this, i don't know why, i have been busy with the other stuff. but here is one factor i will feed in their defense. the securities & exchange commission and the commodities future trading commission are both grievously underfunded. we gave the cftc a lot of new authority to do with derivatives. frankly again, it is partisan difference. when republicans took over the house in 2010 they decided in the budget to significantly underfund the, cftc gets $300 million to run this whole industry. the problem is, what they tell me, i'm just repeating this, if we begin to get tough on these people, they will litigate and they have resources beyond what

we have. and a couple of those cases can sort of exhaust us. so what, one of the things i hope we could have done in the bill was give the sec, for example, the fiscal autonomy the bank regulators have and we couldn't get it done politically. >> gentleman in the back. and there's a woman in the front here. ma'am, can you give the woman in the front here, the second row. sure, go ahead. >> hi, my name is peter ackerman. since 1:90:87% of all mortgages were held by gses. 64.5% of the american people owned their own home. today 90% are held by gses, and 65% of all americans own their hopes. my question is, to the two of you,, what are we trying to end, in interim, there is savings and loan crisis, and that happened in 2008. what are we trying to accomplish in our country with the housing

policy? >> that is a question and neither one of us is now there where we're making housing policy. peter, you heard me say that i felt one of the most effective things we did which was necessary to get through the night was putting in conservatorship. when we did that and i remember talking with barney, right as we were doing that and got no, anything but support from him. but we both side and -- said and i said, this is a timeout, okay? we can't straighten this out right now in the middle of the crisis but it never dawned on me, because no one was standing up and saying, oh, this is a great system. you know, that the public support for private profit, you know, et cetera, et cetera. this is, this is a great system. they all, we have still got it and right now because they're making money hand over fist and all that money is in the federal budget, it actually is scored as

adding to the deficit to deal with it. so you've got some disincentives. it has to be dealt with. i will say it will be dealt with. but the other thing i would say, as you said, it is not just fannie and freddie, it is housing policy. tell me why it is fair someone should get interest rate reduction on million dollar mortgage and renter does it? where does that come from? >> let me say, if i was starting over again i would not have home mortgage interest deduction. unfortunately it is now built in as a legitimate vested interest you couldn't just pull it out. we have had a national policy that has treated renting as if it was somehow second class. i give you a shocking example of that. "the new york times" business section a couple weeks ago had one of the most outrage justly bigoted articles i've seen, how isn't it terrible, all the poor homeowners who live in areas with foreclosure have to put up with renters in their

neighborhood? i couldn't believe what i was reading. i urge you to go back and read this how renters are bad for the neighborhood. being read by all the renters in manhattan who don't seem to be causing all these problems. so i think we need to, to move away from this emphasis. the reason we're not getting rid of fannie and freddie, political science reason, there was a brilliant solution in the german constitution after word war two. people were worried in the parliamentarian system about instability in france and italy where you were getting governments overthrown by coalitions of people who were anti- the german constitution you can not in the parliament overturn a government. you can not turn a government out unless that same resolution names the new government. so it prevents a coalition of negativism from stopping things. there is a majority in the american congress for getting rid of fannie and freddie but

not together on any one version. there are strong free enterprise people in the house who want to get out of it. warner-corker approach where you get a interest rate guaranty. that is not only problem. if you have a two step vote to get rid of electoral college, it will win. but never get together on alternative. that is what keeps fannie and freddie alive. >> woman over here. >> i had the honor of serving as the treasury attache in brussels and before that served on the committee. my question there for is international. what did you learn and what would you advise american policy-makers today about american leadership in the financial institutions globally based on your experience? were there any good examples of cooperation? everyone knows the story of fsa pulling the plug on barclays but there must have been some good things that happened that weren't told and what have you

learned about american leadership in the process? >> would i say this. if you read on the brink, my book on the financial crisis, i explain what happened, how it happened, when it happened. there's. that story is told. i think the crisis in many ways it brings out the worst in some people but brings out the best in many people. and there was great coordination and cooperation and the way we came together. when you look at the, it is sort of the three weeks between the time lehman went down and we got the t.a.r.p. legislation, republicans an democrats working together to stave off disaster, you also had, this was not just the u.s. european banks were teetering. the six different countries came into rescue their banks. when the g7 met and we were dealing with that, that same weekend where we put the capital in the banks, it came together

with a, with a, multiple point proposal. which basically said -- >> we'll leave this discussion here as the u.s. senate is about to gavel in. senators will pick up where they left off yesterday after recessing unexpect he hadly due to the washington navy yard shooting. senators will begin the day with general speeches. we'll look for reaction to the shooting from lawmakers. senators will also vote today on judicial nominations and continue work on an energy efficiency bill. now live to the senate floor the chaplain: let us pray. eternal savior, who promised to never forsake us, be a shield for this land we love. as flags fly at half-staff in remembrance of the victims