challenges -- >> we will briefly leave the discussion on community international banking for live coverage of today's pro forma session of the u.s. senate. expect to be very short. we will then rejoin the banking discussion in just a moment. now live to the senate floor on c-span2.

the presiding officer: the senate will come to order. the clerk will read a communication to the senate. the clerk: washington, d.c, july 3, 2014. to the senate: under the provisions of rule 1,

paragraph 3, of the standing rules of the senate, i hereby appoint the honorable thomas r. carper, a senator from the state of delaware, to perform the duties of the chair. signed: patrick j. leahy, signed: patrick j. leahy, the senate is out for the july 4 holiday and lawmakers will return to business monday july 7 and of course we will have live coverage of the senate on c-span2. now we will take you back to the discussion on banking regulation focusing on community and international bank in posted by boston university. >> -- the shadow finance = hundred and 74% of assets of u.s. banks. it is a very big market presence

even as measured by those even let alone but i think it really is. so it is a clear issue for the industry and i think it is also a major one for the regulators and 40 occ. for the regulatory perspective, i think that we need to think about our current approach which is bible college regulation by a charter. if you are a bank that cam talked about it gets thrown at you and the systemic at the bank holding companies with $150 billion in assets even though i think that it's silly. they are close to cam's model and the globally systemic banks. conversely, if you are in non- banked even if you are directly engaging and financial services that are regulated capitalize on the subject to liquidity and

resolution requirements at a bank, you have none of those requirements. that has been true for a long time in bits and pieces of finance but the banking industry got something in return for all of its rules. it got monopoly charters because of the rapid increase in the financial intermediation especially in the way with coal deposit taking that monopoly franchise model is broken. so the regulation by charter model encourages what we call regulatory arbitrage. when the economics of the business are driven by regulation, profitable activities will go where the rules are less even if the risk is the same. so, what i would recommend instead of the regulation by function model and i try to talk a little bit later on about how that can be done under the current law.

we heard the senator and representative make clear that the new law isn't going to heavenhappen, but there is a kee of the act that puts the tool right now into the hands of u.s. regulators. that's what i think permit the rapid growth of the regulation by function model. for financial service firms this is a really critical issue because what the end o with thet monopoly franchise, the bank being the only place that could gather and insured deposits and the deposit speaking the only liability product to customers large and small wanted has come to be a significant threat. in our practice, we do regulatory strategic landscapes and what we are often asked to do is to look at a particular business line at the bank and model it out to see how holding all things equal which is harder to do, what are the economics of

the business under the banking model and under the non- babe model without the rules where will the business go. and we try not just look at the current rulebook but also the perspective one end of the policy framework. and when you do this, you see across the spectrum a dramatic shift in business. some of this is obvious in the business lines like mortgages where the business is really redefining itself overnight in part because of the capital treatment of the mortgage servicing rights. in other areas it is a combination of rules and technology that we see particularly in the retail payment site. i don't think that it's wrong. i'm not in any way saying that capital will is too tight or that the challenges and changes in the bank regulatory model particularly for the systemic institutions are right or wrong. with a business hat on i think

they are in terms of competitiveness drivers and a definition of comparative advantage in the u.s. financial system. with sharon here i think i should mention we are taking a very different approach to the shadow being in because of our charter functional regulatory framework we talk a lot about it, but we are doing very little other than trying to build up a big bank regulatory framework. and in one limited case the money market funds perhaps address some of those risks through the potential regulation. the european system -- aaron does far more about than i is a far different approach. they do two. one of the key rules apply across the spectrum of the banks, broker dealers and investment managers so that we don't have the pockets of opportunity where if you do the same business like a corporate

loan in the bank or in the broker dealer or a hedge fund it is easy to get away from the rules. i think it is an important difference. interestingly, the eu is also focusing on shadow being in the emerging policy initiatives. one is an effort to choke off the interfaces between the banking and shadow banking by curtailing linkages within the system, particularly in the wholesale financial markets. that's number i gave about 174% of the u.s. shadow assets versus bank assets is 52% in the new so you can see that it's a far more bank centric system and one that might be able to throttle shadow banks albeit at the cost of the far greater concentration in the hands of banks and i think greater systemic risk. there are pluses and minuses on each side of this as the case makes it clear. so even then the effort of

barring the banks and shadow banks are integrating and will work much less well than the functional regulatory framework where the activities are designed into the risks are identified in the regulation and resolution applies across the spectrum. i think that in many ways the riskiest place that we could be in the financial system right now because of the law is as robust. it would be a felony to bail out banks anymore and i do not eat meat that the u.s. regulators would willfully disregard of the law. if there is a crisis they will not step in. but the markets expected to. you can. so i had a great deal of moral hazard left in the system. and i think that puts us at the acute risk. and it's not just in the banks.

we need to look at resolution across the framework of the banking, broker dealers, financial market infrastructure. and critically, people who hold other people's money because the risks are very different in asset management and they are in banking but that i do not thiny are negligible. when you take it down to the bottom line and you look at the certain key products, the retail payments, combinations of rules and computers, smartphones, all of the new technology is rapidly leading to the redefinition. i know that cam talks about how they have the relationships that i think they love their phones better. [inaudible] >> i don't want to go there. [laughter] >> the surveys show most millennial's woulmillennialist o business with google and apple and they are going to be more than happy to do business with

them. paypal is doing small business lending and it's becoming an increasing but the crowd source funding for small business lending. major emerging issues that are still small pieces in the market for taking profitablbut pickingd showing the considerable potential. corporate finance at the biggest end you have the hedge funds are private equity funds like carlyle and apollo. apollo has a book of $100 million of corporate finance and i don't even want to guess how much n. holds against that 100 million but it's not much. major players attract the segments of the market that were once traditional banking. so what to do about that. move away from the regulation to regulate by function. and you can do that under section 120 of the dodd frank act which gives the occ the authority to designat designates

not only that our systemic, but also that those risks to vulnerable consumers or investors. because we have the same issue. although the cfp has covered across the spectrum, there are many financial service firms. it doesn't matter to the consumer if the house has lost, but the lender is a banker and not a bank. a big. of the payments transferred on the system through the bank or apple, the money is gone and we need to have rules that protect customers as well as financial systems. fso implemented the rules but i think they could do a far better job. i did the fighting of the bitinc practices and looking out to the future playing these out in regulatory frameworks and then calling on the printer a regulators into the market to delete itself. it's early days yet and i know that many of the shadow banking products i talked about are

still seen as marginal. but on a business planning basis, i said they could be significant in the key sectors and on a public profit perspective we have seen ibm, companies like the giants in the u.s. financial manufacturing and corporate sector brought by upstarts like apple and i didn't see any reason to expect that finance is any more invincible. i think these shadow issues are very significant and if the policymakers wait for too long to read craft the regulatory framework from a charter to one based on function they will have waited for too long and they will have a new set of risks in the financial system that we are way beginning to see a merge n now. >> thank you. [applause] >> we will next hear from sharing bowles.

>> thank you. and i have been making notes of what to say so i hope that you are all [inaudible] thank you very much for inviting me. it's good to be here and nice to be somewhere other than dc when i come to the states. i do a little bit of scene setting although the eu does have a big problem with concentration in terms of market share held by its large banks. it's not that we only have a handful of banks. in 2010 w the 2010 we actually d 10,192. that's down to around 8,000 now with about 6,000 in the euro zone. that reduction wasn't really bite the banks closing as it has

happened in the states. it has been more by the community banks in fact having to be taken over and forced into the mergers. for example, the spanish where we found that we had community banks with very similar business models that were in a kind of brought into relationship with one another and so we found that we had a systemic happening in spain and it's also worth noting that the first banking problem in the uk was within a row bank. it wasn't with one of the large broker-dealer banks also of course they got in on the act later. i matter i suppose the scene setting thing about the eu is that when we do the legislation because we are not one country and we are operating under a

treaty, in the parliament and the chamber of the finance ministers and there are to change or is it isn't just the finance ministers to the degree if we don't agree it doesn't happen. and we have to actually agree a lot more and so we are well into the details of what happens within the regulatory authorities here in the united states. now, broadly speaking we are all tackling the same problems. for banking, we've got basl coordination for some time and we adapt to the smaller bank ths in a proportional way but they all come under the proposals. we have a problem with mortgages in the sense that all of the mortgages are in the banks and they are also broker dealers and the mortgages and even when they are covered by mr. mortgages has a serious impact on the leverage

ratio. we heard earlier a recommendation of look at the danish mortgage bank. while i tell you he would be very frightened if you saw the leverage ratio and treated them as a normal bank that they have been stable for 200 years. also take care with the term covered on. there are some very good ones for the mortgages like in denmark there are some very good german ones that cover all kind of corporate loans and there are some that are full of rubbish just like any other asset backed securities. so we are having trouble trying to get the definition of the covered bonds and we are working on it. there's also problems that they face held them from one bank to another. so, that has an impact on the large exposures. and it also has an impact on the level of assets incumbent on the bank. in the market that is harder to

coordinate. i think partly because some of it like the dividends are newer in the markets that are more diverse. i think that in some respects, the u.s. has much bigger capital markets and it is well least for those to actually provide a better fun to commit better alternative source of funding than the banks. in europe everything revolves around the bank. the loans rather than the corporate bonds and the asset management is in the banks. the interactions with the markets are different in europe, so the same rules actually gave different outcomes. and therefore, we need to have a look at the interaction with the market also and we are doing banking rules because otherwise you sometimes get the funding results as in the credit valuation adjustments in the absence of having the credit default swap market. now, the problem with having all of this stuff in the banks is that the banks are many times

gdp, not many but several times gdp. so, they are all the more systemic when there is a problem and so maybe that is also why in europe there tend to be what i would call social security for banks rather than letting them go into liquidation. we also do have this problem that we've got a single currency that is not a single currency in the same way that the dollar is and that adds another dimension of interconnection. so, looking at the euro zone we have a spread of the financial crisis and to the sovereign act and economic crisis that exposed the flaw in the imperfect monetary union as well as in banking and the lack of fiscal discipline. so come as it runs on the rules and not on the mutual system, all of those issues, southern banks in fiscal discipline poll had to be dealt with all of one's. one of the ways to stabilize the

euro was to try to separate the sovereign banks, and alongside of that, to stabilize the sovereign fiscal discipline and coordination of projects. so that means on the financial supervision we have a combination of the eu rules plus some special extras which we would call thinking unions and then on the economic burn inside as we call it, we've got lots of new rules to stop the countries from behaving badly with budgetary coordination and discipline aimed at making sure we have much better fiscal control. and again, the stronger the shares to the euro zone in terms of fines and disciplines and other things. so altogether, with the statistics and other things thrown in for good measure, we have already done 64 legislative acts and do you want t you wante about them you will have to go

to my website. but some of the common features with those discussed today is banks are special and in the eu as i said we are much more in their power with the capital market of the significance to take the load. we are also dealing with the structural separation also ours are not as strict as the poker rule in that the activities can still go on in the group. now, i've actually just been wondering to myself today why we haven't taken to say actually we would like the asset management be out of sight of the banks that we can start to build upper capital markets and maybe we should have suggested a structural separation between the asset management and banks. so i might go into writing the finance ministers. on the shadow banking, we do already have more comprehensive regulation partly because some

of the stuff in the bank and also because we have regulation of the funds through the regulations of the funding management and the alternative investment fund management corrective that has to do with hedge funds and private equity. also, when we were transposing basl iii into the directive version four, i decided that quite a lot of shadow banking activity has one leg in the bank. so i got a good place to grab that is in the banking regulations. so, we have made an attempt to that and in particular with regards to disclosure oregard ts like asset incumbents, repossessions and various other reporting requirements, which are now going to be built on a separate piece of legislation. we also have no common bankruptcy law in the eu, so we

have passed the resolution under the recovery proposal. where we have legislators surveillance. so now after usin using up all e equity, there has to be at least 8% of the available assets. now there is only three european banks in the crisis that would have eaten their way through the levels of capital plus 8% in the combined effect of doubts that there is. we have also put a limit on how much more you can do and you then go to the funds or to the states. you can only go for the further 5% because we wreck and after that it should be wound up and if you can't recognize by the time you got up to about 25% of assets, then what are you doing trying to rescue it. we have legislated for the bank fund resolution funds 1% of the covered deposits that have to be dealt up over time, so it may

take a little while to get there in as a part of the banking union that euro zone funding its pooled. the pay into that is all banks, that is absolutely all banks based on the size and risk. there is still a little bit of fighting going on exactly how that is to be defined in the subsequent rulemaking process. now, i just finished off by saying that a couple of words about the banking union. this is for the 18 countries in the euro zone. we have made the european central bank as the supervisor. it will directly supervise the largest 130 banks and then it can call up any of the other 6,000 or so banks if they suspect there is a problem. the whole of the eu that is all 28 member states have the same regulations and rules for the banks supervision from the

european agencies but it will make a further detailed handbook of supervision of its own but one suspects is that the european banking authority is also charged with looking at that handbook and the other handbooks that say these are code here and, so we have different things going on whether you are in or outside of the banking union. they have the pre- funded schemes we have attempts to mutual eyes that in the euro zone and that has failed at the moment. it has been concluded that doesn't matter because you have a common level of insurance and a common system of rules and it is all pre- funded. so, the money is there. when i say pre- funded it will be when they finish paying in. we have also created -- we have also created a resolution authority for the euro zone so

that all of the resolutions will be done in a uniform way. the parliament pushes very hard to make sure this is what we call country blind so that all depends on the bank and the risk involved those kind of things and not that came from the country and we are not very happy with you at the moment because you have been naughty somewhere else. i think a point on the side to mention is why we have been trying to do this, businesses operate from the banks issues about bank liquidity and reliance on a sovereign way heavily on our mind in the parliament and i did go across while he was still at the head when they suggested only sovereign could be liquid assets i said that's just what we want in the middle of the sovereign debt crisis to help separate the

banks. he did say yes i heard what you're saying and as of again in our capital requirements directives would have stretched the boundaries of what can as liquid instruments because the last thing we want to do is to connect back. it's going to be difficult because there is so much sovereign debt around and it happens to be residing there. i was going to say something about globalization which is the nature of this, but i think perhaps there isn't time but i would like to point ou out the plots of the banking regulation is doing the opposite of allowing the globalization in the trade sense. whether that is what the basl committee did on the trade finance. so i'm happy to say that the governors have taken near and buying advice and they have amended that. we have problems now with correspondent inking not just because of the closure of the correspondent banking arrangements but because of

money laundering concerns but also the treatment where it might get 100% runoff in that liquidity coverage ratio when quite a lot of correspondent banking is actually to qualify for less. and then and there i there is ah the derivative clearing and europe has done a little bit on this. not my fault. it was all the commission. and this means that again we are shutting out the emerging markets and making the trade much more expensive for them. and then finally, the uk and the u.s. is leading the way in the capital liquidity in the subsidiaries leaving banking although you can make justifications for it and that is the debate. there's quite a lot going on, but basically we are all tackling the same problems

albeit with a slightly different legal systems in the circumstances. thank you. .. in its history. you know, listen, when i was running i beg during the s&l crisis, the world was falling

apart. in one year you had over 700 tanks failed in one year. we didn't even approach 500 day in five years of this crisis. the 701 year. so for the show was passed, was passed and the consultants were a very saying this is the end of life as we know it. there will be no community banks left by 1995. the banks that survive are tough, they're resilient, they are never will. and those that question, i think most of the banks today will hate and.

of course still have allegations were those extent. the greatest impediment or the regulations of those regulations , the size ,-com,-com ma risk and complexity of the institution. that's what we need for community banks to flourish, for all banks to flourish really. we need to field the regulation, guys, risk. then you cannot a vibrant, forward-looking system. i think five years from now the landscape will be very conducive to any given local area. >> to be able to examine the levels. i know it can be done and we have seen it done before. karen, throughouthroughou t your

career as an analyst, you've given lots of advice to banks. what do you tell your clients today about the national regulatory landscape will look like in five to 10 years? >> it really is a different picture depending on the financial services for bank or nonbank and on the product may ask, one of the reasons you have to do it on a product line bases because even though all of the members come back up to the top tier and turn into return on equity and dividends and all that great stuff for the shareholder to, the business makes really drives the regulatory framework. the only thing i think that is really important that cuts across for the banks and i wish it did for the non-eggs is this issue of internal controls, risk governance and what the sec is taught to bow, heightened expectations. it is really clear the boards of directors canters cool three

ring binders and flip through them when some fancy numbers go by on a white board and agree to things. they should have done that before and i think increasingly they want and that's true with community banks inspector on in the industry while we'll have that are generally czeslaw said he needed direct reseller forever independent of halifax for. >> and fascinated by your functional model. are you going to pursue this? >> i'm sorry? >> your functional model, which you mentioned about the industries. are you going to take the folks in d.c. to think this way? >> under current law it's really worth a good hard look. >> sharing, i am curious when

you develop this unified system. how much you look at the american system and develop. >> well, yes. sometimes it was held all. there is a staggering of the way we did things. dodd-frank came out faster, partly because that is the way you do think that you don't have to go into it in as much depth ss. not that most of you redoing the derivatives legislation. we are at a new book is a dodd-frank and we were able to have a lot of discussions with gary gensler and so a lot of what we then got into our first round was incorporating some of the rules he was going to make engaged. so it's kind of a bit of a nudge nudge process. so that worked well. a few places it didn't work, but basically it did work usually for deliberate reason.

in our case there are quite a few things that i wanted and the parliament wanted and the commission had a different view. i think they now realize we were right. so i do wish that our tri-logs, as they call them in the two-part, the house and the senate were televised and hopefully one way or another we will get there again. the biggest frustration i find if i need for things to work with getting the e.u. and the u.s. together, we need to get intervention even at the pre-basel stage in our markets are different. a lot of where we have made changes and yet i've been guilty. i deliberately made that because it didn't work. now i don't know quite what the

european regulators that basel were doing other than sleeping or furling or wondering about deferred tax assets. i don't think they redoing what i would want them to do. we do have this problem and frustration both in the u.k. and the european parliament that we don't quite know what are regulators are saying it needs meetings because the normal course of things in democracy is turned upside down. you normally have the political backers among the regulators. now is that the regulators doing a first amendment comes with comes with some kind of political signoff. for us in europe, that is both stages both in the first stage of legislation and then we can veto the rules if we don't like them. in the u.s. you have the first stage, which is again in congress and then you have the lawyers and the court during the

second stage. but there is some kind of signoff of what is done. i'm not sure that this is complete so it's a little bit earlier political engagement, especially when you're into new areas it's going to work. i will have another poke at things from a bit dissatisfied with. i'm not dissatisfied. i've got a lot of respect for central banks, but they are not immune. at the moment, they are the one in the majority on all of the financial stability board. they don't have the full range of expertise across all of the markets in everything else and they didn't necessarily cover themselves with glory and spotting the financial crisis either. so i just think we need to reclaim a bit of territory back for the central banks. >> gray. we are going to open it up to

the floor. does anyone have any questions they might to ask at this point? go ahead, sir. >> my name is robert rose. i work for a client a court which is a $5 billion stake here in the boston area. we think of ourselves as a large community banks. i agree with you i'm a fan of community banks, but there are some dark clouds around her industry. in particular, i assume banker friends in various parts of the country who say they are having trouble making money. the >> having trouble what? >> having trouble making money. the executive management is tired. the board is tired. they kind attract talent, young people they cannot afford to pay the experts they need in the world of compliance and things like that. when they go to put themselves up for sale or chat with other

people, they find the charter in some places just has no value. the question is what do you think would be one or two catalysts to an internet around? number to come is there any danger that creeping upward? even in the five to $10 million nice but bankers are struggling with those costs. thank you. >> yeah, part of it is generational change. you know, i am a baby boomer and the baby boomers are beginning to shuffle off this stage. you have a new generation coming up. so part of the tiredness is basically just generational fatigue. a lot of times, particularly in the community banks space, the senior management are a bunch of boomers and all of a sudden what was, you know, you look around the board table and it's nothing but white hair.

so there's a certain amount of generational fatigue. they sort of talk amongst themselves. tired, this is burden some. it not fun anymore. blah, blah, blah. i heard that when i was coming up from the people who had gray hair that. i'm tired. it's not fun anymore. and i thought it was a ball. i like it. but i was ready to go. so that is part of it. another is the relationship between ms gets a little in the weeds, but between the banker in the field examiners. you know, i face field examiners for 20 plus years. honestly, the field examiners when i was in the teeth of a more flexibility to do with the baker resolve without all of a sudden without going to the

kansas city district office archive for dave to washington. everything was in a big deal. you know, i disagreed with my examiners a lot, but we could work it out and they weren't on the phone talking to kansas city or washing 10, can i do this? so part of it is we need more flexibility in the system again. they've squeezed some of the common sense out and not be showing up in the fatigue and worry nsr is not making as much money, it is harder. it is just harder. there's more competition. not necessarily from other banks, but other providers, kind of the apples and they are not in the teeth of it yet, but they will be. but it is tougher. the rules, the regulations make it tougher to make money. again, you used to have more

flexibility. bankunited card is a relationship, but business. and i would make loans to people that today i wouldn't be able to make that loud. they were marginal and i knew probably would have a discussion with my field examiners and probably be able to talk to me to increase. come at least one exam or two to see how the log was doing it for the humor on it. today i won't take that chance. today is black and white. either you are in the boxer out of the box and that is a shame because that hurts the community bank. but your bank, 5 billion i think are kind of in the sweet spot. that is a great little franchise to have and i think you can do a lot with 5 billion. you could be innovative and you can outhustled the competition in a lot of ways in a $5 billion bank. i think in a lot of ways the smaller bank -- you know, it is not too big to fail.

i don't even like that term. it's not those things that keep community bankers up and running. they do just fine. i had a reporter one day asked me if community bank errs were afraid of competition from the megabanks. i said are you kidding? i said everybody is bigger than me. the credit union, the guy that operates out of the trunk of his car has more assets than i do. i compete against everybody. that doesn't bother me. what kept me up at night was speculation, was how i was going to handle the check hype. increasingly toward the end of my career before i transitioned to where i can today was what we call today, we didn't call it in those states of cybersecurity. i was terrified that my systems were going to get hacked and in

a small bank you can only take that loss one thing you are done. so that keeps you up at night. but hang in there. a lot of it is generational change. >> next question. >> you mentioned 1200 counties that have 1200 monopoly community banks click >> now, 1200 counties only served by a community banks somewhere in that county. we have counties in missouri that are bigger than the entire doing states. vermont is like a county. to think of it like that. >> i was wondering to what extent consumers are well served by having lack of competition among banks. and further, you mentioned not so much be concerned about competition from larger banks, the really non-banks providing cutting-edge services and products and how is that hard for a community bank to do that and how reliant are they on

third-party vendors to make the services have been? you know, we are in the street of the great tip o'neill. tape has probably the most famous pieces political advice anywhere. all politics is local. you can apply that to community bank in all community banking is local. it really is community bank by community bank picture question about the 1200 counties. i wasn't saying there is only one community bank server that county. i was saying there were only community banks serving that county. so you could have four or five community banks of that county competing amongst themselves. but there are no megabanks as we call them at icbm by their providers. so it is not that one bank is monopolizing that county

blackface sixpacks monopolizing a system. one county may be served by five banks. as far as innovative products, community banks will do whatever it takes to get the innovative product. that's the part about all community bank is local. some are heavily dependent on third-party service providers. like jackhammering revealed that aponte, -- sis. some are big enough and have the scale. frost bank has a lot of its own internal status. they're down in san antonio. it just depends. that is a decision each of the bank management when i was running my bank i had to decide was a more cost effective to go outside and get that service broker to internalize it and do it myself? i made that on a case-by-case

basis. whatever would help me in a competitive atmosphere, that's the direction i'm headed. >> another question? >> the federal reserve distinguishes between federal banks of larger bank when it comes to capital regulation and allows smaller bank to not measure their capital adequacy under consolidated rules, but rather he bank only basis. i wonder if you think that is appropriate or if there should be a different approach to capital and whether the appropriate threshold for that is the one that's now in effect. >> the threshold is very low right now. we've been pushing to make it higher. i think you have to start from the premise that the average tier one capital, the actual leverage cash capital on average throughout the nation and

community banking is just under 10%. that is tier one. i am not talking risk based capital. risk-based d. average community bank is around 15%, 16%, somewhere in there. so you are starting from a very, very high capital ratio to begin with. so the small bank holding company exemption you are talking about i think is that 500 million below and that is only consolidated capital between the holding come to me in the bank. the bank still has to be well-capitalized six, eight and 10. that doesn't believe that small bank of that measure, to six, eight and 10 would be well-capitalized. believe me it's not good to be

under six, eight and 10 from a particular this environment were bank regulatory agencies are required in any cases more than x, eight and 10 to be considered well-capitalized depending on the bank. so is it appropriate? i don't think there's an appropriateness to it the capital structures of the small banks. i think if you were talking about tanks under 500 elion and whether they are under a different goal of consolidating the holding company capital to their subsidiary capital. i think any differences pretty much de minimis in that area because there already is so highly capitalized. they are way off the charts can her to their bigger brethren let's put it that way. >> any other questions? >> i wonder if care and and cam

could react a little bit to sharon's point on how europe looks at the shadow banking system and has really succeeded in shrinking of versus what we do here in the united states. >> go ahead. >> i think a price that, it is much closer to regulation by function, although the comparison has to be done very carefully. as sharon said, to banking system is so fundamentally different. it is universal banks. the bank suit names that are only relatively new in the united states are only done in a few institutions. so the dangers in the systems are different from the different types of approaches. the risks may be the same, but in terms of risk being highly leveraged his toxic matter where it arrived as are having an adequate liquidity.

but the approach to doing it, charter versus functional regulation in each of the two then uses the want by the structural and different banking systems. >> my only response to that, paul, the europeans on has done a good job of that come a better job than we have. that's an opening to get a shot in here. my biggest disappointment -- i have a lot of disappointment. this is just my biggest one is there are too much focused on the regulated a keen industry and not enough focus on the unregulated but we call the shadow banking industry. their charter gives them all kinds of power over all kinds of non-commercial bank financial

providers. rather than spending all this inanition on those of us that already had the occ, the federal reserve and auditors and everybody crawling all over us, let's turn a little of that fire over to the non-exec dirt. that is my biggest disappointment. i think they are trying to get the low-hanging fruit and tried to put some notches on their pistol. he got to grow up to be a regulator and know where the threat tired though after the threats rather than bludgeoning some hundred million dollars stake in sedalia, missouri. a little editorial comment. >> at the wheel and on that note. thank you very much. on, we will turn it over to you. [applause] >> caring, sharing, thank you very, very much. tom and everyone, you don't have

to worry. i'm not going to leave the group singing happy birthday to the occ, but i will wish you and your staff here standing in for generations, literally, many, many generations and wishing you all the best and congratulations on 158 years and i think that deserves a round of applause. [applause] we started today and i'm folks to jersey boys and trying to characterize the motivations of the speakers. looking at the crowd that is still here, i am just done. when i stay or frankie valley said is just trying to make the world a better place trying to get home items became not only for the speakers, but all of you. in that regard, sharon -- maybe you were scared mentioned we are

thinking about making a transcript of this event because so many issues were raised. so many interesting questions from you and from the moderators. i think it would be a disservice not to take deeper into those. so we are going to do that. i know a lot of you are here only because you signed that to prevent getting more e-mails from common hurley. developing this list of issues might mean you more e-mails from me. i'm sorry. but i thank you very much for your attention, your involvement, participation. i think tom and jesse and my wife, ellen, who is sensibly involved in this. paul nash, everyone else that i neglected to mention. this was a great collaboration.

i would love to do it again. again, congratulations to you and try to get home safe. [applause] is ♪ ♪ be back we desperately need the united states assisted. the iraqi government on

president obama decision to send 300 troops to iraq to support our armed forces. however, the institutions on the ground is developing rapidly. the situation on the ground is developing rapidly. it threatens the integrity of the rack with attentional regional implications. the terrorists are the permanent enemy of the iraqi people, our neighbors and our allies and we must work to defeat that. therefore, we believe immediately and creasing including targeted are crucial to defeat this threat. time is not our side. nor on our neighbors side or the united states side.

further delay the terrorists. on the relationship of the united state of the partner of choice. our relationship is governed by the strategic framework agreement, which we do not have with any other country. naturally, we have always had positive relations with other countries as well in the previous relationship and the precarious situation now facing ices difficult for a two declined offers of assistance from any other country who shares our perceived danger. for example, iranians have offered to provide military assistance. we have always tried to resist that. however, the situation on the ground may push us to acquire more support for my neighbor.

another example is iraq has purchased a number of aircraft from russia. our first choice was to buy american-made f-16, but the process of delivering those chat do not meet the immediate threat we face. the rest assured will never choose to replace the partnership we have with the united states with another country. my government has purchased more than $10 billion worth of necessary equipment for the united states and we are planning to buy or. our countries are forever tied together because of the lives we lost in the treasures we spend in those countries for the last decade in our common fight terrorism. finally, i cannot underscore enough the people of iraq are being threatened, intimidated

and killed by terrorists that are only committed to naming as many innocent people as possible regardless of their religion, at the city, and enough for further terrorists. this isn't just a threat to iraq. this threat to the entire region is beyond. among other things to rise as the situation is resolved and addressed. if allowed to control the gains further, isaf will have a safe haven in the heart of the middle east and in rusted metal iraq from which they can train fighters and launch additional attacks against the iraqi people, it neighbors. thank you again for the opportunity that we look forward to many que