lead to contagion in other countries and is there a disconnect between that probability and the probability of another u.s. recession given how weak our economy already seems to be? i would imagine if there was a 55% probability of a country leading the euro, the chances of a u.s. recession would be significantly higher. >> that's any one country leaving the euro. i think most suspect that one country would be greece. it's also the general view that if, indeed, greece does leave the euro, that would be -- it would likely be the case there would be significant policy response in europe to put up fire walls, essentially, and prevent the crises from spreading. so that essentially is our view.

i don't think it's necessarily the case, myself, that it's a done deal that greece is leaving, for example, because it would probably have enormous cost to greece as well. so, but having said that, that would be the continuing news from euro, it's having a negative effect on financial markets. the committee views that in general, that would be the primary mechanism where by a disturbance in europe would actually impact the u.s. economy. export numbers actually have been holding up quite well overall. so it is important. i think that the committee does think that is important that those uncertainties be reduced in order for the healthiest economic kind of an expansion. >> could you elaborate more on

real gdp growth at 2.5% in the fourth quarter this year and decelerating sharply to 1.9. what's the reason for that? >> the question is the gdp is forecasted for 2.4% in the fourth quarter. that decelerates then to below 2% in the first quarter. again, that is primarily a function of the uncertainty in fiscal policy. sequestration is scheduled to begin. other tax increases are scheduled. any other action from congress, tax will likely rise in 2013. that's what the law is right now. so that essentially is reflected in the forecast in that slow down on consumer spending. >> a lot of the forecasts are for a bigger hit than that. >> again, this is very difficult

to forecast in this situation because there is some presumption that there will be some kind of compromise, but it's probably the case if we talk to every single economist, they might have a totally different scenario how that's going to occur, how kig isn't a that's going to be. again, this is the baseline forecast. this is the median forecast. but again, it is a risk. fiscal policy issues are a risk in the forecast. yes? >> i have two questions. first one, looking at your forecast for this year and next year, you have it averaging 153,000 this year and falling off to 159,000 next year. you said your gdp forecast dips next year because of fiscal uncertainty. is that the same thinking behind

this, or is that something else? my second question was, if your discussions, what was the sense of the committee in terms of giving economic conditions, does the fed need to do more or maintain the current accommodative stance? >> essentially, the payrolls follow the gdp. payroll growth in some sense is a lagging indicator of gdp growth. we're seeing more modest gdp growth. that's why the labor market -- employment growth is generally coming down at a little bit slower pace. the second question, in terms of the future monetary policy actions, the economy right now is essentially growing at a moderate pace. there's not an issue with inflation. there's not a deflation type situation. there's not an excessive inflation situation. so essentially, based on that,

there's really -- the committee doesn't think that there's -- that the federal reserve is likely to do any further type of monetary actions of a qe type nature. there are some viewpoints that perhaps the operation twist might be extended in some different ways. again, that's minority view. the overall view is that we're pretty much status quo in terms of monetary policy. now, there's a lot of uncertainty out there. so that forecast is conditional on the eurozone debt crisis being contained to europe and at least a gradual but substantive movement on fiscal policy issues. so the extent that the economy remains on a firm footing with moderate economic growth, our forecast would be that the federal reserve would not do any

other extraordinary type measures. yes, sir? >> on the cni lending, you said the growth rate is 11.5%. that's what you project. in 2013, the growth rate goes down to 7.3%. is that more a function of, you think, demand, the demand from businesses will be less? is it a regulatory issue or both? >> that's generally based on economic macro type variables. you know, one variable, for example, that's important in cni lending is business equipment spending and the tax benefits for those are easing again. so that will likely result in some slower growth and capital

spending. also, we've kind of had a bit of a cyclical surge here in terms of the cni lending. typically, as we go further into the economic cycle, that the growth rates actually slow even though the amounts continue to rise. so there's a little bit of that effect as well. but in terms of, you know, regulatory costs, yes, the industry is incuring higher regulatory costs. >> with the slow down in india and china as well, i was wondering if you could walk us through your export projections and why you see continued same rate of growth. >> there is some divergence of viewpoints on this, i should mention. the actual export growth has been coming in -- came in quite strong in the early parts of the year. in general, our view is that

even with -- if it's confined to europe, it would not be a significantly slower export growth than we've had. some of our projections have been .25 up to .5%. a lot of the strength in u.s. exports have been very broad based, actually, to all parts of the world, and the types of products have also been extremely diverse. we export everything, including energy now. so that in itself helps to keep export growth on a firm ground, fra collapsing, if you will, even if the economy, the world economy does go into a worse-case kind of scenario. but in general, the -- you know, the improvements -- for example,

china, even if it slows down to a 7% rate, it's still growing at a 7% rate. i'm not saying that's the forecast. and they still probably would be needing -- be importing in order to support that growing economy. so really it's a question of degree, a bit. a lot of the emerging market economies are actually -- even though their export demand may be softening, they're compensating that by easing up monetary policies. that generally is a trend in emerging market economies, so that's going to help the support domestic demand within those countries. that, in turn, should be supportive of increase exports dpand from the u.s.

>> is there a significant stir in that, especially with all the stuff going around the world that service would all the sudden sharply cut back? is there a strong risk of that? >> there is a risk. there is a risk. we've been looking at real disposable income growth. that hasn't been as robust as, perhaps, the spending has. and of course, that is a concern should there be a shock. that will likely improve somewhat here in the near term. when you think about real disposable income, one of those things is what inflation is doing. in the near term, we're getting a bit of an energy price reduction. so that's providing a bit of an added boost to consumers. so then that would likely feed through and help support that number, that real disposable

income number. stock market, financial markets, those are both losses. if they're sustained, that would be a negative for consumer wealth. that could also have an effect, a wealth effect on consumer spending. so there are concerns. i think that's tied up with the risk of the economy. it's important for there continue to be a continued expansion, even at a moderate pace in order to continue this consumer story going forward. i just want to add one bit of commentary. different parts of the country are also doing well. some better than others. for example, i'm from the industrial midwest. the unemployment rates in the industrial midwest came down 3.4% from the recession peak to now. that's almost twice the amount of the national average.

i think it may be more than twice the amount of the national average. that's because manufacturing is improving. manufacturing employment. there are other positive sectors in the economy. for example, energy. they're also supportive. in general, a lot of the central part of the country is doing a lot better than maybe certain regions of the country, which are becoming a little bit more distinct in their weakness. for example, the pacific states have shown some of the worst record in terms of reducing unemployment. mid-atlantic states have also been a built below average. but a lot of a their central part of the country has done quite well. if you look at some of the unemployment rates, they're well below the national average in a lot of places that you probably wouldn't even think. even the michigan unemployment rate is now about the national average. >> what topic was there most disagreement among members? >> that's hard to say.

i think there is actually a surprising amount of consensus about the members, but there was a little bit of probably a distinction between those that were a bit more concerned about the eurozone sovereign debt crises and the u.s. iffiscal policies that had a more negative forecast. those that were very confident in leadership in both europe and the united states, in order to take care of -- resolve those issues, tended to have a stronger forecast. >> if there are no further questions, we'll conclude there. thanks, everyone, for coming. please do introduce yourself to our members if you have other questions. thanks again. >> thank you.

tomorrow here on c-span 3, live coverage from capitol hill of a hearing looking into the defense department's 2013 budget request to congress. defense secretary leon panetta and joint chiefs of staff chairman general martin dempsey testify before a senate appropriations subcommittee. live coverage begins at 10:30 a.m. eastern. also tomorrow, jp morgan ceo jamie dimon is testifying before the senate banking committee about his bank's multi-billion dollar trading loss and the implications that should have on the dodd-frank financial regulations law. live coverage on c-span at 10 a.m. eastern. and a note that jamie dimon will be on capitol hill next tuesday and c-span 3 plans live coverage at 10 a.m. of that house financial services committee

hearing. last week, the comptroller of the currency testified that jp morgan's multi-billion trading loss was due to inadequate risk management. thomas curry also added that what happened does not threaten the broader financial system. mr. curry's comments came during a senate banking hearing on the implementation of the dodd-frank regulatory law. others testifying include deputy treasury secretary neil woland and federal reserve board member daniel turulo. >> this is part of the committee's continued oversight of the implementation of the wall street reform act and is also an opportunity to discuss the implications of the laws recently announced by jpmorgan

chase. they announced it has lost millions of dollars in a large trade designed to reduce the firm's risk. it reminds us that no financial institution is immune from bad judgment. while the jp morgan trading loss does not appear to have caused systemic problems, it's a clear reminder that wall street continues to need better risk management, oversight, and if the rules are broken, unyielding enforcement. to repeal or weaken wall street reform and to fund, would take us back to the days before the financial crisis of 2008. wall street reform was a response to the crisis caused by

a lack of consumer protection, reckless behavior in the financial sector, and the regulators who failed to take action in time. we now have an agency solely focused on consumer protection, tough new rules to end negligent and reckless practices and regulators armed with new powers to ensure the safety and soundness of the banks they supervise. the regulators are also in the process of enhancing the standards for our nation's largest banks through an increased capital work requirements and more judicious liquidity and leverage standards. wall street reform also requires regulators to sharpen their focus on the largest and riskiest financial institutions. all the regulators joining us

today are members of the financial civility oversight consult, a body created to monitor risks facing our financial system. most here are also all working to prohibit proprietary trading with government issues. and the fdic continues to work diligently to implement the requirements and establish the liquidation authority for a global, large, complex financial institution. similarly, while there's a need for a strong regulation of all financial institutions, wall street reform recognizes that small community banks should not be treated the same as the largest banks because large complex banks take on the most

risk and pose the greatest threat to our economic stability. they should be required to pay their fair share and to deposit insurance funds. like wise, the small banks that did not cause the crisis should not have to pay for the risks taken on by their largest competitors, and their assessments have been lowered. a one-size-fits-all approach is not appropriate and many partners have raised concerns about challenges faced by small community banks. i hope to hear from our witnesses today about the steps they are taking with regard to small banks. some have claimed that the wall street reform act was not the right set of solutions to the crisis and that it asks our

regulators -- i disagree. to restore confidence in our financial system after the crisis, we need more, not less, regulators the activities of the firms they regulate. i disagree. to restore competence in our financial system after the crisis we need more, not less scrutiny. the wall street reform act has built a stronger oversight framework that closes regulatory gaps and enhances financial stability and better protects consumers, investors and taxpayers. and so despite a repeated cause to deregulate and defund by those who endure the costly lessons completing the implementation of the wall street reform act must be and remains a top priority for this committee. in that vein, i look forward to hearing from the witnesses here today about the progress they

have made to complete implementation of the wall street reform as well as the actions they have taken regarding the j.p. morgan trading loss and the thoughts on the potential implications of the laws for supervision and wall street reform going forward. i also want to thank member shelby and my colleagues on the committee for all their input and cooperation over the past several months. at a time when most of america thinks that congress is in a gridlock, the committee has been very busy get things done on the senate floor. the bipartisan export import bank reauthorization passed with broad support and was signed into law by the president last week. we passed in the senate this

committee's bipartisan sanctions bill for the federal reserve board of governors received four votes and we helped to secure the passage of that confirmation. we passed a bipartisan transportation bill in the senate and the transportation conference committee meetings are currently on going with the house. we passed a 60-day extension of the national flood insurance program and we have commitment from the leadership to bring the banking committee's bipartisan reauthorization bill to the floor in the coming weeks. in addition there is another important legislative matter helping responsible home owners refinance into lower interest rates at no cost to the taxpayers. we have already had full committee and subcommittee hearings and financial proposals. i would like to take a bipartisan approach similar to other committee past bills of

this congress where we work together in a bipartisan vehicle with amendments limited to those related to the underlying bill. i am hopeful that my colleagues will agree to move forward in this matter, as well, so that we can help responsible home owners and help the housing market rebound. with that i turn to senator shelby. >> thank you mr. chairman and thank you for calling this very, very important hearing and to our panelists today. welcome again. i think we have spent a lot of time together. probably we will spend a lot more in the future right here. today the committee will hear from the financial regulators who supervise our nation's banks. the safety and soundness of our

banking system depends on your efforts. it was not long ago that our banking system began to collapse not withstanding the presence of a large and vigorous regulatory structure. i believe it is critical that this committee conduct vigorous oversight to ensure that the regulators do not repeat the mistakes of the past. as the primary regulator of the national banks, the office of the comptroller is responsible for insuring the safety and soundness of our largest banks. this means that the occ supervises j.p. morgan chase. whose recent $2 billion-plus trading loss has been in the news. and because taxpayers basically guarantee j.p. morgan's deposit the american public i believe has a right to know whether these trades threatened or could have threatened the solvency of the bank. in addition this committee i believe has an obligation to determine whether this loss reveals any operational or regulatory weakness that could cause problems in the future.

next week, here in this committee, jpmorgan ceo jamie dimon will appear to explain his bank's actions. today i would like to hear the occ's views of what happened at jp morgan. in particularly i believe the comptroller should give his assessment as whether the trades ever threatened the safety and soundness of one of our nation's largest banks. banks are in the business of taking risks. and losses are an inescapable part of risk taking.

job creation and economic growth depend on banks taking risks. it's the job i believe of regulators to prevent banks from taking risks that expose taxpayers. some people have used jp morgan's loss as an opportunity to argue for a stronger implementation of the rule. no matter where you stand on the vocal rule this argument i believe is a bit premature. most importantly, why is the occ's current authority sufficient to prevent the trades from putting taxpayers at risk if they did. if so did the occ properly use the authority that it has. i look forward to hearing the comptroller's answers to these

questions among others. also with us is the acting chairman of the insurance. we have been told that dodd-frank will prevent future taxpayer bailouts. yet under the fdic's plan for implementing dodd-frank's authority short term creditors would still be bailed out. the lesson we all should learn from t.a.r.p. bailouts, is that creditors of a failed firm should bear its losses. today i hope acting chairman would reassure this committee that the fdic's resolution authority will not institutionalize government bailouts. regrettably the fdic is not the only regulator that has taken actions that may institutionalize too big to fail. the financial stability

oversight council led by treasury and the federal reserve board have recently used the authority created by dodd-frank to designate several and are preparing to designate a larger group soon. i believe the danger presented is that the market will view it as an implicit guarantee that the federal government, the taxpayers will not allow the designated institution to fail. this was the same problem that arose with fanny and freddy and

ultimately has led to about a $200 billion taxpayer bailout and more to come. i would like to hear from the treasury and the federal reserve board as to how the designation process will eliminate rather than create too big to fail companies. we will also hear from the director of the bureau of consumer financial protection, the bureau's regulation and supervision will impact the safety and soundness of our banking system i believe. unlike other bank regulators the bureau is not required to consider safety and soundness when it writes rules or takes actions against banks. i think this is becoming apparent as the bureaus proposed rule will impose huge costs on banks and create serious confusion about what banks need to do to comply with consumer protection laws. for example, the director of the bureau has authority to declare products to be abusive. however, the bureau has said that it will not write a regulation to clarify what the term abusive means. think about it. the refusal to write a rule stands in stark contrast to the director's statements that the bureau would