less quickly than it normally would following a recession of the magnitude that we saw. [ inaudible ] thank you. marcy gordon with the a.p. given the environment that they've sketched out and the fact that interest rates are at historically low points, would it make sense? would it be an option for the government to issue more long-term debt at this point and take advantage of that? >> well, the government is very gradually increasing the duration of its debt to treasury, i mean, for some period of time. there's a bit of an issue here that what the federal reserve is doing and with the program we announced today, the maturity session program is we're taking longer term debt off the market

in order to induce investors to move into other assets and into lower and longer term interest rates to the extent that the treasury sought to lengthen duration with the borrowing and to some extent offset the benefit of those policies and my understanding is they have a plan and they're sticking to that plan and therefore on the margin they have the fed's actions can be felt. >> you clearly seem to be weighing on the labor market. can you be more specific. what exactly are you looking for? is there a rate of job growth that you need to see and also the unemployment rate comes down. is that enough or do you have to lock at labor part icipation asa whole? >> i can't give you any specific numbers because this is ultimately a committee decision, but what the committee's going

to do is review all of the labor market indicators including unemployment and including parts pagz and other measures of labor market activity and try to make a sense -- try to get a sense of whether or not the labor market is improving in a sustainable way. it's not a month to month-proposition. we've seen a month of strong job gains and two month of weaker gains. obviously month to month there will be statistical noise and weather and factors that can cause job gains to vary. so the question is is the improvement sustainable? is it long lasting? that's the kind of thing that we'll be looking at, but i can't be too much more specific than that. [ inaudible ] >> steve. market news international. mr. chairman, when you speak of the fiscal cliff, typically you don't differentiate between the

automatic tax hike of that and the automatic spending cuts which leaves the impression that you're giving equal weight to both sides. as some would contend that the automatic tax hikes would be more onerous. how do you parse the relative importance of those two aspects and if i may be permitted, i'm also curious to know how the fed is going to conduct open market operations if as the new york fed statement says by the end of this year they'll essentially have no short-term securities to use? >> well, on the fiscal cliff, just the way that the programs are set up, the dollar amount associated with the tax cut expirations including the payroll tax cut and so on is larger than the spending cuts, as i understand it, but i'm not making any judgment about

individual programs and the prm point here is that putting all these things together is you have a substantial withdrawal of income from the economy that will affect spending and will affect the ability of the economy to recover in the short run. in making decisions about how to modify those automatic changes, congress obviously has to look at the long run with what's the most efficient tax structure and what's the best way to spend unlimited resources. those are tough decisions that congress has to make, but in terms of the fiscal cliff, in terms of what's going to happen in january, the -- it's the total of those spending cuts and tax increases which has the impact which not only we, but others like the congressional budget office have identified as being a concern. we'll still be able to do open market operations with our securities, even if the amount of short-term debt is very low

and indeed, of course, over time the -- as securities come close to maturation, we'll have other securities that are of short duration. >> hi, mr. chairman. donna bor ak. there have been questions as to whether the volker rule would have helped the trading loss at j.p. morgan. given the rule-writing process and examining what exactly went wrong, as a supervisor, do you think at this moment it's the right time to perhaps pump the brake, so to speak and slow down the process or has this reesence episode made it a stronger case for proceeding with the volker rule expeditiously and secondly, if i may, since given that you suggested that regulators might be late on the rule surpassing the july 21st deadline, could you perhaps give us a target with how they could release the

rule. thank you. >> on the second question it's a five-agency rule, i believe. and so a lot of coordination and cooperation is needed and we had something like 18,000 comment letters. it's been a very difficult process in terms of the amount of work that has to be done and the amount of coordination that has to be done so i don't have a date for you. i think if there's a silver lining to the events you referred to and it may be that there are things we can learn in terms of writing the rule and thinking of how it would work. one aspect of our rule that i think would have been important in the context of the loss is that in the rule a bank would be required to provide a plan in advance explaining how the hedge was going to be done and how it was going to work. there would be necessary to have an auditing process to make sure that, in fact, that was being

followed and that there were adequate risk management and government rules to oversee the process and it would be necessary compensation for the executives involved in the management of the position. so, one aspect of the rule that might have been rell sent and again, we're still looking at that situation as our docc and others would have been the control of the government's aspect of it and that might have potentially changed the outcome. [ inaudible ] >> mark gregory, bbc. how much worse does the situation in yeeeurope before i starts denting the american economy and thus changing the direction of the fed policy making? >> well, we hope it doesn't get

worse. i think it's already one of the factors that has been a drag on the u.s. recovery and not by many factors and there are others that we've everyone innoned and it's been having an effect on economies as well, countries that export to europe and it is a significant issue and we are hopeful that europe will take additional measures and do all that's necessary to stabilize the situation and to provide the bases for an ongoing stable structure in which banks and sof rinse are both stabilized in which there is a program for growth in which fiscal arrangements are cleared and so there's a lot of work to be done. again, we think that the policymakers in europe have very

strong incentives to get this right and we're very hopeful that we will get it right and we're in close contact as they work on these issues and it's good to be prepared for further problems that might emerge from europe and we have been doing that. for example, you know, we recently did our stress tests of the large bank holding companies and made sure they had enough capital even in the face of the european crisis and we've been monitoring the exposures of banks and other financial institutions to europe and, of course, monitoring the situation there very closely. so we are hoping for the best. we're hoping that european policymakers will take the additional steps they need to take to stabilize the situation, but we are prepared in case things get worse to protect the u.s. economy and the u.s. financial system.

[ inaudible ] >> thank you, mr. chairman. market watch. i just wanted to get back to lending and credit. the uk has started a program where the bank of england is going to make lending to banks only if they lend to households and companies. is that something the fed is under consideration? >> well, we're very interested in it and we'll certainly follow it. the details are not yet available, and i think it should be noted that it's not just the bank of england program, but it's joined with the british treasury. one question might be how much of a fiscal component is there? is there a fiscal subsidy being included there, but we're looking for, as you know, throughout the crisis and we looked for new programs, new ways to look for the economy and the type of thing that will be on the list of programs that we look at.

you have an inflation target of 2% and it shows 2% over the medium term. i was wondering if you could explain why and secondly, you said the fed's prepared to do more if necessary. can you briefly comment on what additional form it might take and what are the relative costs and benefits to do more qe versus more maturity extension. >> well, in terms of the inflation forecasts, again, i think it should be said as a preliminary point that economic projections have a lot of uncertainty about them. we talk about that uncertainty in the survey of economic projections. so it shouldn't take a false sense of precision from those numbers. that being said, there is an issue about whether or not there is sufficient stimulus in the economy. as i mentioned earlier, one

problem is that we are now at the zero bound and that the types of unconventional programs that are available, we know less about them. they have various costs and risks and for that reason you may get a different amount of financial accommodation in this kind of regime than one where short-term interest rates can vary freely. i think that's a critical issue. in terms of the costs i would list briefly a large asset purchases increase the size of our balance sheet and therefore ultimately will make an exit a more extended process. the large asset process means that they own a larger share and it may have implications for market functioning which might affect the ability of the fed to

have stimulative effects in the economy. there are some financial stability issues that we are monitoring and have to be taken into account. so any kind of assessment of appropriate policy must be both at the outlook for the economy and for -- and at the cost and risks associated with new measures and new steps that might be taken. that being said, again, i think at this point we still do have considerable scope to do more and we'll continue to monitor to see how thing evolve and we're looking primarily at the labor market in this respect if we're not seeing, sustaining improvement in the labor market that would require additional action. in terms of balance sheet actions. we're unlikely to do more maturity extension for a while because we've taken it for as far as we can and we'll take other types of steps in order to

make the amount of stimulus in the economy. >> i hear a lot of conversations about the liquidity trap in the u.s. after japan and the bubble burst. if that happens how could economy escape from here? thank you. >> well, the u.s. economy is in a situation where short-term interest rates are close to zero and so what that means is the federal reserve cannot add monetary accommodation by cutting short-term interest rates, the usual approach. it's been one of the themes of my own work for a long time including some of the work they did on the bank of japan that central banks are not out of tools once the short-term interest rate hits zero there are additional steps that can be taken and we demonstrated through both communications, techniques, guidance, about future policy which is something the japanese have done as well,

by the way and through asset purchase which is also something that the bank of japan has done that central banks do have some ability to provide financial accommodation, support their recovery even when the short-term interest rates go to zero. that being said, these non-standard policies are less well understood and they do have costs and risk, but i do think at the same time that they can be effective in helping the economy. >> cnn money. >> chairman, are you at all concerned that operation twist can affect banks and their willingness to lend? does it undercut your ability to increase credit to consumers? >> credit to consumers? >> no, i don't think so. >> take, for example, i've heard the argument that they make it unattractive to lend.

i don't think that's quite right. we're lowering the treasury rate and that should make it more attractive for banks rather than the whole securities to look for borrowers and to earn the spread between the safe rate and what they can earn by lending to households and businesses. the question arises in some context in some parts of the mortgage market, but lower interest rates on the securities and other types of assets and all else equal would induce banks to look for higher yielding returns and higher yielding assets in the form of loans to households and businesses.

>> pickal times. returning to europe briefly. some analysts have said that the situation deteriorate there and the fed could step in by buying european sovereign debt. are there any countries that you would rule out in such a strategy? >> the federal reserve isn't going to be buying european sovereign debt except we have a limited amount of european sovereign debt as part of our foreign exchange reserves as it comes primarily for a small number of countries and that's not something that we would be engaged in. >> you have two new governors aboard. did jeremy stein push you in any particular policy direction? >> they are two terrific people. he's an outstanding academic and knows a lot about finance.

jay has market experience and a lot of experience in government. they both bring a lot to the table. this was their first meeting and i think to some extent they were in listening mode, but they do have an awful lot to offer and i really do look forward to working with them because i think they're exceptional people and i'm glad and for the first time that's the case and it was the seven governors and it was in 2005 and it was great to have a full compliment of people and it would be great to do monetary work so effectively. thank you. >> thank you. in about an hour and 20 minutes we'll have live coverage from the white house. president obama is expected to give remarks urging congress to pass legislation to avoid a

doubling of student loan interest rates by july 1st. we'll have the president's comments for you at 1:40 eastern on c-span3. later today, author peter eddelman on his book "so rich, so poor" on why it produces so much poverty at the same time. the tens of millions of americans are living below the poverty line. we'll have that live at 6:30 eastern on booktv.org. this weekend on "afterwords." this was something that was swept under the rug, and kept not only from the american people and the mexican people as well and there are faceless mexican citizens that have been murdered as a result of this, but the only thing we knew outside of the government program was that guns from american gun dealers were going into mexico and causing all

these problems with the cartel when the government was sanctioning these sales and sending them to mexico. >> the white house correspondent major garrett sunday night at 9:00, this weekend on c-span2. house democratic leader nancy pelosi said today that wednesday's vote to issue a contempt citation for attorney general eric holder is, quote, a shameful display of abuse and display of power. house republicans are looking to hold them in contempt. representative pelosi accused house republicans of diverting attention to jobs and said it would hinder the passage of the transportation bill. current funding for transportation expires at the end of june. her briefing today is just over half an hour. >> good morning. >> good morning. >> this is a very interesting week because so many things are coming together or not.

what we have seen is a shameful display of abuse of power by the republicans in the house of representatives. instead of bringing job-creating legislation to the floor, the transportation bill, they are holding the attorney general of the united states in contempt of congress for doing his job. it's really important to note how this is connected with some of their other decisions. it is no accident. it is no coincidence that the attorney general of the united states is the person responsible for making sure that voter suppression does not happen in our country, that issues that relate to the civil liberties of the american people are upheld. these very same people are holding in contempt and are part of a nationwide scheme to suppress the vote.

they are closely aligned with those who are suffocating the system with unlimited, special interest, secret money and they are poisoning the debate. they are poisoning the debate with that money. and so what does the average citizen say? they throw up their hands and say -- both the houses and that is a victory for the special interest. our founders had in mind a democracy where the government of the many -- the vote of the many and the voice of the many determined our government. these folks want a pollutocracy, where instead of the voice of the many, the check books of the very, very few determine the outcome of the elections. again, a pollutocracy and instead what you see is a

diversion. diversionary tactics and let's not talk about the transportation bill which is only nine days until it expires and student loans, nine days until the lower interest rate will expire. instead -- instead, let us tie the hands of the person who was assigned to make sure that the american people had the right to vote and have the right to vote are able to vote and that their vote is counted. it's all tied together. combined with the debt in the threat ceiling, the republican delay injects not only uncertainty. that has prevailed for a while. paralysis. paralysis in our economy. we hear it over and over again from businesses large and small. any threat to our credit rating, to the full faith and credit of the united states of america

contributes to the paralysis on the part of businesses who want to hire, but are not. why would they do such a thing? it's because it's their philosophy. they are the party that makes adam smith look like a keynesian. they are lay say, lay say, no supervision, no supervision, no regulation, no discipline which those who would exploit the system for privatizing the gain and nationalizing the risk. and our financial transactions. less say, less say, laissez-faire in terms of they don't want initiatives with clean air, clean water, public education, public transportation, public health,

medicare, medicaid, social security. this is what they believe, no government and bless their hearts they act upon their beliefs and their beliefs are dangerous to the thriving middle class in our country. so we see so much of it coming together, why would they oppose initiatives to create jobs? the president's american jobs act. some people call it obstruction. it is obstruction, but obstruction is their orthodoxy. they don't believe in a public role. so it's not that they're obstructing this way of getting something done, but it's no way for them. that's why they take pride in being the do-nothing congress. everybody knows that our founders had in mind that there would be a public role, that we'd have a public/private

partnerships and that the education of our children and incentives with the creation of jobs and then later, economic security for our seniors and economic health for the security of our seniors and we all believe that kids should be in clean, safe neighborhoods and the security of our country and all done in the fiscally sound way and have no political bias to it and that is not partisan in any way and if your belief is there should be no public role and the only role of government is to give tax breaks to the wealthiest people in our country and let something trickle down, if it does, that's okay and if it doesn't, as the speaker said, so be it, but we do not say amen to that.

their approach under the bush years, the george w. bush years, created the deficit, did not create jobs, took out tus to th brink of a depression and it is very hard to grow out of this and it's something the whole world already has done, but when they bring this up again as their approach then you have to say this didn't work before. it will only make matters worse for america's thriving middle class. so we are saying to them, pass the transportation bill. take away the uncertainty of the students for the interest that they'll pay on student loans. pass the middle income tax cut so that we can remove all doubt that that will exist and not be held hostage to tax cuts for the wealthiest people in the country. we've seen it all in their

budget in which they have unfairness which is their goal. unfairness. how else would you describe elimination of medicare, making seniors pay $6400 more while getting fewer benefits while you've given over 300,000, $400,000 tax cuts to people making $1 million a year. do you think it's fair for students to pay double interest on the student loans while they give the same several hundred tax break to the wealthy. you see it all coming together. diversion from not doing their job, of helping us come together on the transportation bill for 35 years and it has always been bipartisan and it has always been a job creator and it always contributed to the safety of transportation in our country, the promotion of commerce, the quality of life and of moving

people and product moving to and from home and work. it's nine days to go. let's hope there's still a chance that there can be some interest on the part of the house, republicans to support what 74 members of the united states senate, one was absent who is on record and said 75 and three-quarters of the senate on record supporting a bipartisan bill that is unacceptable to the house republicans. so this is a serious time especially as we go into the 140 days until the election. 140 days until the election or maybe one day off, 140 days until the day after the election. 140 day, very important. not only to our economy, which is important. not only to our one in five