institutionalizing this important level of engagement. i think the white house wants to emphasize economics in asean, which is smart. incredible stock for u.s. investment in asean. some math is being done over at the white house and you'll hear more about that. but as a preview -- and i think we've talked about this at csis. u.s. investment in asean is multiples greater than it is in china. it is nearly ten times as great as it is in india. and if you look at total u.s. investment in asean and you include energy, we are the biggest investor in asean by a factor of over two times. after the meetings he does in myanmar's capital. for those of you who are skateboarders, it's a paradise for you, ten-lane roads with no

cars on them. you would really enjoy that. and he will do a bilateral with the president of myanmar. you can tell the white house is managing the myanmar trip very carefully given the fact that the president called the president of myanmar and the leader of the opposition earlier this week to get ahead of that trip. the president has three important issues to manage within the myanmar situation. first and, i think, foremost on most people's minds is the 2015 election. right now, precluded to run for president. i think americans would like to see changes to the constitution

so she would be able to run. there will be a question, and this will be a hard one, between the white house trying to support continued reform, economic and political reform in myanmar. after all, this is a country that had cloistered itself for decades and has made an incredible amount of political and economical reform but there's a real push from senate and house legislators, including the new senate leader, mitch mcconnell on human rights and democracy and myanmar. the president will have to address this. i think he should. the fact that democracy and reform in myanmar cannot be allowed to stall. i think also there's a recognition that you have to be practical about how much change the country can handle at one time. the other two issues that he has to address while he's there is

the plight of the rohenga. steve will talk about that. and the toaster achieve regional cease fires. strong core burman population but cease-fire negotiations with a wide group of minorities on the periphery of that center. actually that's going very well. the sovereign integrity of myanmar is important and those cease fires having a political basis not just a military basis is vital. and finally, this is an important story, the new president of indonesia will be at the apec eas and the g-20 meetings. there was earlier fear that he might not go to the g-20. he's going.

and president obama will meet him for the first time and do a bilateral with him in brisbayne, in australia. that should be a very important meeting. it's got half of asean's economy. it may be nuanced and it's indirect but the indonesians will play a very big role in areas like foreign policy and national security concerns in the east asia summit and in asia generally. under joko wi's five-year term. and coming to that, i think one thing you'll see out of the east asia summit and the asean summit is a growing determination to stand up to china on the

maritime security threat that china has very practically posed. mike mentioned, and he's correct, that the chinese have not let their foot off the gas on the south china sea. rhetoric from china on a code of conduct is really -- the best way to look at this, it's like the charlie brown the football is the code of conduct in the south china sea. the chinese are holding it, saying we're serious this time. come on, come on, kick it. and they pull it back every time. i think asean really wants the united states to continue its role in putting this on the agenda, talking about it. and we see increased asean cohesiveness behind the south china sea issues.

>> for the united states not to be in a defensive crouch on these economic initiatives. the united states has been put into that sort of reactive mode on the asian infrastructure, investment bank and the ftap, free trade area of the asia-pacific feasibility study. the way to get around this is play offense. what we haven't seen from the good things from this white house, we have not seen a comprehensive economic strategy for asia. if -- it's not hard to put in place. if they can get their act together and articulate a strategy, the rest of asia will

be game for that and they're very much interested in not having a synocent rick order or, god forbid, political integration in asia. thank you very much. >> we'll wrap up with steve morris, with remarks from steve morris. and dr. morris is the director of our global health program. then we'll open it up to your questions. for those on the periphery, we'll be passing around a microphone. and if you can identify yourselves, that would be very helpful. >> thank you. andrew, thank you very much for pulling us all together and good morning. i'm going to speak briefly to the mission we had to myanmar in august. but before that, a few words about ebola. the president yesterday announced a 6.1 billion supplemental for ebola. the majority of that money for overseas purposes both in west

africa and in support of the broader health ajaend, that's a lot of money. we have been the lead power in the response with $1 billion plus commitment on both the military and civilian side. this steps up the game significantly. we can't do it on our own. the ec, world bank come to the table but the response from other parts of the world and other major powers has been very

poultry. and this is despite a very aggressive diplomacy led by ambassador nancy powell and john kerry and others. australia announced a $24 million commitment just recently following the announcement of the travel ban, which was itself quite controversial. china is the exception, committed up to $2 million. it has special capacities and experiences dating back to sars and pandemic flu response. most of its efforts are concentrated in sierra leone where u.s. responses are concentrated in liberia. this is a very welcome positive development to have the chinese making a commitment of this kind for multiple reasons.

scanning and other points of entry. the region is quite alive to the threat. that's changed significantly in the last six weeks. i will try to minimize any of the redid you know dancy with ernie's comments, which i completely agree with. the delegation that we took out in august to myanmar is a follow on to an earlier mission focused on health. this one we did jointly with the southeast asian studies, ernie's deputy, who i hope is here, was the co-leader of that with me. we went out there as a prompting, forward-leaning opposition and one moving towards harder, negative conclusions that things were regressing or stalled and we framed up this around that

question around which direction are things going and we put a focus around governance issues, constitution reform, around the peace negotiations with the ethnic states and government agenda with a special focus on health. congress is moving to be more aggressive and the opinion climate has hardened and that's something that the president has to deal with as he moves forward here. i -- in terms of our impressions, the electoral season is fully upon folks in myanmar. you will see this has become an overriding prism, that there's a lot of excitement. there's a lot of interest. there's a lot in play. we don't know what's going to happen in terms of these constitutional provisions that ernie pointed to and what will ultimately be the cal class of aung san suu kyi.

this is an ongoing negotiations and back and forth right now. cease fire negotiations in august, federalalism toward a goal and toward long-term negotiatings on the political agenda. there's been further bad news around that, which we detail in our report. so it's back and forth. and still hard to draw conclusions. on the health agenda, what's remark wrabl is that you have major interests. the global fund, the world bank, the usg using its role, the uk. on a long-term basis to facilitate the reform of that sector and major advances and as we detail in this report they are beginning to show substantial gains. but they're making those calculations on a three to five-year timeframe. it's not keyed to whether the electoral cycle is successful at the end of 2015. it's keyed on the notion that there's a government to work with, partners to work with, the

environment is favorable and ngos and others can move ahead. related to that on health we put a big focus in resistant malaria. that may sound like a purely technical issue. in fact, it's a threat to disable the therapies that exist globally right now in control of malaria. the resistance is centered within myanmar and the greater rakhine subregion and beginning to combat that. the militaries have to be brought into the equation. they are being brought into the equation. the global fund has done a remarkable job. the gates foundation is involved and the like. ernie mentioned rakhine. we were, i think, during our visit where we spent a lot of time talking to the parties to this, both government, msf, u.n. and others, it was a fairly brutal, brutal assault back in march upon the msf and the u.n. the state, federal union

authorities pretty much abdicated responsibilities and stood back while that happened and now there's been a process of trying to repair the damage. the president has put special emphasis on this. congress has put special emphasis on this. this is a problem that is terribly complicated and difficult to reconcile and move forward. and it's not going to be fixed tomorrow. but it's something we can't turn away from, nor have we. and i think the u.s. embassy and ambassador mitchell has done a good job putting the stake in the ground, standing up to this abuse and insisting on holding the government to account for it. and i think it deserves enormous amount of credit on that. i won't go into detail about the buddhist and muslim violence, land grabs, crackdowns on journalists, but it's in the report. on the big issues around the constitutional matters and the electoral preparations and the like, it's just stay tuned here.

our view is that the u.s. has struck a middle path of being engaged but being cautious and continuing to call out those areas that are most problematic. the u.s. engagement there draws broad and wide support across the political spectrum. it continues -- we have been able to navigate as a country a very difficult and politicized environment. i mentioned about rakhine needing to push that. on the electoral piece, the central prism leading into 2015 for making judgments, ndi, iri, ifis are on the ground, operation operational, doing a terrific job. we put a spotlight on that and call for stepping up that effort in specific ways. on the health, we applaud what has happened and call for a doubling of the u.s. bilateral engagement and continued very strong support around the global fund. and the world bank.

just in closing, we need to be realistic around u.s. leverage. we need to be realistic around this complex transition. we should not rush to judgment around making headline conclusions, categoric conclusions about where things are and where they're going to be in another year. i'm not sure that's a particularly prudent way to judge something as complicated as this. thank you very much. >> thank you, steve. we'll open it up to questions. first, i'm going to go to george. >> thanks. two questions. one, you talked about some specific things on u.s.-china relations. how would you characterize the overallstate of the relationship? secondly, what role does this election play? you mentioned the little things but how much has the region and the regional leaders paid attention to the u.s. election and the guy that they once saw as a rock star, do they see him as a weak, lame duck?

does he have to prove to them that he's still a leader on this trip? >> i think the china-watching community in general in washington has been a bit surprised that xi jinping as leader has been less accommodating and tougher than expected. the saying in beijing one hears now is he talks like mao -- excuse me, talks like dung, acts like mao. the expectation was that simultaneous pressure against india, japan, the asean countries, cyber attacks on the u.s., that this would lead to a natural pushback. indeed, as ernie said for asean, which tends not to like tension, there has been an unprecedented

amount of pushback. what's been surprising, it hasn't appeared to lead to any cal abrasion in chinese foreign policy. so i would characterize u.s.-china relationship as one that is not in a downward spiral but one where a heightened level of tension is the new normal. the challenge for the president is to continue framing the relationship in a win/win way because, as matt and others have said, on broad economic issues, management of north korea and region regional integration, we're generally still on side. apec is a transpacific grouping. putting enormous effort into it. it is not an apec summit in beijing that's designed to push the u.s. out. quite the contrary. china wants to accelerate movement on the free trade area

of the asia-pacific, including us, mexico, chile, canada and so forth. the reason that the administration and others are saying no is because it's too fast. we have to get tpp done is and through congress. two reasons, one to set the rules before we get into deep negotiations with china. the second is congress can't digest a trade agreement right now that includes china. we're slowing china down a little bit but in some ways china's major theme for this apec is more integration. so the context is not one of downward spiraling hostility, but the level of tension is higher. the chicago council on global affairs released its biannual views of the world. 47% of americans say u.s.-china relations are controversial. 3% of americans didn't have an opinion. >> i would say what do the asian

leaders think, is he a rock star, is he a lame duck? i think the jury is out. the hope is that -- the narrative among a lot of the elites, including leaders, is that president obama has the asia engagement dna in his blood. it's what he wants to do. but he has been sort of hijacked by domestic politics and the elections in the united states and now he may be able to turn to asia for legacy issues. look, the guy wants -- he said himself. his self approve essie is i will be the first pacific president of the united states. he speaks indonesia. he was born in hawaii, grew up in indonesia. for the southeast asians, they do hope that this is a guy who can help talk to americans and set a foundational understanding among not just politicians, but among americans that asia is vital to the future of

ourselves, our kids and future -- not only our jobs but our security. and i think that's the hope. so, there's still that hope there that because he lost the election that that's what he will have to accommodate. work with the republicans. do trade and then start to talk to americans about asia. >> just want to make sure i got one fact right. trying to remember what i said. 49% said cooperative. 48% said adversarial. i think i said it the other way around. >> gilliam? >> between the u.s. and china over sort of gaining friends in asia. you mentioned that asean was kind of welcoming american engagement and american pushback against china in the south china sea. are there other divisions within asean? which countries in that grouping are leading more toward china? i would guess cambodia was one

that was always identified but thailand, perhaps? >> i think it's a fair question. from asean's point of view, we have to remember balance over everything. balance in everything. so if it was the americans that were playing, you know, complete offense and we had all the ideas and china was on its back foot there would be a demand pull for more chinese engagement from the asean's. we have to be careful about understanding that. we have an historic window in the united states. it's the three a's. abbott in australia pulling for him, pulling for more u.s. engagement, abe in japan and asean. everybody is lined up. they want to see the americans playing offense in asia because of the proximity, geographical proximity of china. because of china's -- this disconnect between china's rhetoric, what it says it wants

to do and what it's actually doing on and under the seas. that worries asean. and, quite frankly, they want it all. they want china to feel safe, secure and be economically successful so that they can share in that success. but they want the americans also to be economically engaged, successful and deeply engaged on a security basis so china doesn't use its newfound economic might to impose its own definitions of sovereignty on smaller neighbors. [ inaudible ] >> i talked to the cambodians a year and a half ago and they said you misunderstand where we are on china. we want the americans to be engaged. he sounded like every other asean leader to me. he wants balance. now in practice, his foreign minister has been off the

reservation on that front. and that's being very kind because the cameras were rolling. but i actually don't think it's particularly useful to do sort of a spectrum of the asean countries on this issue. >> kristin? >> thank you very much. thank you. what should president obama's message be on hong kong? obviously a lot of americans watch the prodemocracy protesters. they're going to have a lot of interest in that. how fine of a line does he need to walk? and also in terms of the constitution in myanmar is it realistic to think it can change before the elections and what specifically would have to happen? what does that process look like? thank you. >> on hong kong, there's concern in the administration because --

within chinese media and government circles there are accusations that the united states is the evil hand. >> right. >> behind the protests. my recommendation would be don't worry about that, that the president should speak out clearly for -- in support of what these people in hong kong are asking for. i think there are ways to wrap it in language that suggests it's good for china's development, it's good for china's relations with other parts of asia, across the straights of taiwan and so forth. but as margaret thatcher might say, this is no time to go waddling. i think that's where they're coming down. it's always harder to do this when you're in beijing and you don't control the media environment. it may be that secretary kerry was saying this so the president

didn't have to say it as loudly. i remember traveling with president bush and trying to think about how to talk about these issues in beijing. but he did. and he found ways to talk about religious freedom and other issues. but to frame it in terms of what's in china's interest ultimately. >> if i could just maybe stitch the two together, i think -- i sure hope mike is right. i think the americans have to talk about this. the president has to talk about this. if you look around asia, there's a lot of analysis going around that democracy is being stepped back. i think that's absolutely wrong. democracy protests in hong kong and joko wi arising out of nowhere, small town in the center of java, not part of any political party, not the sign of a great indonesian wealthy family, where do you think asia

is going? i'll tell you, i can and have made the case that southeast asia, notwithstanding the -- i think we sort of have a bubble going on in thailand, is moving forward. the middle class, empowered middle class is moving forward and they want to hear president obama supporting this kind of event. on myanmar i'll ask steve to comment since he has just been on the ground. that's a very good question. it is legally possible -- there is time to change the constitution. political politically, very hard to see how that could happen. so it would be extraordinary. part of what the white house is trying to manage right now is the honest read is it's almost impossible to get that done before the elections. and partially because the elections are coming. so if it doesn't happen, what we should be worried about is

throwing the baby out with the bath water and saying, okay, well, myanmar's economic and political reform has failed because they didn't get across that -- the line. i personally haven't spent a lot of time -- or a fair amount of time in myanmar and some of it quality time with aung san suu kyi. she didn't say this but i felt like she -- i thought there was an understanding there that she wants this change before the election but if it can't be, i think there's iron determination to continue to fight. and maybe if her party, nld, wins, i thought she thought there was room to get enough votes potentially to make changes after winning and controlling the parliament. >> we detail in here there's two provisions that have been at play. one provision within the constitution bars her because of citizenship issues and the

second is the provision around the -- the setaside of 25% of parliamentary seats for the military. most of the debate within the constitutional committee of the parliament has centered around this. and i agree entirely with ernie. i think the signals are pretty clear that we're not going to see in the run-up to 2015, the odds of seeing resolution of the first of those two or the second, to open the process sufficiently where there's a clear shot at full victory, those odds are low. and we face a predicament here. first of all, she and the opposition have to make an internal calculation at some point in time about how much do they lean in and play and how much do they lean back and not play. and those determinations have not been made yet. the u.s. government has a brouder -- how do we figure out

what's fair if it doesn't include those major reforms and an opportunity to have a full run at possible victory? i think that's what ernie is getting at. beyond that 2015 election, what's good enough to be able to continue? it will determine a great deal what our bilateral relationship looks like post 2015. >> can i say on this one, there was high-level engagement. secretary clinton took a risk on this issue, kurt campbell and others at senior levels. they achieved an important historic shift. the white house chalked it up as one of the, you know, signature achievements of the pivot and then except for our friend and csis alumnus in rangoon, state

officials in the white house dropped this. now the president is going, in my sense -- i'm not talking civil service engagement or colleagues at the table. i think they put this on the scoreboard. they dropped it and now they're scrambling and there probably should have been a higher level sustained engagement. not just to turn the corner with myanmar but to make sure that we were engaging at high levels to make sure we didn't hit the difficult -- i'm with my colleagues. i'm not sure we could have -- or aun san suu kyi could have achieved a full free election in 2015. you look at the range of issues and problems we have. we would have benefited from more high-level engagement over the last two years than we've ha had. >> first, you mentioned that the imf reform is jeopardizing u.s.

legitimaty in the region. can you give specific examples of how that's costing the u.s., the failure to pass that reform and you said that we need a comprehensive strategy on asean, that they have the peculiars but don't have the full strategy. can you explain more what you mean and what that would look like? >> imf quota reform is something that the u.s. championed in 2010 at the korea summit of the g-20. and it pushed it because it recognized that for the imf to continue to be an effective institution of, you know, global economic governance, the ability to do surveillance and monitoring of economic policies and to make loans where necessary, it need to address the so-called shares and chairs,

imbalances of governance of the institution itself. it pushed this agreement. everybody agreed. everybody has implemented it. the u.s. has failed to implement it because of congress' unwillingness to approve a relatively minor -- there is a budgetary hit from doing this but it's relatively minor. it's mainly a transfer of money that was already committed to another pot. and i think that's had tremendously damaging implications for the imf's effectiveness, for the united states' ability to sway others on imf related issues, broader growth issues within the g-20 and specifically it's fed the frustration of the large, emerging economies that want more voice in global economic governance. and i think you can draw a line from this failure by the u.s. to follow through on this commitment directly to the

establishment of the asian infrastructure bank and the bricks bank as well before that, which may end up being useful pieces of the architecture, depending how they end up being governed and how they end up being run. just in terms of the -- if the u.s. has an interest in supporting the best elements of the system that it helped to champion in 1944, then it needs to follow through and do this reform. and i'm certainly hopeful that in a new congress, this will be taken up again and passed quickly. it is getting in the way of a lot of things we're trying to do in the region. >> can i ask a follow-up on that? is there an economic trade impact as well? is there a spilling over into those negotiations as well? >> in a broad sense, yes. it's affecting our ability to be a champion of the rules-based order that we're trying to update and uphold, for example, in tpp. it doesn't specifically come up in tpp negotiations or is an

obstacle to ipr, disciplines, whatever. in a broad sense, it does affect u.s. credibility and effectivenes effectiveness. >> what i meant is we've got important peculiars in place, like the tpp, for instance, is not an -- it's not a u.s. strategy for engagement in asia economically. it's an important peculiar. if we did that, it would have set a high level rules-based model that others could dock into. we need to do that. but we will. what we're failing to do is articulate a broader -- connect the dots basically, to connect the dots of the tpp, bilateral investment treaties that we are negotiating and have negotiated, free trade areas that we have with australia, korea and singapore. what we need to do is articulate over the tpp a vision for why asia is important to americans

and what our strategy is to make sure that we are not only deeply part of -- which we are, but that we are driving this rules-based order of how asia will be structured, how it will integrate. and this isn't hard. we have all the pieces in place. we have to sort of talk to what we think. and i think once we do that, we'll be a much better -- >> can i add a quick footnote? i agree with all of that. in theory, the tpp strategy was designed to incentivize a growing group of asia-pacific economies to join this updated rules-based system, 21st century rules-based system. and it's actually worked in the sense that it'st started with five countries, it's now 12. when japan joined, china immediately took a renewed interest in tpp.

it had been looking at tpp as a form of containment or exclusion, an attempt to exclude china from regional economic affairs. when japan formed, china understood that this was a strategy of trying to draw china and others into the rules-based order. while i agree with ernie, you need a broader framing because it's not just about tpp, the reason tpp is so important is that it is designed to, you know, pull people into this higher standard system. so it's just absolutely critical as a trade and broader economic strategy in asia. >> we'll go to julie pace and then howard. >> thanks. julie pass from a.p. i want to follow up on something mike said about she being less accommodating. why it is, and the administration's thinking on this, since they invested a lot of time and seemed to put

emphasis on having obama and biden build a personal relationship with him. >> i think one of the fundamental conceptional flaws of the pivot has been a and there have been different views in the administration. until recently there's been a strong view that much of china's assertive behavior in the east china sea and south china sea were driven by domestic pressures, nationalism, philippines or japan or vietnam provoking china. there's been another view, primarily in the pentagon, which is that this is, in fact, part of a chinese strategy, if you will, to steadily assert more and more control over the so-called first island chain that stretches from japan down.

and to do so first by denying or complicating u.s. access and then asserting control. i think the -- my sense is that the center of gravity in the administration in terms of trying to understand china is shifting toward that latter view. and part of the reason is that xi jinping is not adjusting or calibrating as countries push back. why is that? i think part of it is that xi himselvf has a history, tradition, from his father, of thinking strategically about china's interests and how to secure them, especially in the maritime era. and xi is a marxist literally,

sees the forces of economics favoring china over time. and there are views in asia, across asia, southeast asia, i've heard this japan and elsewhere from senior officials, that frankly the chinese side is not calibrating because they see a certain distraction and weakness in washington and they see a window of opportunity. before they get hillary clinton or republican in 2017 who will be harder lined. it's harder to prove but it's been striking to me that i've heard that hypothesis in a number of asian regions. the consensus is growing that there will be more viscosty with china over the next few years doesn't mean it's a downward spiral but will be coming at a time when the administration has

a lot going on in other parts of the world.coming at a time when administration has a lot going on in other parts of the world. >> on tpp, particularly on the u.s.-japan trade access agreement, i thought i heard maybe a little discrepancy in views, i think. michael talked about frosty talks and then matthew said -- talked about being quite close. so i'm wondering where that is and -- actually, and maybe how you see the -- you know, the mid-term election results influencing, you know, whether or not the president gets tpa. >> frosty, but close i think is the way to put it.

you get different views on these issues, different capacities. with the u.s. and japan, you have a long history, lot of baggage on trade relations that has to be cut through to get this done. then there are personal issues. all of that is leading to, you know, a strained set of talks, including the bilateral ones between the u.s. and japan. that said, both the u.s. and japan and the other ten countries in tpp all have a very strong interest in getting tpp done. and i think that's ultimately getting -- cutting through the, you know, whatever tensions or feelings people have in these negotiations in terms of interests, everybody wants to get this done and certainly the u.s. and japan want to. i think they are close. i think the gaps are well understood by both sides and it's just a question of some final political pchimpetus to g them done. then your second question, i

agree the lack of tpa authority has made it more difficult for the u.s. and japan to reach this agreement. and it's time for tpa to move. i'm encouraged by the early indications, as i said, of both the republican leadership and the president himself, that they are ready to work on moving forward tpa. and i think that that must happen in order to -- tpa as a technical matter, will have to be passed if only minutes before tpp is putting in front of congress. you can't have tpp being nickelled and dimed in the debate. it has to happen and the sooner the better. >> last week in tokyo, i heard from ministers and senior trade negotiators that this is the worst dynamic since the 1980s of the cold war, that the tension in the room is palpable and i said just like every other trade

agreement right before we finish it? in that sense it's more of the same. but tpa is really blocking this because the abe government, which probably has probably has more economic and political statement is nevertheless stuck internally because of questions about whether the president can deliver to congress. it's based on observation of how things have gone with congress for the last six years. so these rays of hope on friday may turn that around. if it doesn't, sadly we'll be stuck five yards from the end zone. >> if i can shamelessly buy a sound bite here. it's always noisiest before the dawn in trade agreements. it shows two sides are getting close to difficult political

compromises that have to be made. i think it's consistent. >> a question. as you mentioned the aiap has 20 countries sign up already. according to recent reports, australia, korea are actively considering to join. the question is, how likely will united states change position? obviously ai has gained a lot of support. under what kind of circumstance or conditions might u.s. consider to join it in the future? >> i think that's possible as a matter of administration policy whether this administration or some future administration. in fact, i might say that's

ultimately likely if this institute gets up and running. as a practical matter, let me be clear the united states cannot join in the near future if congress is not willing to do things they need to enable that. if they can't pass the relatively minor change and budget, do you think they're going to approve multibillion appropriations for a chinese led bank? i don't think so. it's not going to happen as a practical matter. with that said, to answer your question, i think like the united states, korea and australia have their own -- and japan -- have their concerns about the way this institution was launched. there are a number of questions about the governing structure, how the shares and that institution are going to be divided up. in particular how the operational lending standards are going to be set. are there going to be environmental or debt

sustainability standards. is there open precurement so anybody that gets one of these loans can buy products and services from anyone? or will there be a favoritism for certain suppliers? there are a bunch of questions that are legitimate questions that countries thinking about joining this institution need to work through with china. china needs to explain those things. i think actually the concerns that have been raised have moved the needle. china has realized some of these issues need to address them themselves to make sure this institution can work effectively. they also to convince people they're going to need to clarify how those governs and operational questions are going to be followed through. i think that i'm not sure whether korea and australia are going to join. there's an argument on both countries that joining would enable them to work within the bank to shape those issues.

there's also an argument once you're in, it's hard to change dynamics. bank is based in beijing with 37% chinese capital i think is the target. it's going to be hard for other participants to change things once they're in. >> time for one more. we're going here. >> thanks. just quick one for me. i wanted to ask what your expectations might be from the obama informal summit i think it's wednesday. are we going to expect something good from them? anything like previous summits or --? >> not much came out. the most important part was the bilateral investment treaty. they'll say something positive about it. i don't think there's been enough movement. matt would know better to announce the significant landmark let alone completion.

the administrations negotiators are focused on tpp. some criticize had the. they're probably right. there is secretary kerry previewed an agreement on co 2 emissions and environment that will be of some significance and be announced. there's possibility of announcement on military transparency. for example, and then agreements on people to people exchanges and things like that. i do not expect some large framing agreement on u.s. china relations. the administration has tried that in 2009. they issued a statement in beijing where each side respect each other's core interests. it unravelled because it wasn't credible. the new model of relations 2013 effort to do that again has sort of fallen apart.

i noted secretary kerry didn't use that phrase yesterday. i suspect the president is going to be weary of some effort to reproduce the famous three communicates or something like that and be binsz like. he'll have to speak out. i'm sure he will on hong kong cyber east china sea and find examples of cooperation. xi jinping will probably talk about power and other things for his domestic audience. two parallel audiences won't square. that's probably okay for now. >> with that, i want to thank everybody for coming today. this briefing will be posted online later this afternoon csis.org. follow us on twitter. you'll get an advanced notice there as well. thanks very much.

more about the president's trip. barack obama will travel to china next week. he'll have a six day trip. he'll have bilateral meetings with leaders including that rendon da modi. he'll visit beijing, east asia,

miramar. then the following two days at the summit in australia according to the white house. we will be back live at 2:00 eastern on cspan 3 this afternoon. we'll have live coverage of a post election wrap up at the american enterprise institute. several scholars will join analysts in the ethics and public policy center to review tuesday's results. that's this afternoon here on cspan 3 starting 2:00 eastern. coming up tonight, conversations about higher education. the presidents of two schools in the big ten conference. penn state university and rut r rutgers university at 8:00 p.m. eastern. that's followed by a senate hearing on telephone scams targeting elderly. another senate hearing on espionage. all this tonight on american history on cspan 3. this weekend, friday night at 8:00 eastern on cspan, more

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the programs you're watching. call us 2026263400 or e-mail us at comments @cspan.org. or spend us a tweet. like us on facebook, follow us on twitter. with live coverage of the u.s. house on cspan and senate on cspan 2, here on cspan 3 we compliment that coverage by showing the most relevant congressional hearings and public affairs events. on weekends, cspan is home to history tv with programs that tell our nation's history including unique series. visiting battlefields and key events, touring museums and historic sites. history bookshelf with the best known american history writers, the presidency, looking at policies and legacies our nation's commanders in chief. lecturers in history with top college professors and our new

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we're talking about the weekend food festival here. it's not my food festival but it's a great day. i apologize for challenges getting in. we have our special guest this morning. a good friend, old friend, someone we have dealt with for years. it's been decades. governor dan who i say certainly the most important intellectual force in setting the regulatory agenda in the united states and post crisis period. i also argue one of the most potent intellectual forces

globally. that makes you a very important person, very special person in what you're thinking, working on, your agenda. it impacts our members globally. i know you're limited on time. we appreciate you being here. why don't we get started. we've got the g 20 summit coming up in a matter of weeks. it's described as a water shed event. maybe the termination point of the agenda launched in 2009 with respect to the regulatory agenda. maybe the sense we can declare victory on too big to fail. there are a number of issues to be worked out. is it going to be a water shed event? will we declare too big to fail ended? how do you see that event in if not concludes, what's left to be done? >> i don't know 2that i would declare too big to fail. in fact i would not. i do think with the proposal we

expect to be coming out coincident with the summit, we'll have rounded out a set of proposals and now a number of agreements covering capital and liquidity and importantly resolution in the market discipline that would come along with orderly resolution. of course it's intended to insure the recapitalization could be done without taxpayer assistance. i think looking forward, resolution is going to be a very important focus of too a big to fail efforts. we are coming along in having countries around the world put in place mechanisms that would make it possible to resolve even the biggest institutions in an ordinary fashion without taxpayer assistance. there's obviously an agenda that remains there with a number of cross border complications. that's why the work that has

been doing on financial contracts has been important as well. that resolution work i think will continue for a while because as all of you know, it's not just a matter of having legal authorities in place, it actually is a matter of firm by firm basis making sure a that structure of the organization, funding and other characteristics of the firm are susceptible to resolution. it's not a pivot but additional emphasis over the next couple of years in fsb. first i think on shadow banking. as i've said before, to the extent that we have put in place a more vigorous set of liquidity and capital and other requirements for the large regulated firms, the chances of migration out of the regulated sector do increase. that's something that we're all going to need to keep a watch on

and make sure that risk is not building up in other places in the system. and the second area which i know a lot of large firms have themselves noted is the potential concentration of risks in central clearing parties. the promotion of central clearing parties is actually a very important pro financial stability advance. we need to be cognizant of the fact that as more trading is being done through central clearing parties, their stability needs to be assured as well. for example, a stress testing regime designed for particular characteristics and roles of central clearing parties that i think are important to do. >> we had a whole session yesterday on central clearing parties. we had a session in london in june as well. as you think about pushing risk out of the banking system into the shadow banking, do you have the tools to target that risk

where it exists? how do you think that a in context of macro tools. how do you see those being deployed in the future? >> few things there. first, as some activity has just not come back and won't come back and probably to the good. secondly, when activity does seem to migrate from regulated institutions to the unregulated sector, central banks and regulators need to ask themselves the question as to whether there is in fact a set of systemic risks comparable to those when in large institutions. so for example, if institutions that are essential in non leverage conduct the same activity, you may not have concerns. it may be a matter of people who want to take certain risks, perfectly capable of bearing risks, don't have funding

structures. everybody ought to have a shot at doing that. where the funding and/or total leverage of the new actors is of a sort that suggests the reply occasion of vulnerabilities. then we do have to begin with analysis and potentially take action. the issue of the tools and efficacy of tools is one of the great policy efforts of the next five to ten years. this is the world of systemic risks, macro prodesntial. it's less time since it was internal xized and people began thinking about it. one of the initiatives that will be coming out of fsb coincident

with bring ben is margining transactions even between unregulated entities. that's a first step towards trying generalize proden shl requirements to make sure you don't have unstable structures in funding. there are obviously areas that are not easily reached. part of what we're doing at fed and what fsb is doing internationally is cataloging the things that can happen, tools that are available and getting ours to the point we can begin to do this analysis. >> we have a session conclusion of our discussion focused on systemic risks. >> nellie is going to be -- >> that's right. craig body rick from goldman sachs will be there on that

session. if you have time to stick around maybe you should. yesterday it was reported you said you can have systemic risks without too big to fail. it's the interconnectedness within the system that you think is a problem. how do you deal with systemic risks if it's not about the size of the institution? >> i think it's two things tim which are often interrelated. one is funding structures, runable funding essentially. this sort of thing that gary gorten write about so much. second is correlated asset holdings. those things are frequently related with one another. but that -- those are at least two of the lenses that one wants to put on or look through in examining what's going on in the system more generally even if it isn't concentrated in the large financial institutions. again, i think the policy response will vary depending on

the business models of firms engaged in things even if they have funding issues, how much leverage. i can't say with precision what the response ought to be. i think that's the way to begin looking at these activities. >> you mentioned leverage a couple times. you gave a speech in chicago a few months ago where you talked about regulatory capital. sounded like you were proposing going back to something like leverage ratios and moving away from bozul 2 and 3. is that where you think we need to end up? >> bossul 2 builds on 3. i classify 3 as strengthening the quality and capital that needs to be held. upping the ratio, focussing on common equity making sure what is said to be capital will be there to absorb loss.

bozul 2 is more complicated matter. i think the length of time it took to figure out the formulas and all the detail that needs to go along with it. problems monitoring, problems of consistency may well outweigh the benefits that come through or could come through more gran lairty or more risk sensitivity in the modelling. as a look at things tim, stress testing as we developed it here and as other countries and jurisdictions notably ecb are trying to now, i think holds greater promise as a capital tool, risk sensitive capital tool for big institutions but also taking a macro prodenial

look because of scenarios applied to everybody. set of standardized risk weights and then a risk sensitive stress testing model are complimentary forms of capital measurement that together provide pretty good basis for setting capital standards for micro prodential reasons. the future of internal modelling is something that's going to need to be debated internationally. you know -- i think if you look at the preliminary work, the bozul committee has done, some very useful market analysts work on variance in risk weightings of similar assets across different firms. you see a lot of problems that the bozul 2 irb model created. we had hoped for a process that

would have scrutiny by people of many countries of the model within firms. that's not something we've been able to get. that probably underscores the need for a somewhat different approach. >> we at iif have been working to try to find ways to narrow differences. we have over 70 proposals. some have small impact on variances and others large. we hope to come back to the committee with suggestions. if we with go to standardized model, doesn't that engineer into the system standardized risks? >> so the standardized risk weights and stress testing with similar loss functions obviously do create some risks that you have correlated assessment of

potential losses. but i don't -- i don't think that one could say in the absence of that approach to capital regulation you have taken care of the problem of correlated assets. look -- correlated assets holdings and funding structures in many senses is at the heart of financial stress pre-crisis. it was driven by some regulatory arbitrage. some went beyond capital holdings. >> you've spoken frequently about wholesale funding. i know this is a issue for you. where are we in the process? >> as i indicated there will be another proposal, paper, coming out that builds on the one that came out a while back extending the scope somewhat. i think that is an important step forward to get people's

comments and to see whether we can get common minimum margins for spending transactions. we in the u.s. as a i've indicated previously publicly, were intending to strengthen the surchar surcharge applicable to wholesale fundi ining vulnerabilities of large firms. it will be calibrated some depending on kinds of wholesale funding. those are two steps toward, one applicable to the biggest firms, one trying to generalize to markets. obviously we've had money market reform measures enacted at home. this is going to be an area of continued interests and emphasis both by the fed and by the fsb. you know, tim, part of it again

is the question of what happens dynamically going forward. right now, if you look at things like margining, you look at size of shadow banking sector, it looks very different. it definitely looks different from seven or eight or nine years ago. i think we would dilute ourselves if we didn't expect ourselves overtime. new innovations and new business models and a growth of shadow banking. that's why forward looking processes i think will be important. >> to that point, i brought the cover of bloomberg markets in the title bank busters. lenders in the movement to up end finances as we know it. silicon brokers going big stream. money is the text new frontiers. a lot going on in new york and

london. what do you think about new business model? >> i'm not sure there's enough to think about yet. to this point, i think there's more talk about what could be done than what has been done. what has been done has not been scaled up in a big way. we are watching to see what happens, for example in leverage lending as banks pull back from the leverage lending. that gets you to ask the same questions i said before. is there in fact migration activity? if so, is it migrates a healthy way or a way that's going to repeat vulnerability? the technology issues particularly in payments are going to be another really big part of both the regulated sector and the efforts within the unregulated sector to capture what we thought was traditional banking business.

the number of technology -- it's not a single issue or problem. there are a whole stream of technologies. here again i think what we the fed have been trying to analytically by looking at what is happening and gathering comments on what is happening. i don't think this is going to be a single response because you're going to have mobile apps on one hand and whole different systems of trying to lend outside the sector on the other. so i can't say what the response will be right now because as i say, yes we don't have scaled up activity. i know bankers and regulators are quite vigilant as to how these things develop. >> i've got a host of questions. we don't have a lot of time. maybe we'll take a question or two from the audience and come back with follow up. >> we have microphones right here. questions from the audience?

right down front here. >> my question is whether you view that as a challenge for currency wars. thank you. >> so i think this has been a period in the crisis and post crisis period in which central banks around the world have had to turn to unusual and in many cases unprecedented measures to try to fight deflationary risks and also try to provide enough accomodation to support renewed growth. in the environment in which a set of global problems has meant that it's not a one country response, but instead many

countries dealing with low demand and thus having less support from their neighbors than might have been the case with the other set of economic problems. i think the ecb is moving forward for a couple of years now trying under the president's leadership to craft the right set of responses. i think this is obviously an ongoing issue for them. and something we're interested in. growth for europe is growth for united states. >> are you worried about growth in europe? >> more about growth around the world to tell you the truth. there are more down side risks than upside risks. i think the u.s. appears to have some momentum for what is still moderate growth. it's not fabulous growth.

right now obviously other major economies are tilting or at least showing risks a little more to the down side than to the upside. this is obviously a set of things we have to think about in our own policies going forward. >> you were serving on the administration in the 1990s, a period of remarkable economic growth and prosperity. what does it take to get back to that, that period of time you were wearing a different hat in a different administration? >> well it's -- i'm sure there's no single answer. things evolve structurally and you don't go back to those things. i think for the united states in particular, we're going to have to address some pretty fundamental problems. a demand problem is not related

to institution. i also think there's no way around confronting productivity issue. this is a matter of physical infrastructure and physical equipment spending and human capital spending. right now the physical capital stock is about a as old as its been in the post world war ii period. some of that may be because the machinery used now is better and more durable than just like your automobile than the stuff that was made 20 or 25 years ago. i don't think it can be entirely that. since much of the spending over the last few years has been software type things -- which as we all know, whether you want to or not, you have to upgrade regularly. that suggests underinvestment there. i don't have to tell anybody here about the challenges of making sure that people have the

right set of skills and education to do new jobs. i think the focus on productivity has got to accompany a focus on ademand. there's not a quick turn around. there will be a debate for a long time as to which the degree crisis amplified, things happening, accelerated trends we're already in view, or create and holding new problems. i don't think there's any question but that the net result of all of this has been a period in which that much weighted nike swoosh never did happen and unlikely at this point. >> let's take another question. right here down on the right. >> so the fad is preparing new

tools to potential interest rates when time is right because of shrinking market. could you comment on risks of new tools since they're not really tried before? thanks. >> comment on what? >> new tools to erase interest rates when the time comes. because of the shrinking funds market and yeah -- >> so just -- you know, with i think it's important with respect to our own monetary policy and all of its implications to recognize that a we are very much in a data driven data dependant environment now. i think if the economy continues to improve and shows it really does have a lot of momentum, this is going to be a case in

which we can all happily say yeah we've got strength in the economy of course interest rates are going to be rising. but i certainly don't regard anything as on a preset course. we'll have to watch what happens in the economy. i was alluding to down side risks a moment ago. in terms of what's communication of markets is for markets to listen to chair yellen. if her speeches and press conferences. if you look at what she says in her press conferences and in her testimony, she does really give a frame work for thinking about how and when we're going to move. she does emphasize the data, the kinds of things that we're collectively looking at. as markets listen and can make

their own judgments as to whether the economy is moving the way we expect it to move. then you have a better sense of when liftoff is likely to occur. but to the degree your assessments differ from our current assessments, you may think we'll find ourselves having to move earlier or later which is why it's important to keep in mind it is something based on our expectations of what's going to happen rather than some preset since of here's how we're going to go next three, six, nine or 12 months. >> last question. conduct and culture. i saw the fed president recently. got an exercise going to look at conduct. i think we would say there's been a board shift in the institutions. what needs to be done? what are regulators -- what are you looking for in respect to conduct and culture going forward? >> well, to -- there's a role

that regulators can play. culture is a slippery concept. culture -- the culture of an institution is set by many things including the preferences and values of people within it, the people who are charge of running it and those of us markets, regulators who have outside influence upon it. i think that for regulators setting expectations with respect to risks, setting expectations with respect to connecticco conduct and setting one of the most important incentives and ways firms signal what is valued, not valued, acceptable and not acceptable. i think tim that the problem at this juncture is there are so many problems.

for all that i think has changed and the way people have reoriented, put yourself in the position of average european seeing newspapers. with respect to firms, legacy of mortgage problems, libor issues, 4x issues. you can't just be telling yourself it's a few bad apples. there's something about the structure of incentives and expectations within firms that needs to be addressed. i think a lot of boards and management know it does need to be. this is surely a classic case of needing to take a changes that in some instances are not going to manifest immediately. >> wonderful. thanks for coming on a rainy saturday morning. >> thanks tim. [ applause ]

thank you ben. no one in this room has more respect for this gentleman than do i. the reason is because we worked across from each other on presidential campaigns. the quality of the work took a quantum leap. for a while, they would run circles around us. i would sit in my office and fume and say that damn jason

fermon, i'm going to get him. given the gloom and doom of the last few days, u.s. looks good. let's start with the positive. energy prices are attractive, fiscal outlook is better. last year sit on this stage we had the government shutdown. there's positive things about the u.s. i'll give you two minutes. take a minute, and let's talk about what's going on good in the united states. >> a year ago i was on stage with ragu. we had the government shutdown which wasn't the best time to talk about the u.s. economy. i think part of why we've seen growth pick up is precisely because we have more fiscal stability and less fiscal uncertainly now, fiscal drag considerably smaller. that means that the private sector is able to do what it does best which is generate economic growth. i think low energy as you mentioned is is part of that. i think appreciated factor is

slow growth of health cost a decade ago. they were double digit growth. i think you combine with the fact that american technology and innovation continues to be strong and in many ways lead the world. all of that has helped speed our economic recovery. there's a lot of challenges and chance to talk about those. we can saver the fact the unemployment rate has fallen below 6% two to four years ahead of what most expectations were as recently as a year ago. >> you and i were at jackson hole. the focus was lots of interesting discussions. the most interesting was the role of technology. is it displacing workers? is it complimenting workers? we've been talking about technology. we had four sessions today, a session yesterday. it's part of our agenda.

how do you think about technology? is it replacing workers or is it a complimentary relationship? >> we have 200 years of experience with the question. 200 years of new innovations replacing humans could do and replacing tasks that compliment them. i'm not worried the robots are going to take all our jobs. i am worried for some people the reason the robots won't take their jobs is their wage will go down. they'll be willing to work for less and the market will clear with a greater degree of inequality. i think this technology create ace real challenge for those that don't have the skills to take advantage of the technology and use it to raise their wages and productivity. they won't just get left behind, they'll potentially be worse off. the answer to that isn't less technology. the answer is lot more education and higher quality education. even that may not be you have in. we may need steps like minimum

wage or income tax credit or other mechanisms to make sure everyone is sharing in this. >> we know many pessimists. robert gordon has written substantially over the past year or so the best years of technology impacting productivity is well behind us. do you you buy gordon's' view or do you think there's a lag effect or something else going on in the way we pressure productivity? >> we spend a lot of time on this question in terms of preparing the forecast for president's budget and other topics. it's very hard to predict what new ideas someone hasn't thought of today, they're going to think of five years from now or ten years from now. just because you can't think of thosed whys doesn't mean somebody else isn't going to be able to. i think the more pessimistic out of ideas versions that robert gordon has put forward probably make -- again defy what we've seen over the course of history.

i think there's a lot of uncertainty around this. the optimistic case is a lot of innovation we've seen is innovation in technologies that can help us innovate more. better computers, lower storage costs, increasingly cheap ability to reproduce. all of these types of things will make it easier for us innovate and add ideas. i place more weight on the optimistic side of the ledger. any of us have to admit we're uncertain. >> larry summers here yesterday and a host of other people were here. there was a point about 19 1979-1980 we saw inequality increase. what happened in 1979 and 1980? why do we see a labor share of

national income at a 50 year low? why isn't the labor force getting a great share of productivity in the corporate share? >> the biggest problems we face in economy in terms of several decades long is family incomes haven't been rising. they haven't because two things hit the same time, productivity growth slowed around 1973, inequality started rising 1979. the combination of slower growth shared less equally has been a double blow for middle class families. for a while we were partially papering over that blow as more women were coming into the work force. you had two earner couples instead of single income cups. male labor force participation has fallen. these have now stopped and we see it in full starkness. i think a lot of things are

behind it. partially technology, partially globization, partially changes in norms. institutional changes, decline of unions, fall of minimum wage are part of the story as well. the causes of it aren't the same as the solutions just because it's technology doesn't mean we want to solve with less technology. globalization doesn't mean solve with less globalization. it means figure out better ways to adapt and manage very large trends which have been causing it. >> the statistics are sobering from 2001-2007. top 10% received 98% of all income gains. 2009-2012 exceeded 100%. both of us are struggling to prove our worth in government. the president calls you into the oval office and says you know jason, we've got this problem. what do we do about it? what are short term solutions and long term solutions? what's politically viable given the paralysis of this?

>> i think we need to do -- it's a big enough thing we need to do everything we possibly can. a stronger economy is part of the answer. getting the unemployment rate down, getting wage growth up. even after we're fully recovered, we'll face this problem. in the short run, steps like minimum wage for pretax income, the president's proposed taking earned income tax a credit, low wage supplement for workers and expanding it. chairman paul ryan, the republican, president adopted the proposal. the longer run steps are preschool to college. some won't matter 10, 20, 30 years. we need to work on things to phase in over time. >> the earned income tax is a favorite from democrats and republicans. when i was in treasury looking at irs data, there was a high

error rate. it's one of the best single devices we have. maybe that can get done in the first quarter of next year once we're past midterm elections. the fed's policy obviously has been very supportive and created a buoyant equity market for the top 10% now 80 or 90% of equi equities. they benefitted. as fed policy exacerbated inequality in the united states? >> i don't think so. i think the primary thing the fed does is affect the unemployment rate and affect the inflation rate. when unemployment rate is coming down, that's one of the most important tools in terms of dealing with the incomes of bottom 90% of americans. i think more broadly -- i don't think deliberational lens is for

policy. i think this is a debate we've been involved? . >> the book was best seller of the year. i've read 30 pages. i'm sure -- it's interesting to see how many own a copy and how many read it. do you think he's right? if that's the case, why don't we make labor capitalists and put capital in hands of households so they can benefit from those returns? >> i agree with both of your statements. number one, he's good at collecting and assembling data. that data is largely correct and might be more correct for the united states than they appreciates. the different -- increase in inequality we've seen in last 10 to 20 years is primarily driven by differences in capital accumulation not labor accumulation. the answer to that though is not less accumulation at the top although state tax done right is part of the solution. i think it's