ho -- this q.e. in terms of the housing market could have been so much for effective had people just been able to jump and if we could set up some mechanisms to jump through the process so you can get direct access if you want to. and i had to refinance a couple of types and hi to pay $1,800 to pay for mortgage insurance. and i can't believe there are defaults on property rights and so on. that is the justification. it is a fantastic fixed cost to refinancing. that is a policy reconsideration. >> and one more on your list and otherwise we don't have anything else. >> and something i've advocated for for a long time is asset based. and mortgage fixes that. have different reserve requirements based on the state of housing markets.

you could could do mortgages in nevada versus new mortgages in new york. very applicable by the way to europe right now, if they had an asset based reserve requirement scheme. and finally how about bringing back margin requirements and one of the things driving monetary policy is fears of an asset bubble, well let's not torpedo the exchange rate and housing if we are worried about an asset bubble, the fed should get back into the business of budget monetary crisis. >> that is a separate conversation. do you want to -- >> a lot of key thoughts. but the key thing is when we are thinking about the point of our paper is we have to think about the chams of which monetary policy is taking place and some have regional components and some do not. mark touched a little bit on this. the strength of the banking sector the fact it is mostly

national now, except that people are willing to extend credit. if we prop up banks with assets and we still have booms and busts in local housing prices, when fed lowers interest rates and making a decision upon whether to make a loan you still have regional distribution well on top of that. >> a lot of interesting ideas and obviously a lot of negatives and positives to iron out. but the one thing you didn't quite mention which i think would be useful in the context of future crises and concessions are countercyclical counter standards. right now they are set through the cycle and in fact one could argue given the way they are implemented and likely to be implemented in the future through the stress testing process they could very well be procyclical and that is the wrong way you want to do. so set up a system where you

have capital cyclical enter -- and someplaces are doing seek at in new zealand, canada or the u.k. and that is -- >> downtown we have countercyclical counter buffers in dodd frank. >> basil three. >> well we'll see how this works out. >> fair enough. john stablehouse. >> thanks. i'm job stablehouse from the fed, so anything i say should not be held against them. i think this is a question any way, for eric. so what your analysis shows us is the lack of a positive effect in the low ltv or high ltv regions. i'm wondering if the same analysis could be used to show the absence of a continued negative trend in the same

areas. so in particular looking at defaults and new defaults that were happening and so was there anything around the time if we drew the same pictures to see the higher defaultibbishations in the high ltv regions and did that suddenly change around the time of q.e. and is that an avenue we could add to the ledger on the other side. >> so to be clear nothing is about levels. everything is only about differences. that is kind of the design of the regional things. everything that is general equilibrium can push everybody up or down. so think about it as the regions are not helped at all they are helped relatively less. that is the good thing. so when you look at defaults or house price changes or things that we've looked at, you don't see many deferential response and if anything the betterness, when you have to squint a little looks like the better

regions are having less house to price -- and part of this the bad regions were overvalues to begin with. you talk about propping up house prices. we are bringing the trend back to equilibrium. and they can go bad or slow. and they were going up because they were much more over valued. and did it slow down the trend or not? we couldn't see much add of deferential effect. >> what about defaults? >> in defaults -- >> at the regional level you don't see very much. when the payment is lower default propensity falls substantially, sort of on impact. >> we look at that. so we have that in the payment re-set in our things and it doesn't look like that many deferential. it could have aggregate affects but we are only picking out the relative effects and you don't see anything else adding up in the relative effects between

these two, the high and the low regions. >> let's stop here and revisit this later. we're going to take a break and hold it to five minutes so we can get back to close to being back on schedule. >> while congress is on break this week we're showing you events from american history tv normally seen on weekends. tonight on american history tv prime time, visit historic sites in key west tulsa oklahoma, st. augustine, florida and topeka, kansas. tonight on c-span, during the july 4th recess, interviews with freshman members of congress being at 8:00, don buyer compares selling cars to being in congress. >> a lot of people have often asked over the years how i made the transition from car sales to -- and car service to politics. and i've said truthfully, it is a short step.

a lot of the skills are the same. for example, being able to walk up to people you don't know and try to find a way to be friendly and open and connect. find something that you have in common. a lot of it is sales. and i've always had the idea that sales is mostly about meeting people's needs. we've sold 65,000 cars over the years and i don't ever remember pressuring a customer into buying a car. that is the worst way to do it. the idea is always to say what are your needs what are your priorities and what works for you, for your family, how can we meet that need. and politics is much of the same need. what are the crises in your life and what doesn't function in your life and how do we move forward and try to listen carefully. our interview with don beyer is one of four profiles we'll show you tonight.

you'll see elise stefanik brad ashford of nebraska and john radcliff. the reflection on being a new member of the house of representatives underway tonight starting at 8:00 eastern on c-span. here are just a few of the featured programs for the three-day holiday weekend on the c-span networks. friday night at 8:00 p.m. eastern radio personalities and executives at the talkers magazine conference in new york. saturday night at 8:00, an interview with new york times chairman arthur schultzman and david beckay on the future of the times and on sunday night members of the church committee and walter mondale and gary hart on their ground breaking efforts to reform the intelligence community. on book tv on c-span 2 on friday

night at 10:00 p.m. eastern, martin ford on hour artificial intelligence could make good jobs obsolete. and carol berkins on why the bill of rights was created and the debates it spurred. and on sunday live at noon on in depth, the best-selling author peter schweizer who has wrote clinton cash extortion and throw them all out. and on c-span 3 on friday evening at 7:30, the 70th anniversary of the united nations with nancy pelosi and bonki moon. and hear about how timing often influence the outcomes of major

battles. and on sunday at 4:00 on real america, a look back at a 1960 film featuring joe brown about a nationwide search for old circus wagons and the circus world museums to restore them in time for a parade in milwaukee. get the complete schedule at c-span.org. and we have more now with the brookings institution discussion on monetary policy. and in this 90-minute discussion federal reserve staff talk about the effectiveness of federal monetary policy. >> thank you. so our third paper today is by matthias dope can i and veronica selezneva and of stanford and they built an economic model that help us, and some of the consumer finance data john, that thinks if wealth changes,

it changes differently for different sets of people in the economy and when they think about the distribution about quantitative easing and does it increase or decrease inequality you have to look at the different categories of people and how much their wealth changes because it is really a question of summing up the winners and comparing them to the losers. so as you hear, they use a model of where if the fed sets out to increase inflation, which is a proxy for q.e., what happens to different groups of people and homeowners. so matthias will give the initial presentation and we're here to have juan boefain from canada who has done a lot of thinking about these questions now at black rock to respond. thank you. >> thank you for the introduction. it is good to be here. the paper touches on many of the same themes we've talked about

in the first two presentations but the difference is we approach this from the perspective of macro economic modeling. so as we have already discussed, monetary policy moves by moving interest rate, the short-term federal funds rate and short-term rates and if you think of quantitative easing on the slope of the europe curve and rates through inflation and expectations if people expect high inflation, the rates go up to expect for the inflation. and we expect how large the inflation would be and then use the macro economic model to figure out the consequences of the changes for macro aggregates. so compared to the previous papers, the same question more applied to -- from a modeling perspective. so the motivation for this paper goes back sometime and this is a concern widespread with the

change in the macro economic environment but we both grew up in germany and we have a pathological fear of inflation. and so what is interesting for us is if you grow up in germany, in elementary school, you learn inflation is bad in second grade because of redistribution and grandma will lose her money because it is in a savings account because of the interest rate and then you have monetary models and they only have one household and there is no different household or redistribution and so this difference between what we learned about why inflation is bad and what the models do and we use the model that has different types of people and use this model to figure out whether what we learned in elementary school makes any sense. so that is the over all plan, which of course has now become

more kind in parts. so the first step of the program is to document in the data exactly who holds normal assets and debt. if you are a lender, you are going to lose from high inflation and devalue. if you are a borrower and you have a mortgage it is great, because the shink and the house appreciates and the first thing you do is you document who has what in the economy and so consumer finances, we use the 2013 edition and it has a picture of the distribution of wealth of what is looks like in the u.s. economy. the key part of the work is to distinguish asset matures by mature and so you think about the new announcement of a high inflation this will effect short and long durations irvedy. if you have a money in a

account, interest rates will adjust to this. if you have a 30 year mortgage or a 10 year government bond the prices or the values of those will be highly reactive and so in the data we document not just who holds what and what the assets and liabilities are for different groups in the economy. so i'll talk about the data in too much detail and show you one picture for the economic aggregates. and this picture shows the gdp and the u.s. household sector. and we see the flow of funds and sew up the nominal liabilities and that is u.s. dollars because that is what is effected by changes in the inflation. so the green line is the assets and then the solid blue line is the directly helds debts things like mortgages and indirect holdings. what we mean by this. so the stocks through mutual funds and the corporate sector

itself has debt also. so on the corporate side. so if debt gets devalued through inflation you expect it to be devalued -- the corporate sector goes up also. and so the total debt, the dashed blue line consolidates into the household sector to take account of this effect. and so the two things you can see is the huge increase in the liabilities, in the debt of the household sector after 1980 and you can see just before the rice is, the dash blue line and the green line coincide. for a short-term moment of time we had the u.s. household sector being balanced and this is unusual, because the government debt was financed by the u.s. sector and that changed dramatically from 1980 to 2006

and 2007 and reflected the hugin flow of funds from abroad and so foreigners are holding u.s. assets previously and that changed in 1980 and by about 2006 essentially all u.s. government debt on average was held abroad. of course not every single bond, because of huge differences and in holdings but over all normal segments was equal to government debt and household debt is roughly abound and that has changed dramatically and for potential redistribution of inflation. after the crisis, huge leveraging. so both lines drop quickly and now there is a new gap opening up between assets and liabilities. okay. but this is the aggregate picture. what we are more interested in is distribution in the household sector. with huge assets and

liabilities. if you look at individual households, different households have the assets and the liabilities and you have see who gains and loses in the other changes in interest rates. that is what the rest of the paper does. and you can do with this accounting and model framework aupd can do different experiments and the one i want to show you today is the experiment of raising future inflation. so this is a bit related to q.e. but changing the inflation target which is not what people are raising because of the concerns about of the zero low rate bond. and we are zero rate and also in japan for many years now and raises the question is it safer to have a zero inflation target. if the fed were to announce it five points higher and of course you can scale it up and down any way you want. and if the announcement is made,

i'll show you the out come after the announcement, the range is fully anticipated and people believe what will happen and everything is ended up perfect. if there is a repeated surprise and people don't believe and there is changes in the future, everything is the same and so only bigger and a larger redistribution effect. in our experiment because everything is anticipated, all horizons and the normal rates will jump by 5% to compensate for the higher inflation. so here is -- just from the data and the assumed experiment, the impact on the different types of households of the distribution. we do it in the paper for different groups but the most important to consider are these three and the first group is renters and on the xx is the age and so these are households of different ages that rent the home. at the bottom you see the rich and that is the top 10% by net

growth in each age group. and the rich, it is known that the wealth distribution is highly concentrated so a small percentage group at the top that accounts to most wealth holdings and we look at those separately. and everything else, people who are not rich and own their homes. so we call these middle class homeowners. and then we see the change -- the immediate change in wealth with from the new inflation group from the change in gdp. and then we see the renters and the impact is some but it is smaum. the losses are essentially coming all from one group, which is the old rich. the negative numbers it is rich people over about 55 years of age who are taking this hit. and this is percent of gdp and

every group is only 1% to 2% group of population and only 1% of the population so it is a large wealth change. so the older among the rich are losing a lot because the old rich have a large portfolio of bond and savings. and we talk about them being highly riched in equity and it is higher for the rich compared to the middle class but because they are so rich it accounts for most of the holdings of the normal assets and so that is why the losses are where they are. and the gains are coming from holding mortgages. and the main source of debt is the mortgages and the people of mortgages are the middle class and the middle anyone. and the top 10 percent have rarely any debt. and if you are very young you

haven't bought a house yet, it is the middle income. so about age 30 to about age 50, large gains, close to 1% of gdp for these groups and about 2% of households so for them, compared to the income. it is a huge change in wealth just because the mortgage typically is -- is very large compared to household income. many people have mortgages that are multiple of the household income. so in the aggregate a large flow from the old rich to the middle class middle aged. and that is interesting on its own. and to figure out the flow of the wealth does to the macro economy. for that you need a model to understand how the behavior of the rich old differ from the middle class households to see whether they will cancel out in the aggregate or something will happen to the macro economy. so this is where the model comes in. the different types of households and the different

types of income and it is shocked at time and we have preferences in there to capture the financially constraint and you are close to borrower or not and whether that will change your growth and we have the difference in the position. and the keeper of the paper, which reminds with the papers in the sessions is that the folks in the housing sector and we saw that mortgages are an important part of the transmissions of the shocks and depending on how housing reacts is important. and we have different types of housing. this is a renting and buying decision and distinguish between the two segments, large and small houses and i'll show you how this is different. and [ inaudible ] think of this as being set in the world market but this is inside of the country so repercussions for housing prices. and so what we do is col brat

the model to the u.s. data and introduce the policy change and the shock to an economy in the city state and we essentially are going to change the wealth position of each household based on what i've shown you from the data. so we'll make the middle class middle age in our model and lower the debt if line with the data and take the old rich and make their poorer compared to the same amount of what is in the data and compute federal what will happen to the economy. let me show you the main points from the result. the first year is on housing prices. from 0-25 years after the shock, the vertical access, it changes the housing prices. so you see prices go up but they go up only for the large houses, they don't go up for the small houses and that is something we were surprised by initially but it makes sense. so why is this? the gains from the shock go to the middle class mortgage

borrowers and so this increase in wealth you would expect gives an increase in the demand for the house. they are richer and they want more houses. but the key thing about the borrowers is they already have a house and the demand they have is for upgrade of houses and at some point they move to a bigger house so the exchange of prices for the houses they want to move to, not the house they are in right now. and so the demand is for the people they don't have yet is the starter houses and those come from renters but they don't gain from inflation so you have a gain for housing values but it is not for the lower level of houses. so if you are concerned for example for the entry level of the markets where the biggest change in the crisis this wouldn't help you as much as we perhaps initially would have expected. and i did talk about macro etiquette.

here is changed in consumption and output over 25 years after the shock. the first thing to notice about the changes is they are extremely persistent. most of the time we talk about monetary policy and we measure impacts in terms of quarters. this picture is in terms of years and these effects are around for many years. so outpit peeks after 2.5 years but it is visible 10-15 years after the shock because the changes come through change in wealth and change in wealth is going to effect the economy until courts are replaced by new courts and people have to die and be replaced for these to go away and this is extremely persistent and something to keep in mind. and the other distribution is effective and so output and consumption falls. and the reason this is happening is first thing about consumption

is that the losses go to older people and the older people have a higher propensive to kmum because they have a smaller horizon and younger people have many years to consider so they are going to save for a larger fraction of the gain and not spend as much. again this is natural for a life cycle model. we may have expected the other way around because of financial constraints and you would think getting a wind fall would make you spend a lot of consumption right now and we did design the model to capture this and still it wasn't enough. so it seems that because the gains go to essentially the people with the biggest mortgages, the poorest people, that the age effects still dominates. so i will skip this one. just to talk about welfare, i will say two things. the welfareesques are modified because of the impact on housing price is. so if you have a direct loss to your wealth but the house that

you go up -- that you own goes up in value, that would mitigate to some extent the direct effect. so you have to look at the model to understand the full impact on welfare. and to look at the picture and notice the scale. everything else to scale, the upper 2% change here is the 10% change. and the units here are units of consumption. so 5% change which is what the 50-year-olds gain and the change of inflation makes them much better off as they would be as if you change inflation permanently by 5% and if you've seen macro models 5% is huge. most policy changes that we consider have changes in welfare that are a fraction avenue percent and here you get a margin of a percent and i'm trying to point out that the stakes for welfare of particular groups are huge. so the potential impact that you would get from change of inflation if you have a large

mortgage completely outweigh any other policy changes which to me suggests that smi about the political economy of this is quite important because people have very much reason to be concerned about the changes much so than other macro policy changes. and interest rate shock, i'm out of time so i won't go into that. but let me just say that lowering interest rate turns out to be similar in the implications than the inflation experiment even though the effects are larger in magnitude. and there are some debate on whether changing interest rates are good or bad for rich or poor people and whether it is good for the middle class mortgage borrowers because it is cheaper but it is bad for the old rich and there is debate about changing asset prices, but it is of course true if you have a long-term bond and the interest rate falls the bond goes up but if you are a saver, interest

rate aren't good for you and this comes out in the model. and let me summarize the key points. the most important point is the change in welfare from inflation and other reasonable changes is huge. so in that sense, the germans had some reason to be concerned because that dominates because if you think about a personal effect of ip flation. and the effect of allegation is effected by wealth and it doesn't go away because of [ inaudible ]. and the effect of aggregate is downward, different from what may have been inspect -- expected and there is an effect on housing prices but it was effected up as opposed to the starter level homes. thanks. [ applause ] >> so thank you very much for having me here and giving me the

opportunity to talk about these issues and to have the chance to spend some time on this very interesting piece of work. so i have a few comments to make and maybe as i -- a way to start i will just start with some initial considerations. so i took the topic and question of what we're trying to address today maybe literally and i want to face my comment by saying that because i think there is a lot of interesting results from the paper and that have implications beyond the questions we are trying to tackle today. but i'm going to try to see what the paper is trying to tell you what we're trying to talk about today. about the questions about q.e. and the questions on inequality and that raises the question of what we mean by monetary policy and i'll raise questions and try to think about what we are presented with here today and

what as pet of monetary policy this is talking about and i think at the end of the day the essences of my comment about distinction in terms of what we mean by countercyclical policy and versus what should be the design feature of monetary policy itself and i think this paper speaks more about the framework and the design framework than the monetary policy and what q.e. policies are, in a battle for policy. and i think it was a good job describing the paper and the result. i did a slide in case he cannot done that. but i will just now show it. i think i've understood the paper. it starts from the observation that we have large gross nominal positions which means that inflation could potentially have an important implication in terms of welfare distribution and the comparement being

considered here is what if the fed were to inflation inflation from 2% to 7% for ten years. i'm making it as explicit as i can because i'm going to come back to that and think about how do we think about this experiment. and then we have an environment in which we're carrying out this experiment and the design ingredients are we have a -- well, there is borrowing constraints and that is going to explain part of the result and households that are different and they are different in terms of the age, their patience and also we assume there is some inequality at the outset. so these households are different in terms of the inequality -- or the outcome they are facing during their life. and then there is a lot of great work being done in calibrateing

the flow of funds for the account and the survey of consumer finance and this is based on what was done before. and this is a consider contribution being made there. what did they find? they find -- i think this is intuitive. it is pretty result that it was not carried out dramatically as was in the presentation, but if you boil it down the inflation distributes wealth away from the asset rich reasonably in this setup toward the more endebtled middle age middle class homeowners with typically homeowners and it pushes the houses toward the higher end because the middle income people that have been receiving this wind fall are trying to upgrade their house. again, i think this is intuitive. and finally inflation reduces aggregate consumption because the middle class households have

a lower propensity to kmum and they have a longer life ahead of them allowing them to be patience. and based on that, i think inflation has quantitative large inflation effects and this is large because we haven't been exploring it in terms of the redistribution of monetary policy that extensively and you can see that in action it is very important and the authors suggest that this makes changes in monetary policy contentious from a political point of view. they also conclusion that inflation could have an impact on activity which is interesting and intuitive and finally we have some implication for the housing market which we've been discussing and i won't dwell on that. so what do i take away from this in terms of how i think about monetary policy and i think this has implications for the design of policy frameworks.

back in canada in 2011 we went through the process of renewing our inflation target and we thought should we move to a price level target instead of an in flation target or think about changing the level of the inflation target. interesting, at the time, the question was more to blower the inflation tart as opposed to increase it. and we went through these questions like those displayed here were part of the analysis we've done at the time and i think this is very relevant. so i think the paper by itself speaks was the right level of the inflation target and this is a relevant question and i don't think it should be on the table. it is the wrong moment to be thinking about this but we should first achieve our inflation target around the world and then talk about changing them. but it is on the table. it started at the out -- i think during the crisis with russia

and the world government raising that. the bank of canada has done speeching where this is a question they are studying as part of the renewal for 2016 and a loan they raised at the last minute, i believe raised at the last minute and so this is on the table. and i think this shows another channel why it is costly to do so if the interest rate is to stimulate the economy it seems to be working in the opposite direction because if you look at the output implication. but if that context, we were talking about the inequality here and i'm not sure where the others were coming down in terms of where it means for inequality. so we have in the set-up people are born unequal. can you be born rich or part of the masses as they put it in the paper. and there is inflation creating

some zrib uks, from the elderly to the middle income people. and i think given the german up bringing i'm not sure this is what was in the mind here but it might suggest if you look at it on the face of it it might not be a bad thing if this is what you are looking at. inflation might be distribution progressively wealthy and it is a potential distribution of wealth and some people could see that as an outcome of that. and i think the question is what do they make out of this implication of in equality and the marginal point in this case is for it to have an in equality you have to have that to start with and you have to assume that but that is something for the panel but it begs the question of talking about q.e. or inconventional policies and what is behind the inequality that we are

exacerbating potentially. and finally i think i have a couple of minutes so let me make a couple of more points. even if the question is about the inflation target, i'm wondering if this is the right experiment to look at. and let me just explain. and again taking things literally here. we have a 500 basis point increase in inflation target which means a 500% increase in price over the years and people are talking about raising the inflation target because i think the interest rate height be lower for reasons not mentioned in the first session. i think if you look at the survey for the economic forecast it is a few basis points lower than what they were thinking a few years ago. dudley made a comment back in february that he thought the long run fed values would string

to 3.5 to 4.25. and the crisis may have shown us on top of that, it is significant and you may want to add some caution and so maybe 100 basis points, 200 basis points but i think 500 basis points is out of the realm of at least the question the level of a sufficient target i would consider seriously. and then the question is if that is the question we're after are the results quantitatively important and there are questions around that because now we are -- about two fifth of the shock now. and this is a model this would tend to make a bigger shock and have a bigger impact and i think we end up with a smaller impact on consumption and output and also there is another question about the increase being permanent as opposed to only being for ten years. so these are designed questions of the framework, i might be

allowed to do more but these are questions to think about. i'm out of time, but i think this experiment is useful to think about the 1970s smile of question -- style of question and the kind of question to calibrate for the 1970s but in that case i would see the implication of not being about monetary policy or implementation but about the consequences of doing monetary policy mistakes but i don't think any banks are wanting to produce the '70s out come, i hope, at least, and this is about the cost of inflation and the design of policy and less about whether policy itself as distributional impact. this is getting into g-20 we're submitting type of things, if it i had to negotiate that text, i would say that changes in inflation target should be

policy contentious not policy regime and in fact i think this is why we think in canada that the agreement on the level of inflation is a policy decision and should be decided by the government and the bank of canada which is a separate decision from the unconventional policies and that is where i'll leave it with minus two minutes and this is related to the forum but i think this is a very important piece of work. >> and so i'm going to keep this short, but come please sit up here for a minute. and matthias if you could respond at all to what john said. >> so thank you for yu comment. i basically agree with what you said. it is true, the comparement is a large change not exactly what people would expect to be

implemented in the next three years. it is exploring what the model does and kind of a drastic comparement makes it easier. and you can use the same framework for policy work that has to be done. and in the narrative, i think it goes the other way, it is borrowed constraints and because of the experiment we do is one that relieved borrowing constraints and it would in fact be moving in the other direction and smaller but i don't think more than proportionately smaller in terms of the impact. so that is just in terms of the comparement. in terms of the aggregates, it is true the output, the aggregate, is relatively small and i think it is fair to say this is probably not the main reason that monetary policy or inflation changes would affect

out pit. and i would point out, we have only looked at distribution in the household sector. and visible from the first picture one thing that is important is redistribution between the broad sector of the household and the government and the foreign sector and this is a picture that has completely changed because as i mentioned with this picture, by this point we have a huge amount of assets being hold by foreigners and huge government debt. so some of the potential benefits from inflation would come from deflating some of the government debt at the cost of foreigners and you can think of this differently depending on if you are foreign or not, but something that would factor into the picture. if you think for example about the debate in europe it is not so much about rich versus poor germans it is about relieving the pressure of high sovereign debt around the eurozone. and even though the operative

effect is different, it is just shown in the partial analysis. >> let me see if there is say question or two and if not we'll go right to the panel. eric. wait for the mic. >> is there a quest in the model. how do we think about if patients have kids and they would save a little less and transfer to the kids. >> the model that i've sewn doesn't have that yet and that is a function of how far we've gotten yet. we do need to make the rich rich enough. sand now we do it in a different way. but we know it is highly concentrated and that is the reason why the rich don't have so much wealth and putting it in there will make the rich smaller and some of the effect will go away. in the past when we had it in there and used it to produce wealth, it wasn't enough to do

much of an impact but it is true it is a concern but based on what we've done previously it will not be a concern for the over all effect. >> gentleman here. >> yeah, i'm a little bit puzzled by the last paper. in my long life in economic -- i'm veto tonsic from -- formerly from the imf, i heard the statement from the freedman that the rate of inflation is minus 2 and then he said at one .40% would be okay and then at 7% inflation we worry about implementation of taxes so first of all does it make sense to say that the fed can bring about 7% inflation and keep it there. do they have the tools to do that? and second can they make this

unannounced statement? i mean people are dreaming. how can you one day wake up and say we are going to bring 7% and nobody else had anticipated. it makes no sense to me. >> let me say a couple of things about this. certainly a long debate about whether the target should go up and the ability to maintain the target is a big debate. our paper is not about that. it is about a different part of the debate. i would say in history, we have observed large changes in inflation and we're driven by policy so in the 70s inflation went up in many countries and in german much less so than in the united states for example due to the military choices. and in the 80s the same experimentation in reverse the inflation, it did the same thing, just with the negative side. so if you think of this as

applicable to episodes of large changes in inflation, i think we've seen many of those so it is relevant from that perspective. and what is crucial here is this is something that has to be -- to be effective, to be surprising. if everything is anticipated, interest rates would adjust of head and there would be no distribution. and distribution is about surprised. and you could do this asa one time wind fall but this is not systematically to do on a regular basis. and this is what you could do, and which we haven't talked about yet, to have something systematic but linked to the business cycle something cyclical a variation in inflation to a -- to try to alleviate the burden of debt in a more strategic manner. but there is strategic steps to take so far of that kind. >> and can i clarify out of the paper to make sure i understood

the conclusion. this is an experiment as something that should be considered and because it reduces inequality and how do you look at the inequality implication versus the contractual implication on output. so where do you land on this? >> give it is a paper on partial policy and i couldn't take it on a partial policy. it is one tool on the vocation of policy on one dimension. on my personal view, i think the impact on policy is there it is not going to be driven largely. i think of the potential desire to increase inflation is driven by something else. i think it is driven in europe certainly by the desire to lower the burden of debt and of governance and the private sector which is not here but an important consideration.

and i think that will be an aspect to understand the implications of that. in places like the united states, you would think of it as a tax foreigners. it's somewhat mischievous but it would be relevant. >> careful what you say, someone will take you up on that. >> veronika do you want to add to that? >> [ inaudible ]. >> you mean inequality? >> exactly. >> i'm going to ask the authors to feel free to participate from the floor.

just to reiterate, spending a lot of time on stanford and don is here at brookings sometimes and sometimes at the bank of england committee. and former vice chair of the federal reserve. i think somebody quoted you without attributing it, quantitative easing is like reverse robinhood. i heard people saying maybe it doesn't have the effect on inequality when we just thought of this crudely as lifting stock prices. you think it did. defend your position. >> thank you.

and thank you for having me here. i appreciate my security blanket in don being with me. don sat next to me at the fed for five and a half years. to the extent we disagree, i'm sure he's right. he used to pass me a note but now with susan here it's going to be more difficult. i begin by just trying to frame david's question. that david and brookings called together this conference i think says that distributional consequences matter to the conduct of public policy, and we central bank types some of whom were supportive of qe at different phases, some of whom weren't, should not be defensive about this question. and the idea that distributional consequences should be sort of somehow beneath central bankers is wrong. we talk about the efficacy of any policy and we talk about the distributional consequences.

if someone rolls out a new tax reform plan, the front page of all the newspapers will say who are the winners and who are the losers? i give brookings credit as saying this matters. we shouldn't treat it at not right for the central bank to take this into consideration. quantitative easing was created by don and others in the depths of the crisis. it was created to deal with a certain problem that was in the markets. and i would say that it has become such a long-lived product, and that it's used by virtually every bank around the world, tells us that we should be thinking about it in a different context now.

as a first approximation i do think what we did was radical or new or novel and unprecedented so none of us should know -- think that we've got the answers on it. however, it does strike me as though quantitative easing is fundamentally different in cutting interest rates in that it appears to be working through fundamentally different transmission channels. no longer credit channels and lending channels appear to be the dominant way in which it impacts the economy, it appears much more to be working itself through asset prices, whether you think about housing stocks or financial stocks, i think that is the dominant channel and as a first approximation if three quarters of our fellow citizens get 96% of their income from labor income, it strikes me we ought not be dismissive and say everybody wins. we talk about triple down economics and the conduct of fiscal policy and we should ask

ourselves, as brookings is here, what the impact is. because the asset transmission is the dominant channel and because those are held not so much by rich people butch by people with big balance sheets a lot of sophistication, an openness to liquidity, a sophistication of what central banks are trying to target and they view they have liquidity so that they would react differently versus those that are lower quinntiles of income strikes me as something kwies plausible. when i look at the wealth creation, i view that wealth creation as being significantly above what my former colleagues predicted. when i look at what they expected in the real economy, i look at the real economic performance as markedly worse than they predicted. so that's what i think raises these questions, makes them

absolutely germane to today's discussion and i absolutely do worry that we've created a product not with bad intent, we've created a product that may or may not turn out to be counterproductive, we're in the middle of this experiment where we are now but where the gains have been extracted by the most well to do by the most sophisticated, who see that the central banks are to one degree or another trying to get asset prices up to drag up the real economy, they get the joke they have been willing to play the game and it does strike me as though we have to think about not just the efficacy of these programs but really who are the winners and the losers. and because we are in the middle innings of this game, it reminds me, david a little bit when you came to visit don and mend you were doing a big on bear stearns and the financial crisis was among us, it was hard to judge the prudence of any individual decision. having this discussion is great

but i think neither josh nor i or don want to give you any definitive answers. >> definitive answers? >> i agree with the first part of what he said. and i agree with the first part. i do not think the fed should targ evidentet particular income distributions. there are certainly intersections between what the fed has done and those things and the distribution of income affects the channels by which these things as kevin was noting, can be effective. but i don't -- i would be -- i think it would be wrong for the federal reserve to say we are going to steer away from our maximum employment stable price

target or take longer to get there because we think getting there as rapidly as we can will have effects on income or wealth distribution that are adverse. those are decisions for congress to make through taxes and transfers, not for the fed to make. i thought today's discussion was really good and really interesting because, and this goes to the last point kevin made because it really illuminated the channels that were working and that weren't working in order to make monetary policy effective. and the fed needs to understand that so it can make a determination about how much monetary policy it needs to do to hit its primary goals, to get aggregate demand and aggregate supply and keep its objectives. and it might inform a conversation between the federal reserve and the congress.

if the federal reserve said here's what we're doing and it's having these effects on income distribution and it's up to you, the congress, whether you're comfortable with this and there are other ways of approaching this and up might want to use fiscal policy as josh was discussing, that conversation never occurred. in fact the people who are uncomfortable with quantitative easing often said it relieved the congress they didn't like the quote moral hazard, because they said it would cause the congress not to tighten as much as it should. so people who opposed quantitative easing were saying we want less easing and more fiscal restraint which i think would have been a disaster for the u.s. economy. >> so kevin made a couple of interesting assertions, one was that asset purchase quantitative easing is fundamentally different from lowering short-term interest rates. do you have agree with that?

>> for that to be true you have to believe in the wealth effect and consumption. we talked about equity prices and home prices and economists debate the extent to which there is a wealth effect from consumption consumption. you have equity prices rebounding from very low levels and the same with home prices. we're talking about recovery from very low levels. so i am more skeptical that there was a lot of wealth effect on consumption and that the much more direct and measurable impact is simply on interest and debtors who are saving money on interest payments versus holders of cash and other deposits that are losing money. >> that's more like conventional monetary policy. >> more like conventional. >> i thought when they cut short-term interest rates, that's where they looked for things to happen. how is buying mortgages different than cutting interest

rates? >> so i'll answer that two ways. first, in order of magnitude what the fed has done during this cycle makes our predecessors look like pikers. so that's one. two, i would say that asset purchases find their way into asset prices through our actual purchases but also through signaling. and i think that the federal reserve in the depths of the crisis and to this day remained aggressive in quantitative easing, is a signal to sophisticated and financial markets that asset prices are more than ever the predominant channel through which policy will found its way into the real economy. did in the old days the good ol' days pre2007 did the fed believe that by changing short-term rates they would have an impact at the long end of the curve, that that would find its way into asset prices?

you bet. if you tack what central bankers take ear jauss take seriously of the problem of the zero bound, they're saying we're trying a new tool, it isn't easy and we're not sure of the transition mechanisms and my judgment is is the fed data dependent as they're thinking about policies? you bet. but writely or wrongly the market came to the asset prices they tended to to. >> clever had this observation that the real economy had done worse than the fed had hoped and asset prices had done better than the fed had expected qed. is that the useful way to look at it? >> this is a discussion we've been having today. i think -- -- i think qe had a

mass imimpact on prices. i mean i've blookd and did all of that. it's very difficult to get a clean measure of qe and the impact on asset prices. when you look at these windows, which would be the nice way of looking at an event, you have to assume some kind of market efficiency. i think what i see and you can look at the ec been this year. what we see a port it's difficult to allow us to see what is the impact but i do see massive teases out there. if you look at the investment in japan or in europe it's entiredly driven by a q kind of thesis. the way you see that is that bad news/good news.

i think we see -- this is suggestive of a pretty significant impact on asset prices. and if i can go from there, on that i think where i'm not sure i reach the same conclusion and i'm not sure where the conclusion is. i think it's very difficult to get into the argument of what's the alternative? i don't see a an alternative that would have created something better at this stage. it's difficult to undermine this argument. but to me i think it's maybe another issue of framing the question, which is we take the crisis as given. i mean all of the discussion has been like a crisis has occurred policy has responded what's the impact on inequality?

but there's another debate out there, which is lean versus cleaning. should central banks play a role in the buildup of imbalances. the question is was there anything we could have done to prevent or mitigate the buildup of imbalances before the crisis? that's why we are doing a lot of reventing of policy frameworks. i don't think we have fully completely grasped is the extent to which monetary policy in the face of the crisis might have something to do with that. that's a bigger question on market policy than the response after the fact. >> you want to respond to that don? >> that's a very legitimate question. my personal preference would be to keep the fed focused on maximum employment stable prices, their inflation target

and use other tools to deal with the build up of imbalances if at all possible. and one of the tools that owe considered to me as i was listening particularly to the regional thing was ltvs. so one of the lessons of the regional paper was that the easing of monetary policy has been less successful. the short from low mpc to high mpc spenders has been short circuited or cut off or less effective because people were underwater on their mortgages. by the same token, i think part of the buildup into the crisis was a leverage buildup in the house told as well as the financial sector. wouldn't it make monetary policy more effective as well as help

financial stability if as these asset prices -- the house prices were rising, regulated -- ltvs were regulated and they came down. >> loan-to-val value use people would have more equity they could use the low are rates and you might allow even higher loan-to-value ratios. it struck me that these guys had come up with another reason for using loan-to-value ratios as a countercyclical cool. >> and that's not currently in the fed. >> susan you look like you wanted to say something. >> macro prudential policy is. to prevent the buildup of dead.

you made clear that the benefits of qe3 were not enough to benefit the cost. what judge bivens pointed out is -- well, can you say it but you can't do anything about it. that's true if you're the president of the united states, too, so the fed shouldn't feel so bad. what is your view on the political economy of this? if the fed had done less, do you think the congress would have done more and then we would have had less inequality? >> i know "i don't know" isn't very compelling. one, there is no qed in qe. we're in the middle of this. >> i got to write that down. that's very good. >> and the unwind of this we are all speculating. if the unwind were as simple as

it is in an academic model. so there are plenty of ricks-- i know there are distributional consequence or sophistication consequence we should care about but your question is about the political economy so i don't know. but i would just suggest this -- if you are democrat/republican, doesn't matter in the congress and for six or self-en years your neighborhood central bank says based on our projections, the economy next year will be materialial longer even 20 a-2015 because in part of the prudent monetary policy being taken, tell me what's the

willingness, the courage in making a really tough choice. because things are going to be as well if you continue to sit on your hands. so my view is imagine the federal reserve and a big km in in -- imagine if don or the chairman said, well, with all due respect senator, to you and your 99 colleagues, we pulled a rabbit out of the hat in the financial crisis. that's what the federal reserve was born to do. we were born out of the panic of 1907 respond in the 2007 panic and we think on balance we did pretty good job. on the margin we could have certainly done things better. if you're asking us to take an economy whose growth rate is unchanged through the $400, what

if we leveled with the political authority and say 2% is about what we can do by ourselves and if you want this economy to be growing at historic prend trend at 3% plus, there is prersly but to get to the next of both growth, we need you. so when i come back in front of this committee, if the economy is not better, let me be very clear who that is. that's a very different dynamic. i don't know what the results will be in the political climate. i just i feel we share the

burden seven and a half years later. you want me to believe the members of congress looked at the forecast seasoned didn't believe they needed to do anything? >> let me start again with i don't know. >> good answer. >> but i do think on balance that the central bank and the omb and the congressional budget office and the world bank and the imf said we were on balance makes politicians, not all but some, unwilling to sign up for a very tough choice. this is not to suggest as some of my friends would that there's no role for central banks. there's a powerful role for central banks. and this may be unpopular in the room it's a powerful role but

it's a pharaoh central bank. after seven years of chronically missing its forecast maybe a little burden sharing would be in order. if the politicians take us up on it, that would be a wonderful thing. and if dough-the-don't, it would still be a good thing because the truth is when i jond the federal reserve, around the time chairman bernanke did and don had been there for a long time the central bank had a lot -- i worry that we can single handedly do this by ourselves and i'd just assume we'd try to crowd in some other good policies. >> how does this look to you, john, from outside the united states? >> i think it's very difficult to get this coordination right. i have -- i man, we've been spending quite a bit of time at the g-20 twabl discussing what

the world needs to get out of this, in terms of uncertainty on the politics on the miss kol side. and this took going deeper into the policies. i think it's an added question about what is the right so you need to get this kind of an outcome driven kind of kword yags and i can see why politics would crump this -- >> it's interesting that the bank of johnson tried kevin's coach, right for five years, they lectured the government about what they needed to do on the supply and demand side of the japanese economy, pded up with a new government and a was

part of of the new program. it didn't seem to work in japan. they had to turn the whole -- the ten tral bank. >> i think the fed i agree in the minds of the politicians listening that the optimism about the federal reserve about future growth took a little pressure off the congress and perhaps enabled them to engage in more easily in restrictive fiscal policy. i don't think they'll pay a lot i do think the fed needs to do everything it needs to do to hit the powers in a democratic society. when it falls short on its

forecast, when the unemployment rate isn't falling or is falling for the wrong reasons i think whatever -- it's got to guess what fiscal policy is going to be and then double down on -- in the united states' governmental structure that takes this goal seriously and does everything it can to hit those goals and say i'm not going to do more to hit those goals because it's your responsibility. that would not have been comfortable to me as a member of the federal market committee. >> john, you mentioned in your slide, you said that the bank of canada thought about the distribution implications of alternative monetary policy regimes. what was that conversation like? is -- is this consistent with

what we've been hearing this morning or different? >> in kenya every five year we have to renew our inflation porg et in thely to does it require. >> there's a lot of theoretical argument to make it appealing. you would have in the current environment a lot more to go in terms of catching up on the price level so that would suggest more easing. you might think that people will then be convinced that is coming. and in that context one of the questions are what are the imwe

didn't go into unconventional policy but we had low interest rate like everybody else for a while now and we've seen a buildup in the housing sector building up and as a result of that, the government took some measures and it tightened up the mortgage rules as you were suggesting before as a countercyclical policy and those rules were mainly targeted for high loan-to-value ratio which is where we were seeing more vulnerabilities and those are people who don't typically have high income. >> you have toll realize for conclude and i think this is about trying to get the right mix between macro prudential policy and larger policy. again, i agree with what don was saying before. i think the primary objective and what susan was saying well.

the primary objective of monetary policy should be staeblizing the economy. i think the financial stalkt of it should be first and foremost on the macro -- i think we have a remaining question. to the extent of monetary policies policies policies contributing season i need to take into account. >> tuesdayan, what are the things that i he had the kind of flip thing that maybe a little more

inflation here would be good and we'll just export the cost to the rest of the world. so when you think about the question of impact and quantitative easing and short turnout rates forever. how do the distribution am i pli cases work if we think of ourselves -- and you can't say i don't know. on kevin gets to say that. >> okay, then i'll try to know. you can look at the same interest in income that i talked about for u.s. hose how olds, can you look at the rest of the world sector. they've been clear losers from very low interest rates. so foreign creditors to the tune of several hundred balanced a year or over the course of this period have lost out on interest they would have otherwise earned. it's already a good deal for the u.s. to have extremely low interest rates on government dead. it's good for the government

they can borrow more. they could have taken on more fiscal stimulus and could be versely we've taken on lots of inflation. we benefit from having the world's reserve currency. and, david i think you alluded to earlier you can say what you want by the u.s. economy and the u.s. dollar but we are blessed with our competition. >> gentleman here on the aisle. >> caller: hello. the last time inequality in the u.s. was this level was just before the major depression in 1929. and following the depression there were a lot of inquiries commissions and policy changes that led to eventually less

income equality. this financial crisis there were similar inquiries but they just fizzled. all they had was two parties and responses and one hypothetical question i have is what if department of justice put 50 or 100 wall street executives mortgage bankers in jail, would it have had any impact on the monetary inequality? >> i'll answer it. i don't think it would have had much impact on income inequality. do you have a question? >> thank you. >> tell them who you are. >> i'm angel from the peterson

institute. for those where qe has an impact through asset prices wouldn't it follow at a time of tightening that the fed should sell assets? >> as i recall don, when we adopted a balance sheet expansion regime when we were confronted with the zero lower balance parenthetically not obvious that the central bank thinks that the zero lower bound is the problem, my recollection is that our original exit strategy is that we would shrink our balance sheet back to something like normal. that is, after all, we cut rates to zero first and increase the size of our balance sheet to get

get -- that is certainly not the exit present pals that our former colleagues have adopted now. i'm not sure i understand why. a sentic, of which independent now the and the signaling could work in the opposite regard. we're selling assets and we sure hope you doesn't follow us. a cynic would have that as a supposition as to why sort of normalizing the balance sheet first is no longer considered prudent. i don't really know the reasons for it. i think that there is a certain symmetry to it. i think knows will -- interest

rates and qe are cousins, they are not identical twins. it would be prudent to signal the exit regime would be done, not by a fire sale but by announcing we would be shrinking the balance sheet and it turns out the assets the bank has are the assets to the world's financial markets are dying to hold on to that that would be a very prudent step and could at least take them out of the situation in which they might take them. >> and then the dollar strengthens and asset prices continue to move up at which point they could argue that

market financial conditions have heightened so i don't have to. i like your idea of using the balance she's and sim et thetory call chases it strikes me as the prices i think the uncertainty around this is holding back labor markets and labor income. not in a way we can prove but given the notty of what we're trying, every reason to believe that the investigationing in convention as spt. >> yeah. >> >> do think unconventional

documents are looking for guidance or qe. and that has different financial impact on pngs funds life insurers, so and we've seen a massive compression of premiums around the world. to a point where it is a puzzle. you see basically very little compensation for risk across the curve. we're talking about inflation target maybe being raised, we're talking about liquidity issues on the bond markets, we're talking about a whole set of issues that for some reason you would think would be risk and you would want to be compensated and yet we don't see that happening. why is that?

main is mean if those are depressed, you won't get the normal approach would you want to see. that gets you thinking about a sequential approach where i think raising rates is the first thing but eventually questions about what we're doing with the balance sheet might become more irrelevant and more unique. >> so two points. i think our original play was so there three stages. what's changed is the natural runoff has been postponed until after the increase in rates. it's not quite as radical a

change as you suggested. and i think there's a decent reason for that. we can discussion and differ on it. there is a desire to get the federal fupds rate up. ? >> obviously you wouldn't raise the rate until you thought the economy was on solid footing and things would progress naturally, but we know, we live in an uncertain world in which bad things can happen, now if you're selling off that port holeio the fed munds rate is still at zero or ten basis points are whatever, right? then something bad happens. might be. >> you would need to resume

purchasing securities. that would be very difficult and there are lots of people out there that would -- both in the political and economics spheres, that would resist it. so i think you do need you need to get some space to guard against against. >> andy. and mike's coming. >> i'll be over there. i'll be brief. since it's 12:30. >> reading the papers for this. >> and just to come back to a point that don made that connects to the session you had with larry somers a few months ago. let's suppose that qe at the zero bound is -- has crucial political elements to it that it has real income based dugsal

en enthere really isn't any fundamental reason why you couldn't delegate that responsibility to the treasury, they would participate in sales and longer term treasury securities or you could change the federal reserve act and say it needs to do large scale asset purchases, that in doing so it should consider the income inequality. i just don't think over time that the public broadly is going to be willing to accept the argument that don made. in that case the mandate probably needs to change. >> the you think the mandate should be changed to make inequality part of their -- >> >> okay. so again we're just recognizing -- >> we forgot the part where he wants to be popularly elected.

>> the point is and i thought the papers this morning made a fairly strong case for income and abound for those or leave it with the fed and adjust the mandate at the zero balance. but anyway, maybe there's a third option but it seems to me that this is, again just tying back to the issues, the kind of issues that larry somers raised, which are closely connected to today's connection. >> you're talking about larry somers talking about the relationship between treasury debt management and pressurery is putting do any of the authors

want to weigh in here? please, josh. >> i'll try to be quick. so in the short term i'm clearly an extreme pessimist. if the fed had pulled back i just don't think they would have stepped in. i do totally agree that over the long run we need to rebalance how we approach macro stabilization. i think we trained a generation of policy makers that a short-term control by the fed on interest rates is all that you need. that's a huge problem. if you look at asset markets right now than i'd argue the labor market and over parts of the real economy. part of that is a function of how early we are in the department of recovery. if you look crease it's only in

2014 that the labor share is crawling back. i hate to sound like an optimist here give it a little time. if we allow the blip nor a data we will see some of that call back back. >> to that point, this is also a reason why i think there's been -- i think you're right this recovery has been unusual live weak. and yet the s&p -- the s&p has not only recalled a hole it 60% above the prerecession people. >> 6-0%? >> 60 points. the way i think about it, we made ahead of the i think you're

right. we are earlier in the stayedio on the financial recovery i think it could be impact of qe having an impact and i think it begs the question about what's next. it it. >> i think the one entity that has in some sense in front of them as we speak in 2015 this chose between investing and financial assets and real assets, our corporate ceos. the s&p 500, the massive cash flows that may well have markets that may well have peaked. that's whether these two assets are equally attractive. >> they found inviting their

closed hair back atlessin aggregate global demand shareholder buybacks are running at about $1 trillion, in 2515 a record and an a, some of which might be strategic, some might be called quite rudely financial understanding. we share that labor is going to get their fair shave butting it and they are willing to support their own -- there may are may not be a central bank put but the world is getting higher and

higher -- owe if i look at them in the conundrum of the labor market that we're in, we're going to have this surge because it seems to me as a final thought we seem to be favoring financial assets over real assets as a matter of public policy without any bad intent. >> that's depressing. >> so let me make two advertisements before we end. one is that this afternoon in this room at 3:00, roz chetty of harvard will be here to talk about his latest work on mobility and inequality which will be livecast as this was. and then i can't remember when in november or october october i think, we're going to do an event that raises some of the issues that susan mentioned about the -- what is happening to the long-term interest rate and why is it down and whether we should expect it to go up or are we in some long term trend?

>> october 30th. >> october 30th. >> i know if i give you enough clues. i failed on the most important one. please join me for thanking our paper presenters and the panel. while congress is on break, we're showing you events normally seen on weekends. visits to historic sites in key we florida tulsa, oklahoma and topeka kansas.

join us for the c-span city tour at 8:00 eastern. tonight at 8:00 eastern, it's republican elise stefanik of new york, she talks about the experience of being a new member of congress. >> i pinch myself the first state of the union is an historic event to be sitting on the house floor when prime minister netanyahu delivered the joint session, i looked around and once again there was a moment i can't believe i'm here. in february i participated on a congressional delegation to afghanistan, iraq kuwait, jordan and for me i was able to visit with mountain soldiers delivered to afghanistan but one of the visits we had was with the newly elected president of afghanistan and it was four members of congress with the president. i pinched myself at that moment as well.

so yes it's a very awe-inspiring experience. but you understand that the reason why you're put in office is to represent your friends and neighbors from back at home. when i stop pinching myself, i think it's time to go. >> our interview with republican elise stefanik of new york is one of four congressional profiles tonight. you'll see republican brad ashford, john radcliffe and don beyer. that starts tonight at 8:00 eastern on c-span. >> the c-span cities tour is partnering with our cable affiliates as we travel across the united states. join us and cox communications this weekend as we learn about the history and literary life of omaha nebraska, where one of the

first advocacy groups was fighting for racial equality. >> omaha had a reputation in omaha and in the united states as a city that when you came in if you were black, you needed to keep your head down and be aware you weren't going to be served in restaurants and you weren't going to be staying in hotels and when the de porres club began their operations, they used the term social justice because civil rights wasn't even part of the national lexicon at that time that the idea of civil rights was so far removed from the idea of the greater community of omaha or the united states that they were kind of operating in a vacuum. i always like to say they were operating without a net. there were not those support groups, there were not the prior experiences of other groups to challenge racial discrimination and segregation. >> we look back to the union pacific and how the construction

of union station helped omaha's economy. >> union pacific is one of the premiere railroad companies in america, founded in 1862 with the railroad act signed in law by abraham lincoln. it consigned several railway companies to build the union pacific and they were charged with building the railwayconnect the east and west coast. they started on the west coast and were moving east and they met up in utah. that's really what propels us even farther. we become that point of moving west, one of the gateways of moving west. >> see us on sunday afternoon the 2 on american history tv on c-span3. like many of us first families take vacation time.

and like presidents and first ladies, a good read can be the perfect companion for your summer journeys. what better book than one that peers inside the personal life of every first lady in american history. "first ladies," presidential historians on the iconic lives of fascinating women. a great summertime read available from public affairs as a hard cover or an ebook through your favorite book store or online book seller. >> the ninth circuit court of appeals is considering whether to strike down california's concealed carry regulations. a panel heard argument on restrictions of gun owners to carry concealed weapons in public. the regulations being challenged

are in san diego and yolo county, california but it could have implications statewide. the oral arguments are an hour and 15 minutes. all rise.

the united states court of appeals for the ninth circuit is now in session. please be seated. i want to remind everyone to turn off their cell phones so we don't interrupt the attorneys presenting the case. you may proceed. >> chief judge thomas, paul clement for the appellants in the prudia case and i would like to endeavor to save three

minutes for rebuttal. my client's complaint here is not with the california statuary scheme because the statuary scheme itself can be interpreted to respect second amendment rights. indeed it has been so interpreted in the majority of california counties that allow good cause to be interpreted in a way that is much more permissive and allows people to get concealed carry permits for self-defense purposes. and that includes california counties like sacramento county that are quite populous. thus the source of the constitutional difficulty here isn't with the statutory scheme but it's with san diego's interpretation of the good cause standard and san diego's policy. thus striking down san diego's

policy would not invalidate any statute of the state of california, and to the contrary doing so would save those statutes from constitutional doubt. >> now, the question here i would also emphasize is not whether there is a constitutional right to concealed carry. rather the question is whether there is a constitutional right to some outlet to exercise the right to bear or carry arms for purposes of self-defense. the answer as the heller decision i believe makes abundantly clear is, yes, the government cannot completely foreclose an avenue for exercises an important second amendment right. now, the government in response to this would try to suggest that the second amendment is somehow a homebound right and thus does not extend to bearing arms or carrying arms outside the kurt large of the home but only extends to keeping the arms in the home in the first

instance. >> mr. clement in terms of the procedural status of paruda at this point, since the sheriff chose not to appeal and now the state's going to be making an argument here and has asked to intervene, is paruda a difficult vehicle now in terms of we have the surrounding cases, we have preato and we're holding in abeyance baker can paruda be decided the same without the sheriff here? >> i think it can be decided the same. that might depend ultimately on how the the state resolves the state's motion to interview. we don't have an issue with the state being here to ent convenient to defend -- to get involved in this case. we do take issue with them being here under the prong of rule 24 that justifies them being here as of right because of a federal statute. we don't think that properly understood our challenge calls

into question the constitutionality of the california statutes for the reasons that i think i've already elaborated. we don't have a beef with those statutes. if my client was so fortunate as to live in sacrament open county there would be no objection to what the state has done. the objection is to the county as policy and the way that the county interprets good cause. >> do you think the recent die night of -- denial of cert, since the supreme court doesn't like to talk about the second amendment very often, years go by without it can we read any tea leaves from that? >> i suppose that might make this court's decision all the more important, but other than that i think all cert denials are worth about the same, which is in the cosmic scheme of things not very much. it's important in the client in one particular case that their case is over but i think we've been instructed time and time again not to read anything

precedencial into the simple denial of cert. >> what can the sheriff require? can he require a safety course of to the interest that's being asserted here by the county and safety. you know we're not here to take issue with the idea of a licensing regime generally. we don't have a beef with the way the same licensing scheme is administered by the majority of counties in california where they require a certificate of training they require certainly other background checks and make sure that somebody is in a category where they are eligible to possess a firearm. but we don't think that whatever else could cause can be interpreted to mean. maybe there is some case down the road as to whether a county can have a slightly more restrictive interpretation of good cause. the one thing i don't think it can be is that you only get to show good cause if you show you have a better reason for the

firearm than your fellow citizen when it comes to self-defense when the supreme court in the heller decision said every decision, the people one of the key words in the decision the people have the right to possess a firearm for purposes of self-defense. it seems a little anithetical to the basic thrust of the heller decision to say that the only way you can exercise your second amendment right is to show you have a better basis for exercising that right than your fellow citizens. >> counsel, you're unhappy with the comparative nature of it. but you've emphasized that self-defense is the touchstone. so can the county require someone to demonstrate that they require a firearm for self-defense, regardless of whether it's compared to anyone else's need for self-defense? >> i suppose that you know if a county wanted to take a position which says that we want you to in order to satisfy good

cause, articulate the self-defense is your good cause and then essentially hum a few bars and articulate why it is you feel you have a need for self-defense. i don't think that we would be here objecting to that. because as you say, you know it's not just my client who is focused on self-defense, obviously the supreme court in the heller decision was focused on self-defense. we take that as our guide. and we think that certainly self-defense is something that can be -- satisfy the good cause requirement. it may be that you need to explain the basis for your desire for self-defense. but i don't think it should be that the only way that you can do it is if you say i have an acute need for self-defense that distinguishes me from my fellow citizens. >> under your theory, any self-defense should be justifiable because? >> well, no. i don't think so. because we take this case as it lies. and as it lies, the san diego

policy did not give my client any opportunity to say anything about self-defense beyond it is a distinct right to self-defense compared to other citizens. we weren't denied because our articulation wasn't good enough in the abstract. we were deniesed because the county has a policy that requires the showing to be extraordinary vis-a-vis your fellow citizens. >> the premise for the three judge panel decision was that a law abiding citizen has the right to carry in public, whether openly or concealed. so that as i read the three judge panel, so long as you're not a convicted felon, or insane or a child that is to say you're a law abiding adult citizen, you have a right to carry whether concealed or open. and then it followed from that. because california does not allow an unrestricted open carry

that the concealed carry had to be very sort of generous or permissive in terms of carrying. do you share the premise of the three judge panel? >> we think the premise of the three judge panel's opinion is correct. >> no, when i say premise i mean your argument stems from a premise that any law abiding adult citizen has a right to carry whether concealed or open, but one or the other? >> i would -- even -- >> any specific showing for desire for self-defense. >> they have a second amendment right. that doesn't necessarily follow from that they would have an absolute entitlement to it. the second amendment like all constitutional prinples is not a principle without limits. >> what limitations do you see? >> i don't know that i see any particularly obvious ones in this context. but, again, my -- >> no, that doesn't help me very much. you say you can limit the right to carry in public, but then you

don't tell me what. >> i mean, look, as a starting point, i think that it's fairly clear that you know states should have the option about how they regulate carry. if one state wants to prefer open carry and another state wants to impose concealed carry, they have that option. they may also have options in how they go about their licensing regimes whether they require training courses, longer training courses and the like. now, i think with respect to restrictions that went beyond that, with all fairness, to me and my client i think we have to see what the policy is in order to kind of understand whether there's an argument that it conforms with the second amendment or not. >> may i ask you then to go back historically to robertson v. baldwin where the court said the right of people to keep and bear arms is not infringed by laws that actually prohibit the carrying of concealed weapons. that's not been abrogated by the

supreme court, correct? >> i don't think they've ever had occasion to revisit that. i don't -- with all due respect i don't think they abrogate -- >> my question is with that kind of almost a black letter law statement, how does that case fit into your construct and what would you have us do with that case? >> well, what i would have you do with that case is to understand that dictum the way i would understand some of the other references even in the heller opinion itself. this was the point i was trying to make. we're not here saying we have an absolute constitutional right to conceal carry. and the way i would understand what the robertson court meant by that dictum was super dictum. 13th amendment case and they have a paragraph where they're making a drive by statement about six different constitutional rights. what i think they meant is on the assumption that there was open carry in that state a

concealed carry restriction would be consistent with the second amendment. that's the way that the supreme court in the heller decision understood what was going on in a state like georgia in the nunn case. the state foreclosed both open and concealed carry. in that context the georgia court in the 1820's or 40's said you have to have a right to carry this one way or the other. otherwise you're jumping the tracks from the regulation of the second amendment right to the obliteration of the second amendment right. that's how i understand the robertson dictum. >> if we assume for a moment that the heller right applies in this context. why wouldn't it survive interimmediate scrutiny? >> there's a healthy debate here. i don't think san diego's policy can survive any form of

heightened scrutiny. the reason why i think that is there isaical a couple of haulllmarkhallmarks. you relax the presumption that the ordinance sore statute is constitutional. then you shift the birdurden to the government other than the burden son my client to challenge it. you require actual evidence. if you look at the evidence in this case it is all of one declaration by a professor, this is the excerpt of the record, that cannot be enough to satisfy -- >> why not? it's countered by the declarations that were put in by the plaintiff? >> here's why i think it can't. he doesn't get to the relevant question. he sort of makes two observations. one, less guns, less violence, and two less concealed guns less violence. but it doesn't ask what is the critical question, which is if there are less concealed

licensed guns how does that affect the level of violence? that's the relevant question. and the county has no evidence on that and no excuse for not having the evidence. you know this is -- >> the district court have conducted a trial? is there a factual dispute on the question? >> i don't think it's a factual dispute. what i think it is is this case went to summary judgment. the county had its opportunity to marshal all of its evidence. the burden is on it. at that point, it doesn't get a do over. it marshled what it thought was sufficient evidence. we don't think they got the job done under intermediate scrutiny. to finish what i thought before, the supreme court in a case like turner broadcasting talked about predictive judgments. that was in a context where therehead to be a predictive judgment. the federal government had never imposed a must carry requirement on cable operators before. you had to make a guess. here the answer is sitting in plain sight in sacramento

county, in fresno county in san bernardino county. there is no evidence in the record or the world, that when those states adopted a more permissive interpretation of the good cause standard that the sky fell or violence went up or crime went up. when you have an obvious comparative out there and the state doesn't offer the evidence, that doesn't get the job done. >> what do you do with the second, third and fourth and woolard -- i forget the other one. >> drake. >> there the court said similar statutory provisions survived inter intermediate scrutiny. >> nose decisionthose decisions aren't binding. we could look to the