the requirement that we -- i think with those two individuals already exiting and the additional expense of transacting business in that market, you can see other participants exit and cause less liquidity. there's a lot of topics to go over and i know my perspective is going to be from a regional platform and more granular than some of the other perspectives you'll hear here today. >> thank you. our next panelist is kathleen yo joined ge capital in 1990. she manages the largest private sector issuers and contributes to the fixed income investor relations efforts. >> i add my thanks to you

putting together the session. a great deal of interest to ge capital capital, and i think to any issuer who makes regular use of the bond markets. the whole question of liquidity and if it doesn't function as it should means the bond markets do not function efficiently. representing issuers or the viewpoint, which is what i'm most familiar with, to the extent that the bond markets cease to be effective, more important, a source of capitol, which can be flexible in its form, and allows issuers like ge capitol to hedge its balance sheet risk. the reason i say that is concerns about liquidity, having impact on secondary market pricing and also on the new issue premium, which investors

quite rightly and logically demand to take on in order to buy a new bond transaction. to the extent there is a disconnect in the market, and those issues are elevated. it translates 2krek9ly into a higher cost for funds. and by further extension it can affect what business is chosen to go into or not, and ultimately job creation at its very end. the other aspect which i touched upon, the u.s. debt markets have the most flexibility in terms of the type of securities that they allow an issuer to look at. in maturities in option ailty of calls and puts occasionally in currency denomination. that same flexibility, which can, you know, raise challenges in terms of how you monitor the market is also one which would

allow a corporation like us to be able to immunize our balance sheet from interest rate and currency risk. to the extent that the market ceases to behave in a way which is efficient, then that means that you could argue we have greater risk on our balance sheet, by virtue of the fact that it's more difficult for us to hedge it that translate potentially into more systematic risk into the market itself for smaller companies, it's probably even a more crucial issue. ge can toll can always get a quote on a new issue. for smaller companies that don't come that often. it may not be merely a matter of cost, it could be a matter of access which is of greater concern if you think about the greater economic picture. i think as all the panelists have shown, the liquidity question is a complicated one, i

don't think there is a single source you could point to as being a cause of the concerns here, and as a result of that, i don't think there's a silver bullet that's going to solve everything. whether it's bond market standards, electronic trading platforms, putting securities on exchanges, none of them by themselves is going to fully address the situation that we're discussing today. for all of us who have benefited from the markets, whether it's as an issuer who's been able to raise money, as the investor who's earned returns, and frankly the broker dealer community who has acted as intermediaries in the marketplace, we probably need to look at a full scale view of what has gone on including recognizing the struck toural changes that have happened in the market and need to be recognized because you cannot go

back to pre2007. it's a fundamentally different world. and all of those have to be taken into consideration with a view frankly for what in the future is going to make this market continue to provide the value it always has to all of us. >> thank you. and next dr. larry harris. who holds the chair in the teaching department. professor harris served as the sec's chief economist from 2002 to 2004. dr. harris? >> this is a great opportunity to participate in what i expect will be an interesting discussion. several of my co panelists have already identified definitions of liquidity which i completely concur.

it's the ability to trade when you want to trade without too much impact and in reasonable sizes. now, the question is where does liquidity come from. the ability to trade is provided by other people who are willing to trade with you. and it's really important to think about, who are the other people who might be willing to trade with you? >> traditionally, we think about dealers as intermediaries who are willing to do those trades you want to trade, the dealer will come and provide you with that service. and i expect that dealers will always be very important in fixed income markets and to a lesser extent in equity markets as well. >> the equity markets is extremely cheap to trade an awful lot of risk. the credit risk associated with equities is much greater than the corporate bonds or treasuries. and yet, these securities trade with very small spreads. measured in single digit basis

points. in contrast, the spreads say in corporate debt are on the order of 135 basis points. to put things in perspective, if you applied that spread to a 40 dollar stock you would be trading a $40 stock at a one half dollar spread. not unprecedented, though we used to see spreads like that in the equity markets. we saw those spreads before order handling rules were adopted that allowed the public to offer liquidity to the public. when i say the public offers liquidity to the public retail or institutional can be the other side that we spoke about a few moments ago about the liquidity is the ability to trade when you want to trade. who do you want to trade with? if there are people who are willing to trade with you, who aren't dealers that's another set of people who can do trades. the order handling rules in the equity markets converted those

markets from 25 cents to 50 cent spreads. still, 5, 10 cents for the less actively traded securities. much smaller than what we see in the fixed income markets. so what we need among many things is the ability to allow the public to supply liquidity to the public. if we're looking for liquidity, we have to look somewhere. so i want to close with just a couple quick observations about what are some absolute truths. not everyone can be a buyer or a seller at the same time. we think what happens if everyone wants to trade and the bottom line is that simply can't happen and -- people can try to do it they won't be able to do their trades that's where the extreme volatileity comes from that we're worried about with systemic risk.

the answer to that is a couple fold, when lots and lots of people want to trade, that there's some procedure that will allow people to step up and profit from those opportunities. all of these liquidity events that scare us create enormous opportunities for profit. these are just like god given -- the religious experiences for people who are interested in profit, we need to make sure that people can step up when those opportunities arise we have to ensure that information about the economy is widely distributed that not everybody wants to trade at the same time, if everyone thinks they can trade at the same time, they may very well do so if they did so that would be a problem how do we get people to not think

foolishly? that could be the hardest problem we've ever encountered right? one way we do that we inform them about liquidity conditions we ensure that they understand what costs are likely to be and we also ensure that they have full information about the economy and about events that potentially might scare them. a couple things i want to mejs. there are a few things that haven't been mentioned. the credit default swap market has grown tremendously in the last 15, 20 years. and to some extent it's become a substitute for the discovery of the value of default risk. of credits we see in bond bhark ets. a substitute for the normal price discovery we see in the corporate bond markets. a lot of that liquidity we fear ended up in the credit default

market. part of the reason is that people especially -- not for profit institutions that want to own interest rate risk. they don't want to -- if they're only interested in pure risk they will buy treasuries, the problem is they have to pay a lot because there's a tax advantage to treasuries. they offset it with credit default swap and it never goes away. >> if it never goes away, it doesn't matter does it? we'll be talking about aging populations, that's why people's opinions are so important surely there's going to be a shift in dealing in banks to other

structures possibly quite sense oibl. we want to protect the public from the exploitation of deposit insurance strategies and finally, the fact that interest rates are so low is very important. in part, because if you're paying 1 and a quarter% in trade. bonds are only paying 4% you end up losing almost 4 months of interest to do a round trip trade in the bond. who wants to buy a bond when there's four months interest lost just by stepping in and anticipating that some day you're going to have to go out. bonds end up being discounted and corporations can't offer them as the prices that they should many. >> thank you very much. >> you mentioned that your

recent roundtable you had, it was not necessarily a consensus on the definition of market liquidity. we heard a few folks talk about that issue, what was the consensus that you heard at your roundtable of what is the definition of market lick wit identity. >> i wish i could say there was a consensus, i would like to address professor harris' comment about the religious experience. >> one of my comments was that liquidity is not a god given right. it comes at a price -- one of the things that was great about my committee, we had academics, end users traders, pretty much every stakeholder at the table, and it was an opportunity for then to talk to each other about liquidity and what that meant. i think the one consensus was

that we all need to be working together, thinking about this a little bit more, in a muchp more serious way. the market clearly has changed. the players are different the structure is different, we have to be even more mindful to make sure their incentives, to make sure we have more liquidity providers, as opposed to fewer ones. some of the natural evolution that was mentioned earlier today means that we may need new tools in place as well. >> have you all been talking about that at the sec? >> no. >> ever since larry left, at least, in 2004, it's obviously a critical regulatory construct beyond being a concept of market forces in play right now, liquidity is something we look at at the broker/dealer level,

even though we don't have liquidity prescriptions for broker dealers. we have not sought to seek a common definition with folks. i too, like you have heard sandy's definition, you hear a bunch. at core they're very similar, it was a little harder when you tried to define high frequency trading, that one will really get you. hopefully liquidity we can get our heads around hopefully it's not any less of an issue as i pointed out in my introductory remarks. where we've seen as has been pointed out by some of the panel panelists panelists. year after year after year we're at 11 trillion plus, if you include asset backed securities, with a market

structure that's circa 1950, are we okay with that? it's okay when the markets have been running. in the panics when there's need for emergency liquidity provision, it's not coming out of the sec's $1.6 billion budget. no checkbook, no balance sheet, i'm looking at you, dr. lang, we're all going to be looking at you, if there's a dislocation and that's the real problem, that's when bad policy gets made weapon you've heard me time and again implore the industry to get together, by that i mean the market makers, the buy side the sell side, the issuer communities. i'm glad to see ge here get together and come up with some common private market solutions and point out to us the regular u la tory fixes we need to employ. one of the things you need is

proactive regulatory thinking, god forbid in a major dislocating event. we're going to have title vii for corporate debt, that's something no one should want. it is a pressing matter even though you've heard me say this until i'm blue in the face. we've spent significantly more time addressing this than we have looking at this issue of liquidity. if it wasn't mandated by a 5-year-old, we're not paying attention to it and that's a real problem. >> you know, mr. harris dr. harris brought up the fact that you know what happens in the marketplace, when the play's over, and everyone's looking for a cab, we've seen a lot of

demand for the fixed income product and a lot of it has been produced -- is the definition then of a functioning liquid market when it's just the daily trading or is it when a market has the capacity to respond to anomalies or to -- in the marketplace. and if that's the case then what is the right amount that have? i mean should it be able to respond to a really sudden movement where people may have to wait a few days to move that position, or should they be able to move that position on that day. >> liquidity is a multidimensional concept, it has lots of different characteristics, you're asking now, the day to day liquidity as opposed to deeper liquidity. >> the bottom line remains that

liquidity is the ability to trade when you want to trade, someone has to supply that ability. and so the people who supply liquidity on a day to day basis may be different than the people who supply liquidity on a daily basis. what we need are mechanisms that allow us to seamlessly transition between the day to day demands for liquidity, and extreme demands for liquidity about the people who are willing to respond on a day to day basis they may get blown by when there are huge demands for liquidity. those people who would not normally respond can step in. for that we have to think carefully about the structure markets, how we can allow large people to participate easily. and make sure that they're not

inhibited by regulatory problems or structural problems in the design of the markets. >> is there anyway to measure what the depth of a market is in that environment? >> i think there's a couple ways to think about market depth. that is one of the most critical measures, right? the way we think about it is, what is the abundance of available transactions that could occur in that moment of time. and just to give folks a frame of reference. you know precrisis, the u.s. treasury market you are typically able to trade a clock of $500 million without having a material impact to the price. the long term average is about 190 million, year to date in 2015, that number is now at $120 million. the real question is, what are the expectations that the

marketplace has of liquidity in the u.s. treasury market. that's really what the fundamental issue is here, when we think about treasuries, do we expect to move the market at 120 million either side transaction? probably not that's why many are having conversations around this, because, you know, i will tell you it makes the discussion even more complicated than it has been so far, is that in fact liquidity is in the eye of the beholder right? with regard to certain asset classes and certain investors who are likely to buy long term holder holders, they don't expect deep market depth they manage their positions accordingly and in fact they value earning the liquidity premium that they are paid by the marketplace by holding less liquid positions. on the other hand, back to our u.s. treasury market, if you are a holder of the u.s. treasury you may very well be holding it

for cash management purposes as a high quality liquid asset, if under, ma et stress or just managing cashflows, you're looking to sell it you're not going to have an expectation to move price. i think measuring market death is important. there's no single metric, there needs to be a fundamental understanding of what the variety of metrics look like. they're as tight as they were precrisis. they're probably a little narrower than they have been. offers widen when you put too much pressure on the trading you want to do. >> to this list of characteristics, we may add that liquidity varies according to whether you want to trade quickly or whether you're willing to be patient. we have people who are more patient they're usually able to find liquidity there's a time

dimension as well. >> just to interject on that a little bit. i agree to some extent because liquidity is really about the durability and that expectation of it being available. so clearly you manage liquidity you're going to get from your asset base based on market value and market depp th. if you have more time, you don't have to see pricing volatility. if you have less time, you're probably going to see some level of pricing volatility. depending on what you're doing with those assets, you should have a very full understanding of what your expectation is going to be and if your markets place is going to be there. durability matters. >> let me illustrate this point as i fully agree with it, the stock market crash of 87 was caused because too many people expected that their portfolio insurance strategies would work in particular they didn't recognize that if everybody ran for the exits at the same time,

there would be insufficient liquidity to meet their needs. and yet the crash ultimately stopped because when prices were reduced enough people stepped in and they made a lot of money. and we haven't seen are kras like that since. in part because people haven't had the foolish expectations. and also in part, because there are people waiting in the wings who say, if i see something like this again, i'm going to jump. >> how is liquidity important to black rock. >> first of all, i would echo the comments by many many of my fellow panelists regarding there are many different definitions of liquidity, and i think it's constructive for the purpose of this discussion, we can largely unite on the definition that liquidity is the ability to trade at a certain size without materially impacting price. liquidity is important to us as

an asset manager because we have -- we manage investments for many different types of clients. some of them for example, a public pension fund, liquidity is not particularly important, those are looking to buy fixed income assets to match long liabilities and they will generally mature the bonds they hold. we may be managing money that our clients are holding as cen essentially short term cash asset managements, and they maze need their money for other corporate purposes. liquidity, the importance varyies with the client type. end investor type, the importance of liquidity very much varies with the asset class mentioned. liquidity is incredibly important in the treasury market. given the profile of boulders and their trans, as. liquidity is less important in

say long term infrastructure debt funding. >> so the question then, i think we agree primary on a definition of liquidity, and so one of the purposes of this conference was to talk about the question that everybody's asking. so is there a liquidity problem in the fixed income space today. >> before we move to folks who would know that, because they do it for a living you know, just to touch on one point of that definition, that it becomes apparent as we talk this all out together. the import of the definition of liquidity, based on the end investor or the business model for a dealer, a bank or a broker, holding positions on their own book for charges associated with that, whether

they be capital liquidity charges, the definition is different than i think in an agency structure and i was pleased to hear dr. langen say that asset management actually provides stability to the system which i think is hugely important point that can be lost especially in the fsoc debates on systemic importance. but for them the definition of liquidity, if it's one i hear economists use, the price at which you can execute a transaction, you're able to do it, it's just at what price. in the agency construct that is a morell vant definition. you're going to get the deal done, you're doing if on behalf of somebody else they're going to get more or less back based on the price. in the context of regulated entities. it's wholly separate avoiding the concentrations the type of definition that has driven the inventories down, which i guess is a good segue to your next

question that you pose to me is there less liquidity in the markets, as a policy maker not a trader nothing somebody on the street the data that we've seen is what caused me three years ago to give my first speech. issuance is up inventory's down it's just basic math. as bad as i was at math i was able to get that one with some assistance from my council, it wreaks -- did says to you you have to address it, you have to look at it, it doesn't mean there's a lack of liquidity, and, of course it's asset class by asset class, it means it's something we need to pay attention to. and so i guess, maybe dan would be in the best position from the trading desk perspective to answer that question certainly on the muni side. from my perspective, i'm going to assume there's a lack of liquidity until proven otherwise, i have yet to see anything to dispel that notion. >> i think when liquidity, when it am coulds to the actual

securities, by asset class, there's going to be a difference in liquidity, in the muni arena, it's because of qsep. you're not going to have tremendous liquidity in that 50,000. price discovery could be difficult. because an a-rated water sewer rev in california may trade differently than an a-rated water/sewer rev in oklahoma. we don't trade treasuries we use them for hedges. not that well lately by the way. the other areas where we see liquidity issues happens to be in the mortgage arena. you start talking about abs, like a sub prime home ek you're working with a customer to show them sub prime home ek you take down x number of bonds, you think it's attractive. you think it's getting better

over time. you show that to an institution to make an acquisition those folks may look at that piece of paper for a short turn around would be a week, sometimes it's two and three weeks before they get their work done and decide to come bag. one of the concerns we have from a regional standpoint is, how long can we own that piece of paper in our inventory until we are told it's a piece of paper and you have to get out. if i'm going to do my work on it, my work has to be done relatively quickly because it's going to trade that day or the next day. we do our work we take it down. we start offering the bond out to institutions who are going to take two, three, four weeks to look at it. all of a sudden, now, i can't transact in that asset class any more. that was one of the things i mentioned earlier about several dealers stepping out of the nonagency abs arena. liquidity from the security is

one thing, and the amount of time you need to hold it and the new pressing regulations coming down saying you can't hold it for that period of time, makes you step away from the product. >> i think we should also think about some of the micro effects. low interest rate environment. the ten largest u.s. and european issuers have 18,000 bonds. that's a lot of little bonds out there to trade. they're very much, by definition means it's going to be a less liquid market. we're about to leave a period of low volatility. those two pressures are likely to go up, and greater volatility, that's what's speering the new fear in the market, in terms of, what will liquidity be when interest rates go up. >> if i could add to that.

i think sort of saying the same thing, the panel is in agreement generally, all of us are expressing it in different ways. it seems to me that the key issue is whether investors are sort of anticipating what the liquidity in their transactions are, that's more important than whether current market depth is high or low or bid spreads are high or low over time, we had large depth in treasuries before the crisis. and much larger depth in other asset classes before the crisis. which didn't hold up during the crisis. so i think precrisis liquidity was not a predictor of what would hold up. currently if measures are somewhat less, i'm not sure that it's going to predict how it would react under a stress event. and so was the key -- one of the key issues is what -- how are investors anticipating this? is this part of their investment

strategy? and do prices reflect it, and do practice risk management practices reflect that? >> i think that there are two issues we have to separate as we address the questions you offered. is there a liquidity crisis? the first is are we in the midst of a transition zm if overnight we say that every bond dealer who works at a bank can no longer deal bonds, the next day, it will be a little harder to buy bonds. no question about it what will happen afterwards the banks will sell their operations to hedge funds to other companies, to the employees themselves and they'll get reorganized to find the capital and make money, because there are opportunities to make money when people demand liquidity, by the way, there's no such thing anywhere of free liquidity liquidity.

liquidity always has some price sometimes it's low and we'd like it to be low it's always always priced. the first issue, is there a question of transition? and if there's a question of transition, how do we get through the transition quickly? maybe we don't want to have banks dealing bonds. the second question is the systemic risk that's in front of us. i think it's worthwhile if we spend a few moments talking about the scenario that people are afraid of. scenario is this. the public has now purchased a massive amount of fixed income. at fairly low rates, and the prices are fairly high they'll be happy if they stay there that was their expectation. but if it looks like rates will rise and therefore, bonds will drop, or there might be inflation in the future. then we all know that these corporate bonds are going to drop in value, those people who know better than others and earlier than others are going to

race for the exit. because they want to get out quickly. the question is will they be able to get out. and how many will they be able to get out, they will push prices down as they should, because those conditions suggest that bond prices should be lower. will they push them down beyond where they should be? will they overreact? of course, if they over react there will be plenty of opportunity for those people to step in, but they may not step in quick enough, these are our fears that we face as we address those fears, let's recognize that when the bond prices drop their yields rise everybody who was interested in fixed income, because they're concerned about their retirement retirements, looks at it and says, i wasn't so interested in buying it when my perception of bonds, they were return free risk, just the opposite of what we're looking for right. these high prices are called return free risk. now all of a sudden bonds are giving me a return that is

respectful respectful, maybe i'll step in at this point. the question is, how quickly will they go in. is there a potential for volatility, absolutely. whenever there are large core lated behaviors that are significant fractions of the economy, there's potential for systemic risk. and there will be changes in the future, the question is, can we create systems that are robust enough that when they happen, people respond quickly that we don't get an over reaction that we hurt us all. >> it's my opinion, and i think others have expressed this, the cumulative effects of the series of recollections have made it essentially more difficult and expensive for certain dealers to act as market makers. these rules, including others, supplemental leverage rainshowertio

under the rules. since the crisis, to what extent have banks imposed stricter internal limits on their business units. not from a regulatory standpoint, but in reaction to a regulatory stands point and market changes. have banks changed their risk profiles. >> let's start with some of the changes banks have imposed on themselves. clearly, as everyone here did, so did our franchise live through the 2009 financial crisis. and the pricing activity and the changing liquidity dynamics actually informed our perspectives and views on price activity. as a result, our risk appetite for certain types of trading activities and certain types of risks changed. for example, even if you peeled back all regulation, chances are, there would be less liquidity being provided into the marketplace, because learning has occurred in some

aspects. that's important. that said regulation and much of it, i would say, the largest portion of it coming out of basal on behalf of the g-20 which focuses on liquidity charges, capital charges and things of that nature firstly it's absolutely important that minimum standards were created to create a level of resiliency and reliability into the marketplace, so that's really a good thing. but as you mentioned chairman one, more work probably needs to be done on what is the cumulative impact of all of those regulations added up. i would also posit each rule is almost written so it wouldn't comply with the rule before it. when we think about lcr which is an extreme stress test that assumes a run on liquidity for your banking institution. it assures you're holding the

right amount of cash to meet those outflows. for example, precrisis, if you were engaged in short term wholesale financing, that might have been an open position. if you are compliant with lcr you are not using short term wholesale funding for your inventory management. it's not creating a liquidity risk if you will. that said, the fact that you've raised that cash, you're carrying in liquidity and to give you some perspective, j jpmorgan is holding about $600 billion at the end of the first quarter, last reported results. that's an enormous amount. balance sheets are the largest banking institutions are about holding 25% in liquid assets. in addition to holding that in liquid assets. the supplementary leverage ratio which was created in basal, and implemented here in the u.s.,

because it's trying to create a consistency around concerns related to risk weighted assets it's risk agnostic and th chas a financial charge on all assets, including cash including treasury, it weighs extremely heavily. when you get to u.s. gsib for example, it assumes you may not be compliant with lcr, so once again, taxes, any activity you might be doing to accommodate client flow in the repoe market. if we step back market liquidity in the u.s. treasury market, we clearly are holding more treasury securities as high quality liquid assets. we are not putting those into the marketplace because we need to hold them unincumbered on the balance sheet. we also are not putting out vast amounts that we're holding in excess, why? if we put them out, because

we're already compliant with lcr, we would be adding to our cash which would draw an incremental 6% capital charge, and if we transacted in that way under the proposal, it would be charged an incremental gsib surcharge, it's about how the rules work together and if you're compliant with those that are addressing the systemic risks, there might be room to sharpen our pencils and allow more liquidity to flow back into the system, because i think there's more that could be in fact accommodated in that context. >> thank you. >> in view of the changes in the profile of people that have in the past made markets in those securities, those who have changed, as an issuer and a major player in the marketplace, have you seen the risk profile that some of those players are willing to take? in other words people have taken more of your issuance in

the past maybe having a diminished appetite in some way s s. >> well, i think the answer to that is after what happened in 2007, 2008 and you would probably know this better than me i think every asset manager did look at the credit allocations they would give to every single name and also a cross product. and really making an assessment of whether those were at appropriate levels or not. it is typically bullet securities, carrying a fixed coupon or floating rate coupon. we issue more in the retail market securities that have calls in them those are in some

sizes what they're interested is earning that coupon rate, and they're not really looking to trade or anything like that. even having said that, i think that we do see more smaller ticket sizes when i look at the benchmark securities that we put out there, and those are dollar globals, which we do once a quarter in terms of, you know, that's the benchmark issuance for that period. the ticket sizes are smaller i think it's a function of single name exposure i think it's a function of a lot of the other considerations that every asset manager is dealing with on their side. now, we have also adjusted in the sense that we are actively shrinking our balance sheet, so that where as before on an

annual basis we were putting out internationally on a global basis of 80 billion of debt. we went down to 20 something and have even moved to you know, a strategy, which we announced on the tenth of april, that we're not going to be putting any debt in the market, long term debt that is for five years. as we bring down the size of the balance sheet. now that's an extreme reaction, but, i think every issuer does tend to adjust the size of what they look to put out the frequent issuers, i think what's an interesting phenomenon is with absolute interest rate yield levels so low, the issuers you don't tend to see as frequently have looked at it and sid, this is a historic alal chance to put on funding. you've had a whole new crop of issuers come into the

marketplace, as well as the issuance which has a very different impetus to it, than the ones like ge capital who were in there on a regular basis. >> the ge experience is probably worth talking about just a bit. tremendous lesson was learned from ge in liquidity. ge as you may recall funded a substantial fraction of its operation for many years up until the financial crisis they did this because the commercial paper was -- carried low interest rates the boft of funding was low, but had associated with this problem that they had to fund every few weeks or in some cases every half year or so. when that market disappeared.

ge had enormous liquidity problem and would have failed if it wouldn't have been for the government stepping in. it's interesting to think about how we should think about this problem problem. >> ge perhaps knew it was so large, or perhaps they were just ignorant and they did this, had they funded their operations longer term before. they would have paid 2% more in interest. the -- their ability to fund short term and get away with it gave them quite an advantage in the market vis-a-vis their competitors if there's no penalty for this type of behavior, we'll see a lot of people doing it, leading to systemic risk, so i think it was right what we did in resolving these problems in the financial

crisis, as we now think about what types of instruments issuers not just ge should be issuing, they have to do it in a way that's responsible. the only way to keep them responsible ultimately is for there to be a serious penalty when they make a mistake, the problem is are we willing as a society to bear those ben elties if it has an impact on employment if we are willing to do that we don't regulate them, if we're too concerned about the ememployment issue, they have to regulate them otherwise, we're going to end up holding the bill. >> i think, you know the commercial paper situation you allude to over lima ultimately filed. we did have sufficient backup lines to cover the cp program

and one of the things which maybe not everybody is familiar with, in u.s. dollars euro and sterling, we were our -- we placed our own paper, we did not use dealers and we continued not to use dealers in the dollar market. what was very interesting was that we were rolling the paper but other people who were having redemptions on them actually couldn't sell acid backed paper. they were coming to us asking to sell us back our commercial paper, and we always did buy back. you know that was a standard policy, so that they could create liquidity because quite frankly the dealer community wasn't able to action date the flood of requests that ultimately created the difficulty for us while we

could handle our own program, wen with the in a position to be providing liquidity for the greater system that was just not something we could do that's certainly an open question. i think that particular time there was a new answer to it and we did learn from that, in the sense that we ultimately reduced the size of the program, and we're going to take it down to five by year end ever since '08 we've been running a liability portfolio where the average life is around seven years on a blended basis. where the average life is 3 to 4 years. but it is at a cost we also have

a liquidity buffer and everything else like that and the decision made in april to shrink down the size of the balance sheet and ultimately just focus on, you know, three core businesses rather than many of the others is based on an assessment of ultimately, can you meet the hurdle ultimately can you meet the hurdle rates than you would like and the answer was no. so where we're pulling out is middle market lending where we've been there for many many years. it's a business decision. it's -- there's no value judgment of is it right or wrong, but it's a logical next step in implication of many of the policies that case before. >> larry summers recently said that we might not have been such a good idea to go out there and shrink all the financial institutions a little bit because when you shrink all of them a little bit, who's going

to make up the difference? i guess my question to you is whether w the fact that we've seen in the banking space a reduction in the dealer space, a reduction in capacity how does that impact your thoughts on liquidity both on the buy and sell side? >> absolutely. so when we think about the cumulative impacts both of regulation but also of the learnings from market participants that sand yee lewded to earlier and the changes in business models that result from that we look at the new status quo where there are less dealer inventories and less available liquidity as the new environment in which we need to collectively adapt. for us that's meant looking deeply at the market structure and fixed income. and one of our observations is

that based on firms taking risk and keeping securities and inventory and finding the other side at a later time feels somewhat dated says specially in the context of the rapid growth of the fixed income markets. we've talked about the issuance of them over the past several years. so we've looked at many other securities markets and ultimately we believe that better use of better of emerging technologies such as electronic trading, such as broadening the types of training protocols used in fixed income alonging all buyers can create more points of potential transactions rather than the traditional client to broker dealer single attraction. collectively, we believe all of those steps can incrementally

enhance liquidity. i would echo what kitty says earlier which is that each of these steps on their own is incremental. one one looks at these single steps it's easy to be dismiss i. but there are several steps in concert can meaningly improve the status. that i believe market participants recognize that. there's a great amount of realtime development in the electronic trading space both being undertaken by new emerging firms as well as the large incumbent global investment banks are investing heavily in technologies and thinking of the next stage of evolution of their businesses. >> chairman, can i jump in on that before we lose the train of thought? because i think a critical point we need to debate or get on the record is what i view as a recent push by some policymakers in washington certainly within

some constituent members of ifsoc is not ifsoc itself to attempt to vilify in this context electronic trading specifically as the cause of the lack of liquidity which to me is turning the world on its head. i listened to dr. harris and i'm intrigued by his notions, one i've been following for a while, maybe a shoot shoots will grow are from from the chaos of these rules that have decreased liquidity. maybe new market participants will come along. maybe it will be a hedge fund, a broker dealer that just trades fixed income. but employing new technology new business model, electronic trading is happening in the aftermath of all of these other changes yet being pointed at blamed for this lack of liquidity. and we can't let this narrative go unchallenged. you've seen it in the fsoc annual report.

i've been around this town long enough. there's rawls got to be a boogie man somewhere when you're trying to misdirect. i think this is an effort of misdirection. i think this is an area, electronic trading that we -- and i mean we at the south korea, the cftc needs to encourage and not run away from, not vilify, not accept that this standard pushback that we're getting. and i second point, too, which is the notion of the acura gatt impact of regulation. and your question, how much is standard risk management post-crisis and how much is regulation? i was listening closely to sandy who couldn't answer your question without getting into both because i think we've reached a point where we've seen historically 2008 to maybe into 2011 where there was prudent risk management undertaken in response to a crisis. i don't think you can parse them out any longer. i think you can't say it's

dodd-frank it's lcr, nsfr, you go down the road, then it's prudent risk management because what risk is there when you've been told you risk everything. so there is this burning need i think, i know the new york fed has been looking at this, but it goes back to your introductory remarks which i think you politely didn't call out jamie dimon for asking that question to ben bernanke but he was the one that did it and it inspired me to look at this issue, where you said no one is looking at the aggregate impact. some people call it the golden egg of death. it's on the s.e.c. web site. i implore you to take a look at it. i've identified after committing my own staff resources for six or nine months 300 or so regulations that apply to a

hypothetical u.s. financial services holding company since dodd-frank. not only related to dodd-frank some international measures, too, but since. if you look at this chart it reeks impossibility. how do you do it? you're not too big to fail, how do you pay for compliance costs? how do you provide liquidity in a situation where you have all of these rules which if you're lucky the cost benefit has been analyzed rule by rule and not in the aggregate. it's something we policymakers have to look into. >> can i quickly say something about the hft question? the hft has gotten a really bad name and they're not the boogieman in the room, if you will. in fact, i think the report that was just released today will show that the hfts actually provided by liquidity during the event window when there was increased volatility. but i do think the report does say we need to look at this a lot more closely in terms of that trading strategy and

whether it creates some other unintended consequences. i just wanted to put that out there. >> can i add something to that? i appreciate going back to, you know, not just regulations being a factor for changes in market liquidity. there really are a number of factors, there's the own risk management and coming back to electronic trading. i don't think and i'm not going to speak for ef-sock analysts, i'll speak somewhat for myself from the fed. it's not meant to be vilified. it's an unknown. it's very new and there's not as much information about it to market participants or regulators about it as much as perhaps. and i think the interagency study, staff study on october 15 was actually a nice step forward

on this issue. it doesn't try to identify a cause. i mean, it certainly was looking for whether there's an error or something. it did not find an error. and so it took a step of let's provide as much information to the public about what happened during that window and there's an enormous amount of information in that report that i think people will now be able to look and evaluate and each individual participant may be a little part of that whole piece and by seeing it all together, we may learn something more about it. but i think it was quite careful to not vilify. but a couple of interesting things is it is a very big part of the treasury market and an even bigger part of the treasury futures market. and so i -- it's -- are all investors and market participants and banks and ccps, are they managing for this risk

adequately? so it's pretty important to -- it may be adding liquidity. we probably shouldn't say they all trade the same way. they're probably all unique individual firms just like banks or broker dealers are. but when markets are transacting at milliseconds, it's important that the institutions who are participating in those markets can adequately manage their risks around that. so that, i think is sort of one of the key take aways from the study. >> recently federal reserve governor jerome powell said there's no doubt that liquidity has been reduced in certain fixed income markets but he also indicated he wasn't too worried that a degree -- the decreased market liquidity would cause big problems when the fed starts lifting interest rates saying i'm not particularly concerned that a return to a higher volatility will leave much of a market on the u.s. economy. mr. leyland what's your response to that? >> a return to higher rates? i don't know if that's going to happen any time soon. i mean, we've heard them talking

about it for a while. but if there is an exit by the mutual fund group, the insurance group, the four investors, the folks -- the three investor groups that have purchased the majority of the corporate debt that have been issued over the last decade, if they all decide to exit at one time, we'll see a dramatic drop in prices. i'd rather go back and talk about electronic trading if i might, something that talking about the global issues and how they've seen the sides for the global issues go down. i saw a presentation by will rhodes of the rhodes group about a year and a half, two years ago, and it was specific to electronic trading and he likened it back to if anybody remembers how we saw the number of transactions and equities go up and the size of the transaction go down and he put graph up of what happens going on with global issues in the fixed income world and we saw

the same thing happening. the volume of transactions was going up dramatically and the size of the transactions was going down. and when you talk about electronic trading in the treasury market, i suppose the high-frequency traders can take place, we don't trade in the treasury market. when you get off into the corporate world, there's a number of global issues could be traded in that fashion but the majority of the fixed income world so limited in scope to their size that you can't have a high volume of transaction ss if there's a million bonds being offered at a particular price, that's what you get. you can't do $100 million worth of that bond because there's only a million bonds there. so electronic trading, the adoption of electronic trading has been tremendous. i think it lends itself well to the treasury market and global issues. but when you get off into the majority of the fixed mark

market which are smaller qsips, it works, but the majority of the market it just doesn't exist. >> just to add, i think we've been spending quite a bit of time talking about liquidity as we perceive it right here and now. i think even more importantly we need to look at what our expectations are for market depth and the demand for liquid any the future. i think as we look toward the horizon, it's probably important to note and not to pick on regulation because i agree completely there are lots of other factors but one of the items that is, in fact in our forward control is about 40% of the rule writing the still yet to happen and likely many aspects of it will further decrease the level of market liquidity. and i would ask that is it the opportunity right now to take a pause from the base that we are at higher capital higher liquidity, reinforcing stress

testing, higher standards broadly to determine in the context of what i mentioned earlier -- the balance of safety and soundness in the construct of functioning and effective capital markets. our goal collectively should be the resiliency of the u.s. financial economy and it's comprised of those two items. so i think here might be the opportunity not what about rolling back what has occurred not about being concerned because i agree with governor powell to the extend that we have a marketplace and markets are resilient they will evolve, no doubt. but we see further market decline and we are at precipice of the potential for changing monetary policy and the unwind of quantitative easing which will very likely present a an increased demand for that same liquidity. so as we're entering into that

so before we respond to that how do we want to take it per year? >> that cues up with the last segment of our time together and it's going by so quickly. but the last segment was designed as we talked with panelists about the road forward for ensuring that we do have market liquidity. if we say there are some space is shrinking, where is the space that we can increase. and embracing technology, embracing some of these ideas. because one of the things particularly from my perspective is the last thing you want to do is let congress fix -- [ laughter ] who needs to fix liquidity? it's the marketplace. we need a robust marketplace. and we need a marketplace that has some space to be innovative

and if we tend to try to constrict the activities of the marketplace then we're not going to fix either a perceived or a real liquidity problem depending on what side of that you're on. so what are some of the ideas that people have out? >>. >> so when we look at the market and think about ways to improve the liquidity situation from the status quo i touched on some of them. one of our set of ideas falls under the broad category of modernizing the market structure. and what we mean by that more specifically is in fixed income an evolution in certain products where appropriate, the more liquid fixed income product, treasuries and, say, larger investment in great corporate bonds, we believe those could suitably be traded on platforms and exchanges over time.

what that mean sthas the finite capacity -- balance sheet capacity that there is would then be freeze up if products in a way to improve the liquidity of less liquid products that will never be suitable for exchange trading. secondly we believe that a construct called open trading where rather than looking for bilateral connections of buyer and seller, you have a broader pool where those connections can be made in essentially increasing the network and uncover some latent liquidity. in addition we think those previous two steps are logistically and practically only scalable in an electronic trading context. u.s. credit markets over the past decade go from 0% to 15% or

20% market share right now. and we think there is something for significant growth. to date electronic trading has been an efficiency and productivity tool. it hasn't changed the process or certain infrastructure of the market. but as new entrants improve their technology we think electronic trading and the adoption of new trading protocol cans actually help to uncover liquidity that's not currently being tapped. all of these ideas have in common that collectively they would reduce the capital intensity of the market business. one of the constraints to new entrants in the market is that it's a capital intensive business to buy and hold bonds on balance sheet waiting for the other side of the trade. by making it more investigation intensive we think that will allow new providers to emerge and as a large user of liquidity

and a large customer of broker dealers, it's our n our interest to have a broader network of providers. so we think these ideas help foster the goal. >> does that shift the risk more to the investor than the broker dealer. >> one of the comments made earlier by dr. lang is that in a way one of the impacts of the collective of regulations has been to shift investment risk from the leveraged banks leveraged unregulated banks to less levered investor funds. so whether that's an intended or unintended consequence that's already the status quo that investors bear more of the transaction risk. yes, i think that moving from a principle to an agency market would -- would formalize what it has de facto a cured already in changes over time.

>> when we think about electronic trading, let's be careful we know what they are talking about. there are the electronic change service systems, the people who organize trades and match people together and help people form those trades and there are the electronic traders employing dealing strategies. so the electronic traders they'll make good or not according to whether they're profitable. we have legitimate concerns about whether they can blow up or something like that. let's talk about the electronic order matching systems. there's a whole variety of these things. we know the simplest forms that are exchanges. but they will work and they already do work in treasuries and they work in many equities, not all. but they won't work in some of the bonds that these panelists have talked about where they really only trade by

appointment. that said. there's room for electronic markets or facilities to help the trading of those bonds. so in particular, the development of an order display facileity facility, a facility that would allow people to say i have this bond i'd like to sell it and here's the price at which i'd like to sell this bond. we have systems like this, but the problem is people regularly trade through those prices. by trade through what i mean is that if if the market is offered in one of these system people will be arranging a trade at 102 so the buyer would have preferred the 101 price. that's not necessarily an evil thing, it's quite possible that the broker didn't know about the 101 price. so it's essential that we have some system that allow people to know that these prices are available. finally we have to make sure that people don't violate their

agency obligation to their clients and trade through when they do know about these prices. so just to give you some -- an interesting statistic interactive brokers gave me a lot of data they collect the best bits and offer some of them are firm, some r indications of the prices at there people have indicated they're willing to trade at all or sorts of different venues and they combine it to a single series. and ski the question -- given the report of all trades that took place during the united states during the time i had this data, how o trade throughs? and the trade through rate was 42%. and 42% of these trades there was a party either buyer or seller, who could have been done better presumably if they could have accessed these prices. maybe they would haven't been there if they could. but this shows the incredible potential. so what's needed an order display facility.

doesn't have to be mandated by the government but it has to be something where private entity cans create these things where the prices are made public, not necessarily through a consolidated system but if not reuters and others will consolidate the information as interactive does. but most importantly a system where you're not allowed to trade through those prices because you're not doing your client a service by failing to pick up the easy to pick up trade. now there's one complication but it's not all that great. if you say that you can't trade through that price you must make that price available so that it can be taken. but if anybody can take a price then it has to be the case that the trading system has to be an all-to-all system where if i grab it, i can settle the trade. well, we do this all the time in equities. why should bit so difficult to do it in another security that are named by the same system we used to name the equities.

they have qsips. they're just securities. so let's settle them up that way. very simple suggestions. these are the order handling rules that i referred to before that made equity training so incredibly effective. it won't be the same in the bond markets because there are so many bonds. now the extent that it makes the bond markets better it will make the -- everybody else better offer. and so the total value of those 42% that traded through -- i had it here someplace, it's about per year. the difference between the trade price that they received and what they might have received, we don't know it but it's indicative times the -- not the full size of their trade but only the displayed size that total value adds up to $600 million, $700 million per year. and that's just on the limited data that i had available to me. there so there's huge potential for change here and if we save

that money for investors, how much more willing will they be to buy ge securities or anybody els. >> i was going to ask, if you -- obviously you're going to reduce your -- but if you had had access to platforms like that would that have been a benefit to ge? >> well, i think the platforms are -- first of all, i think there is a role for electronic platforms, absolutely. i think the key to it is -- and dr. harris touched on it -- how do you make it so that all -- you know most buyers and sellers actually use the platform as the means of choice for buying over selling securities? and if that were the case and to the extent that it removes the inefficiency and truly, you know, security transactions are

transacted at the best levels then, you know, i think for an issuer it does start to set a true secondary market level that potentially is tighter than what might have been. and then that new issue premium is probably a tighter one than people would ask for when they're trying to build a buffer in as occurs now days. and i think the key question is how do you encourage people to make use of this so that the majority of transactions do occur on certain selected platforms? because then people have access to that information. i mean in some ways we're talking about information transparency because a logical buyer would not allow a price done at a worse level if nay knew the better level potentially existed. but because they don't have that

information, they just think they're getting the best price and they do it, i think that's a very big question. how do you ensure that it becomes the systems of choice or the platforms of choice and that there is this free flow of information that hits 85%, 90% of the players in this market? >> our regulators. so how do we -- >> i think transparency is definitely key in our futures market. you know we were mandated under dodd-frank to have such a trading platform and i think with that we'll have fewer markets, it will be transparent, the prices will go down and why wouldn't it work for the fixed income market just given the number of bonds that were there. i think some of the suggestions that black rock has put out in terms of mandating a more liquid

benchmark for some of the fixed income securities could be good. i think the all-to-all trading venue is a good idea and for the most part if we continue to share data as regulators, the more information out there for the public, that will create incentives for the market to come up and be more creative as well. >> so moving from big to small it curs to me this whole conversation, believe me it occurred to me before but we were and having talking about systemic risk. i think dr. lang was talking about in the that context, sandie was too, and kind of interesting that of all the things dodd-frank did it created a financial stability oversight council to find and address pending systemic risks and here's one we're having a conference about and talking about, it's been written about for years and not real obvious

action being taken then, yes, i guess they're busy designating insurance companies so i think that we should expect and demand more out of any council given the types of power that fsoc has been given on this issue. and we haven't seen it. they have, of course access to the ofr a supposedly independent group with some really smart spokes who are supposed to do this kind of research. they can research these issues, they can get the data, larry can help them if they need it and they can report to fsoc and it would be nice to know more of that is going on. maybe it is. i'm famously not a member and every now and again i read in the journal what happens, or bloomberg or whatever other reporters are here. so i think not enough is happening on these issues, the actual liquidity crisis itself and then looking at the aggregate impact of regulation

and its role on liquidity. both of those should be and could be happening at ofr and i as a citizen would feel better if that would happen. moving down the scale within the fixed income markets we oversee, both the muni side and in some way the corporate side because we have plenary authority there, i view it as kind of two main issues, market structure bigger picture and microstructure issues like dr. harris was getting out. but they're so integrally entwined you have to look at the same. we still have guys named vinnie and joey still trading tens and billions of dollars on the phone and it's very opaque. before trace and emma on the muni side you would have no idea what the prices are and those prices are post-trade. and we as an agency. we as i think a government need to decide is that the right market structure? if not, the worst possible thing

would be for congress to come in and do a title 7 on that market andsy let's have central clearing and exchange-like trading. it sounds great. it's a future market like construct, it was laid over with derivatives, a formerly otc market and it hasn't gone great so we'll see how it turns out 10 or 20 years from now when the fec finishes its rules. i that's a huge issue but there's what i call the pitchfork moment where we recognize the retail participation in these markets in muni, of course 75% retail given tax advantage that makes sense. and in corporates it's getting close to 50%. half through asset manager, half direct. an $11 trillion market or however you want to size it. it's close to double digits, if not 11. that's a huge number and a huge

notional and if we can bring as commissioner bowen said more transparency, if investors understand, a, what they've just paid to do a trade whether it's buy or sell, if they understand what the prevailing prices are before they do the trade as opposed to after and if they get the pricing and fee information that i think is being inflicted upon them today they might get the pitchforks and, sorry dan, go after their dealers and demand a change of market structure that provides more efficiency. and i think dr. harris' idea which, of course, if you didn't see it it ran in the "wall street journal" a couple months ago, is hugely important. one i admitly hasn't thought about but i'm not a ph.d. economist. but this notion is an apt one. i think you can get major market structure changes coming from the grass-roots if you provide this transparency at the retail level, get better executions you might get more liquidity and i hope and expect we can do that.

so i think the commission is -- as joking as i've been on think on this front of retail transparency, pushing the sros, i think it's not enough the commission should change its own rules to show customers how much they've paid on a trade. that would change a lot. and on the larger fixed income issues, we need to commit our staffing resources start thinking bigger picture, entertain the ideas from the industry that hopefully don't require big rules but that can make big shifts. we've done talking about it but it's time to put in the motion. >> you brought up an interesting point about fsoc and their role that was supposed to be the coordinating entity and this is a very important subject. is this dialogue going on within fsoc to your knowledge? >> my knowledge isn't really great with respect to fsoc

because they don't really tell us much. i read the annual report and in the annual report it says this is something they're looking at. i think it was on about page 117 and it talks quickly about electronic trading in that context. that's what i was referring to earlier. i think setting up the potentialing into givepotential ing into -- boogieman. when folks hope that we're doing things in washington when we know they're not, i hope they're doing this as opposed to spending their time figuring out whether to make institutions that should be able to fail too big to fail and designating that. i hope they address it soon but i honestly chairman don't know. >> i don't sit in on those meetings. this report, this joint one, if it's any indication in terms of how our agencies can work together then i'm excited about what they will do for us. >> let me make a comment on

that. so there is something in the annual report so that is something the principals of the council have discussed. and, again, this report is an interagency effort, which is -- the cftc and the fed and the treasury, it is not -- so i think what the fsoc tries to build on is the expertise of each of the agencies. this report could not have been written by just a whole new entity. it requires the expertise that the federal reserve system can bring to it in understanding treasury market actions or the cftc can bring to in the the futures market. they are immense, traction actions are being done in milliseconds. it doesn't take many days before you get into billions and billions of transactions and identifying participants. so i think it's a good example of some way this is council can be effective.

>> and just one for related point, not that you don't have enough to do mr. chairman but in this context -- i won't disagree, i think the report is good quality staff work and you do know, of course, that given the exemptions in the law there is no regulatory authority to treasury markets by either the fed, the cftc and the felt see and the congress should look at that. >> our time is drawing near and we still have so many questions left. is there any -- neighbor want to make a comment of something that you thought we'd talk about but we didn't get a chance to talk about and -- dr. harris? >> sure. very very briefly when the trace data became available at

the same time msrb data became available, mike pivobar who's now a commissioner of the exchange, the s.e.c. and i, another woman named amy edwards did a study of transaction costs on bonds and that study shows something very few people have appreciated and it's a shame they don't. it showed that an issuer who has lots and lots of issues that are very complex that those issues trade in less liquid markets than issuers who have few issues outstanding and issues are very similar. so we should somehow try to figure out how to educate the issuers. whether they are municipal issuers or whether they are corporations to issue fewer bonds bonds. they can reassure existing bonds, the states can form municipal bond banks so the ventura county mosquito abatement district doesn't have to go to the market. they don't know anything about

it. let them go through the state. and the corporations have maybe just or or five or three or four benchmark bonds. so mr. reyes's firm has talked about this. if we could beat down the different names the markets would operate more effectively in the corporate and municipals. already we don't have many names in the treasuries and they're extraordinary liquid. they may not be as liquid as they used to be but they'll be liquid again. it's according to the demand. one other very quick comment. mr. leland said something that really bothered me. not that he said it but what he said, which is that -- there's the story that you said about holding a bond that you would be forced to divest of because the period at which you had to hold it would be too long so that's a

concern. unless there's a good reason for a regulation, he's at a disadvantage to his competitors who are unregulated and i hate to see unbalanced playing fields unless there's a good reason. we need to survey our regulations and make sure there are good reasons. one of the reasons we're pushing dealing out of banks is because of the deposit insurance. but where reasons like that aren't present or there are akronistic reasons it's not fair that his firm shouldn't be able to adapt to a changing world and he ends up losing his business to people -- hedge funds or otherwise -- that aren't similarly regulated. not because they aren't regulated but there's simply no reason for it. >> well this has been a great discussion. this is a discussion i think is not just a one time event but something that should be ongoing.

i'm hope iffulful more of this dialogue will go on. i'm going ask our audience to show their appreciation for this that you feel presentation. [ applause ] and i personally appreciate all of you participating in this. i know these are very busy people and i found this to be very stimulating. with that, we are adjourned.

wisconsin republican governor scott walker is announcing today that he's running for president. that's live from waukesha county expo center starting at 6:15 eastern. governor walker released this video ahead of his announcement, then we'll get more on today's announcement from the washington bureau chief of the milwaukee journal. >> for too long they've said we have to compromise our principles to win. scott walker showed the path to vic story to run on our principles. conservative, bold decisive. he balanced budgets, cut taxes beat the special interests improved education created jobs, and showed how to fight and win. >> america needs new fresh leadership, big, bold ideas from

outside of washington to actually get things done. wisconsin, we didn't i believe in around the edges. we enacted big, bold reforms and took power out of the hands of the big government special interest and gave it to the hard-working taxpayers. those lives are better because of it. we fought and we won. the republican field, there are some who are good fighters, they haven't won those battles there are others who won elections but haven't con sis lentsistently taken on the big fights. i've showed you can do both. without sacrificing our principles, we won three elections in four years in a blue state. we did it by leading. now we need do the same thing for america. it's not too late, we can make our country great again. join our cause and help us fight and win for america. >> i have gilbert on the line

with the milwaukee journal sentinel. he's the washington bureau chief. good morning, craig. craig, are you there? >> can you hear me? >> we got you now, thanks for being patient with us here. governor walker is launching his campaign, we understand, at the same spot y hewhere he celebrated his recall victory. what's the spot and what ice the symbolism there? >> well, the spot is called the waukesha county expo center. the symbolism i think is twofold. one, the recall his recall fight, his recall victory is the foundation of his candidacy. it's not impossible to imagine his running for president without the recall it's what sets him apart i think, in his own mind and truly does set him apart from others in the field. only the third recall of an american governor in history and the first time a governor survived a recall and really the

basis for his campaign message and argument that there are fighters out there in the field and winners out there in the field but he is a fighter and a winner and the other piece of symbolism is waukesha county where he's doing this announcement is not his home county, which is milwaukee, which happens to be a democratic county. but it's really i would argue the best performing republican county in the country when you factor in how lop side it had republican is. he's racketed up massive landslides generated more votes per capita than any mid-size or large count in the country. this ties into something you eluded to earlier which is this sense that there they believe their path to victory has a lot to do with mobilizing republicans which is something waukesha county is famous for. >> what was the strategy if you can call it that, was there a

strategy for him to hold off until more than a dozen other candidates got in? does he lose anything by having others join the race before him? >> i don't know that he loses anything. i think the timing had to do with the fact that he's a sitting governor who had to pass a budget. in this case the budget was a struggle even though the government in wisconsin is controlled by republicans completely. he had some battles to go through within his own party some controversial issues to work out some budget issues to work out. it finally got done in the nick of time. he just signed the budget yesterday yesterday, vetoed a number of provisions in the budget but it's finely done after some drama, i think he still has an opportunity to get a little bit of a bump out of this budget announcement -- out of this campaign kickoff because even though he's been a de facto

candidate for six months and even though he's been someone regarded within the political community as in the top tier of candidates, he's not that well known. his name recognition is lower than a lot of people in the field so he has room to grow in that sents. i think he'll get not only a wave of media attention over the announcement but he's also doing things like, you know, sitting down and -- the family is doing interviews. i spent yesterday with him as he spent half the day with abc news and just that -- the report that abc news does on the "world news tonight" will expose him to more people than any other thing he's done in the campaign to date so that's really, i think, a chance for him to get a little bit of a polling bump out of the race and secure his place for now in the top tier of candidates. >> what can you tell us about

any details of the event itself? we're going to have it live on c-span 3 in the late afternoon early evening. any sense of who will be there with him, what type of event it will be? >> well, it's going to be indoors but it will be a crowd event. not every candidate has done this but there should be about 3,000 to 4,000 people there which is again i think speaks to his sort of political signature of energizing and moblizing izemobilizing grass-roots republicans. that's been his calling card in wisconsin and i think it will be his calling card if he can succeed in this effort for the republican nomination is to feed off that and create that sort of intensity among republicans mobilize republicans, energize

base base base, psych conservative voters. we don't know what he's going to say but he'll certainly revisit the recall because he's still trying to tell the story to people that haven't heard it or maybe have heard it but don't know the details. i think he'll try to start to fill out his agenda a bit, issues and ideas, what he stands for and what he would do. i think that's a little thin at this point. i think there will be an element, as i alluded to earlier, of a sense of who he is personally and where he comes from. >> what aspects will his opponents try to seize upon once the announcement happens? how will they go after him? >> well i think going forward they're going to go after him on his foreign policy credential which is he lacks as a governor.

i think they'll accuse him of flip-flopping on issues. he's already admitted to changing his position on immigration. the campaign talks a lot about building on his "authenticity" as a candidate. again, the recall is part of that theme, but the immigration being the most notable but there have been issues where there's a perceptions but he's shifted his emphasis or changed his position and that cuts against that argument of his of authenticity so i think that's something that his republican rivals will push at. there's been occasions in the campaign where he has declined to answer or ducked questions on the campaign trail. i think his rivals will push at that and suggest maybe he's not ready for prime time. this is a challenge and a testing ground for all

republican candidates and he's got to grow into a presidential campaign and his ability to do that will go a long way towards determining his fate and he's going to -- it's going to get rough at some point. >> we'll see what happens later today and beyond after he makes his initial speech. craig gilbert is the washington bureau chief of the milwaukee journal sentinel. >> it's a pleasure. governor walker will be the 15th major republican candidate running for the white house. we'll have live coverage of the announcement at 6:15 eastern on c-span three and follow that with your facebook comments tweets and phone calls, all part of the coverage. if elected president, hillary clinton says she'll work to build an economy that benefits everyone. she outlined her economic policy plan and talked about immigration reform this morning at the new school, a progressive

university in new york city [ cheers and applause ] >> thank you. thank you so much. thank you very much president van sant. and thanks to everyone at the new school for welcoming us today. i'm delighted to be back. you know, over the past few months i have had the opportunity to listen to americans' concerns about an economy that still isn't delivering for them. it's not delivering the way that it should. it still seems to most americans that i have spoken with that it is stacked for those at the top. but i've also heard about hopes that people have for their future. going to college without drowning in debt. starting that small business they've always dreamed about.

getting a job that pays well enough to support a family and provide for a secure retirement. previous generations of americans built the greatest economy and strongest middle-class the world has ever known on the promise of a basic bargain -- if you work hard and do your part you should be able to get ahead and when you get ahead, america gets ahead. but over the past several decades, that bargain has eroded. our job is to make it strong again. for 35 years republicans have argued that if we give more wealth to those at the top by cutting their taxes and letting big corporations write their own rules it will trickle down. it will trickle down to everyone

else, yet every time they have a chance to try that approach it explodes the national debt, concentrates wealth even more and does practically nothing to help hard-working americans. twice now in the past 20 years a democratic president has had to come in and clean up the mess left behind. [ applause ] i think the results speak for themselves. under president clinton -- i like the sound of that. [ applause ] america saw the longest peacetime expansion in our history. [ applause ] nearly 23 million jobs, a

balanced budget and a surplus for the future. and most importantly, incomes rose across the board, not just for those already at the top. eight years later, president obama and the american people's hard work pulled us back from the brink of depression. president obama saved the auto industry, imposed new rules on wall street and provided by health care to 16 million american s americans [ applause ] now, today isas the shadow of crisis recedes and longer term challenges come into focus, i believe we have to build a growth and fairness economy. you can't have one without the other. we can't create enough jobs and new businesses without more

growth. and we can't build strong families and support our consumer economy without more fairness. we need both. because while america is standing again we are not yet running the way we should. corporate profits are at near record highs and americans are working as hard as ever. but paychecks have barely budged in real term ss families today are stretched in so many directions and so are their budgets. out-of-pocket costs of health care child care caring for aging parents are rising a lot faster than wages. i hear this everywhere i go. the single mom who talked to me about juggling a job and classes

at community college while raising three kids. she doesn't expect anything to come easy. but if she got a rays everything wouldn't be quite so hard. the grandmother who works tarntd clock providing child care to other people's kids. she's proud of her work but the pay is barely enough to live on especially with the soaring price of her prescription drugs. the young entrepreneur whose dream of buying the bowling alley where he worked as a teenager was nearly derailed by his opportunity debt. if he can grow his business he'll be able to pay off his debt and pay his employees -- including himself -- more too. millions of hardworking americans tell similar stories. wages need to rise to keep up with costs. paychecks need to grow families

who work hard and do their part deserve to get ahead and stay ahead. the defining economic challenge of our time is clear. we must raise incomes for hardworking americans so they can afford a middle-class life. we myself drive strong and steady income growth that lifts up families and lifts up our country and that -- [ applause ] [ applause ] and that will be my mission from the first day i'm president to the last. [ cheers and applause ] i will get up everyday thinking about the families of america like the family that i came from with a hard-working dad who started a small business and

scrimped and saved and gave us a good middle-class life. i'll think about all the people i represented here in new york and the stories that they told me and that i worked with them to improve. i will as your president take on this challenge against the backdrop of major changes in our economy and the global economy that didn't start with the recession and won't end with the recovery. you know advances in technology and expanding global trade have created whole new areas of commercial activity and opened new markets for exports but too often they're also polarizing our economy, benefitting high-skilled workers but displacing or downgrading blue-collar jobs and other mid-level jobs that used to provide solid incomes for millions of americans. today's marketplace focuses too

much on the short term. like second to second financial trading and quarterly earnings reports and too little on long-term on long term investments. meanwhile, many americans are making extra money renting out a spare room, designing websites selling products they design themselves at home or even driving their own car. this on demand or so-called gig economy is creating exciting opportunities and unleashing innovation. >> but it's also raising hard questions about workplace protections and what a good job am look like in the future. so all of these trends are real and none is going away. but they don't determine our destiny. the choices we make as a nation

matter. and the choices we make in the years ahead will set the stage for what american life in the middle class, in our economy will be like in this century. as president, i will work with every possible partner to turn the tide. to make these currents of change start working for us more than against us to strengthen, not hollow out our american middle class. i think at our best, that's what americans do we are problem solvers, not deniers, we don't hide from complaining, we harness it the measure of our success must be how much incomes rise for hardworking families not just for successful ceo's and money managers and not just arbitrary growth target untethered to people's lives and

livelihood s livelihoods. [ applause ] >> i want to see our economy work for the struggling, the striving and the successful. we're not going to find all the answers we need today in the playbooks of the past. wen cat go back to the old policies that failed us before nor can we just replay the same successes. it's not 1993, it's not 2009 we need solutions for the big challenges we face now. i'm proposing an agenda for strong growth fair growth and long term growth. let me begin with strong growth. more growth means more jobs and more new businesses more jobs

give people choices about where to work. employers have to offer higher wages and better benefits in order to compete with each other to hire new workers and get more. small businesses create more than 60% of new american jobs. they have to be a top priority i've said i want to be the small business president and i mean it. throughout this campaign i'm going to be talking about how we empower entrepreneurs with less red tape, easier access to capital. i'll push for broader tax reform to spur investment in america. closing those loopholes that reward companies for sending jobs and profits oversea ss.

>> and i know it's not always how we think about this, but another engine of strong growth should be comprehensive immigration reform. i want you to hear this, bringing millions of hardworking people into the formal economy would increase our gross domestic product by an estimated $700 billion over ten years. then there are the new public investments that will help establish businesses and entrepreneurs. when we get americans moving we

get our country moving. let's establish an infrastructure bank that can channel more public and private fund s funds channel those funds to finance world class airports roadways, bridges and airports ing ing. and let's build those faster broadband net, woulds and make sure there's a greater diversity of networks so consumers have more choice and really there's no excuse not to make greater investments and cleaner renewable energy right now. our economy, obviously runs on energy and the time has come to make america the world's clean energy superpower.

i advocate that because these investments will create millions of jobs, save us money in the long run and help us meet the threats of climate change. and let's fund the scientific and medical research that spawns innovative companies and creates entire new industries just as the project to sequence the human genome did in the 1990s and president obama's initiatives on precision medicine and brain research will do in the coming years. i will set ambitious goals in all of these areas in the months ahead. let me emphasize another key ingredient of strong growth that goes overlooked and undervalued. breaking down barriers so more americans participate more fully in the workforce, especially

women we are in a global competition, as i'm sure you have noticed, and we can't afford to leave talent on the sidelines but that's exactly what we're doing today. when we leave people out or write them off, we not only short change them and their dreams we short change our country and our future. the movement of women into the american workforce over the past four years was responsible for more than three $1/2 trillion in economic growth. but that progress has stalled. the united states used to rank 7th out of 24 advanced countries in women's labor force participation

participation. that represents a lot of unused potential for our economy and our american families. studies show that nearly a third of this decline relative to other countries is because they're expanding family friendly policies like paid leave and we are not. we should be making it easier for americans to be both good workers and good parents and caregivers. women who want to work should be able to do so without worrying every day about how they're going to take care of their children or what will happen if a family member gets sick. you know last year while i was at the hospital in manhattan

waiting for charlotte to make her entrance. one of the nurses said thank you for paid leave. she sees firsthand what it means for herself and her colleagues as well as for the working parents that she takes care of. it's time to recognize that quality affordable child care is not a luxury, it's a growth strategy, it's way pastime to end the outrage of so many women still earning less than men on the job and women of color making even less. >> all this lost money adds up, and for some women, it's thousands of dollars every year. now, i'm well aware that for far

too long these challenges have been dismissed by some as women's issues. those days are over fair pay and fair scheduling p.m. earned sick days, child care are essential to our competitiveness and our growth. this doesn't pose an unfair burden on businesses. i will fight for families first just like i have my entire career. >> beyond strong growth, we need fair growth, and that will be the second key driver of