. . . . . .

and if you look at the ones that are either negative, bank of new york, hsbc, they actually slunk. citi group, they grew it less than the inflation rate. so the regulations have really sort of kept the largest of the institutions from growing where

as the regionals kind of grew on pace. the large regionals seem to grow about the same rate as credit in the economy. it kept the biggest shops from growing. is this a good thing or bad thing? i think it depends who you ask. they would probably think it was a pretty good outcome. did the constrained economic growth, no matter how hard you try to beat the data i do not think which is correct. i don't think is data analysis can cleanly identify which side is right. now, if we go to the banking system.

equity is up. the biggest use is deposit funding. what we have here is my living, breathing banking system. what i do every quarter is i take a his gram of the banks over a billion dollars. i wish we could get that to move again. my technical guys are supposed to be having that move. somebody click on that downstairs and get it to move. i smooth it and you can actually watch the banking system change through time. you probably missed it earlier and if they clicked on it again that whole thing will click to the right. okay. click.

it moves in a very noticeable way. there are a couple of noticeable factors that make it cruel to the right. if it was closer to halloween that would be my frankenstein. why did banks increase their funding? well, in 2008 the feds started paying interest on bank reserves. it drove customer deposit rates. there was a new assessment scheme introduced. banks are charged premiums based on total assets less their equity instead of deposit balances. it allows the largest banks to expand without paying anything extra without deposit insurance premiums. if we look at small banks -- and these are small banks, they already used a lot of deposits in their capital structure.

in the left column are banks less than -- i can't even read it, 500 million. you can see they increase their deposit funding. it is a little bit but not a lot. their equity went up and the scales are not the same. the equity went up a tiny bit. if you go to the bigger banks the changes are quite dramatic. the red is 2016. you can see what you saw before. the largest banks are -- or the panel column are in the far right and banks by different sizes. you can see they really started using a lot of deposit funding. it was replacing things that run. they replaced their whole sale uninsured liabilities with deposits. so you can actually do fancy we

con metrics and i did it. what you can find is just what we said t. smallest banks increase their use of deposits about 3.9 percentage points. 10 to 50 billion went up about 12.25 and the largest ones went up 7.6 percentage points or there abouts. so i mean the banks took on a lot more. okay. let me go to the next slide. why does this matter? okay. uninsured whole sale bank funding, wholesale money runs when they smell the sign they run. deposits run a little nowhere near like wholesale funding. it started the fed and regulators that alerted them

they had that problem. they didn't even realize it was a big deal until the wholesale money started to ruchbn. it brings it to the core. if you identify something more quickly and address it more quickly chances are you'll have less losses. the longer you let losses fester the bigger they tend to become. so when they are hidden the problems get bigger before they get addressed. so was the regulatory solution here to take the canary out of the coal mines? when i talk to folks they say, yeah, it was. they wanted to keep mutual founds and they really wanted to get out of whole sale funding because it caused them so much difficulty last time. they call the system safer

because banks have increased their use of core deposits. it is another name for government insured deposits. so what we have here is with this new balance sheet mix the taxpayer is really on the hook for banks more than it has ever been. the deposit to aspect ratio while it is up 1.8 percentage points. deposits are way bigger percentage. if the banks get into trouble and taxpayers have to stand behind the banks we aren't any better. wholesale liabilities are not there to take losses if a bank should fail. so when we talk about this it's not just the taxpayers. the taxpayer is kind of paying the bill. here is the ironic path.

they cover all of this and even more. at 1.25% give tennessee reserves in the banking system right now the fed is paying roughly 30 billion annually. the interest rate that banks pay on their deposits, which comes out once every week, it's 4% on checking accounts and 6% on savings. let's call it 6% and let's put it on about 11.5 trillion. that's about 7 billion annually. deposit insurance premiums were a hair under 10 billion. so banks have 13 billion left over to cover regulatory costs. what does it actually cost to implement? nobody really knows the numbers. bloomberg did a piece on it earlier in the year. they have estimates that range

between 2.9 billion. it was over many many years. once it is put in place the ongoing annual cost is a frank of that. so i don't know. call it 5 b. call it what you want. maybe chris or somebody has an idea. here we have them compensating. the desoz sit insurance premiums they have to pay every year and probably all of the regulatory costs. so taxpayers literally are paying for all of these things. who left? it was the institutions that had no deposits. they just got out last week. ge capitalrestructured.

the institutions that had no deposits and got no payments for the feds are the ones that really found this system that we put in place that they had to get out of the financial business all together to get out of the designation. i think the banking system is a lot different than it was. so when you look at return on assets -- i'll stop there. >> thank you. it is a tremendously important point to remember that stable deposits mean government. guaranteed mean taxpayer risks. i want to give the panel a chance before we get to your questions to either react or something to something somebody else aid or just expand on the

points that you want to emphasize. two or three minutes each. we'll just go down the panel in the same order, chris. >> thank you, alex. >> i think of listening to the presentations this morning. the solution that comes from washington every time there is a market problem is to reduce the market. going back to 1998 when the fcc changed the rules for nonbanks to sell and pass through security, the objective there was to prevent systemic risk. it created a monopoly in the united states for banks. it was done deliberately. they decided to hand it to the federal reserve board thinking that the world would be better. in fact, no. nonbanks need to have a way

separate from the commercial banking system which is when city basically took their monopoly and ran the bank into the ground. they should have unwound the physical intervention but this shows you how regulation and how rule by experts inevitably goes wrong. it should be well below the marketplace unless you see one of the big banks forcing rates

down. that's the one thing i talked about is that there are times twlen fed should be able to pay above market rates as when they first started. rates were just about 0. you know what happened the next day? if you war small bank it was kind of nice. >> thank you. >> i suppose i would possibly think about con seeding that maybe far day they should pay an pof market rate. if you're going to implement chris is right. other central banks you see this. it is below, not above.

it is that the banking sector could be more stable right now. it brings to might jerry, a friend of paul's and i -- a story that was a 14th century irish graveyard and it's very stable. just not much going on there. that's how i think of this. you an enormous pile of cash sitting there earning government interest and nothing really is going on there compared to what could be going on there. >> thanks. >> so a couple of comments.

so you do need deposits that are with an insurance scheme either that or you just are open to the idea that you have no insurance. if you have deposit insurance and you're working in an insurance system like that it is not necessarily bad. but that's what banks do. you sort of try to find that. the other thing that they do is they offer transaction services. a lot have gone to the banks partly because they left the money funds. i don't see it as an absolute negative. for the payments to banks, what you will hope for is that the fed at some point can reduce that.

so i agree that the payments on reserves are higher than the banks funding costs. they are probably higher than the rates but, you know, a market rate could be say 1%. if you add the capital requirements, fdic insurance premiums they are paying for a little more. it is a very new system for them. they might be able to narrow that gap. instead of one and a quarter i could be 1.125 and then 1.25 and then much less. >> the large bank cost -- >> on average but the marginal cost -- i mean they are rereceiverr reserves. they have to fund them some how. i agree to narrow it but it's

not entirely the whole 1.25. >> thanks, paul. >> yeah, so if we go forward the fed has had this argument that bank deposit rates are always slow to adjust and eventually we will come around. so that's pretty slow. the way i see it the fed has a political problem going forward. i don't think any of this was n intended. i think they got in trying to do all of the right things but i

think they are now in a bad way. most people don't understand that payments are taxpayer payments. they are payments that would lower the federal government receive sit if they weren't paying it to banks and it's a transfer payment plain and simple to banks. it covers the cost of now regulatory compliance. that's why the biggest banks when they were, you know, asked, did they have it or not they said we are quite happy right now. they will be happier as the fed raises interest rates. i don't see this as politically sustainable long term. it still could go on for a long time. there's a day of reckoning that people kind of figure this all out. it will take a while because the whole thing is complicated. >> we will first have chris and then nelly. >> a lot of reserves came about

because the fed was buying securities. what's between the cost of ioer and the forgiveness that the fed is giving by holding treasury? that's the plus, right? >> the fed does make more money on its treasury portfolio than it pays banks, that's true. you know, since 1914 up until 2008 reserves were viewed as a tax. that's why -- it's a change that reserves became an asset not a tax. it's a whole change in the way you have to think about banking and what assets you're holding. i think all of yours show banks are holding a lot more reserves or cash as it was in your charts!

if they want to move out of that they can certain dloi so. there's nothing preventing them. >> but they are getting paid in an overknight rate that is almost equal to an annual rate. >> there's no risk -- >> hang on. they have to have a certain size for required reserves and, you know, the system that has gotten bigger. the balance sheet in the future will be expected toob little bigger because the system is bigger. it is not changed for decades. but it does -- the reserve puts it into the political -- when

they are extra they pay to the treasure rhode island up until now they have paid -- the fed has paid the treasury $550 billion. in the next few years some of that may go negative. i don't know -- thinking about chris's question whether you come out positive or negative on that. it will matter. >> and if it were talking about the fed and treasury and how involved they want them to be or not be in the banking sector. i don't agree that the fed has to have a certain size balance sheet. it has to have a certain required reserves. the fed is the only thing we have. it is the only one that can decrease the reserves in the

system. they can control quantity without a required reserve. so i don't agree at all that we have to have anything close to what we have to have. >> other comments from the panel? >> the biggest beneficiary is the federal government. if we throw a few pennies back in the cup for the private banking industry -- i can't believe i'm sitting on a panel. we are sitting in a building that was created to fight fascism in this country after world war ii. come on. >> all right. the chair allocates himself two minutes to put out an alternate hypothesis here. burt always tells me you have to understand the fed and treasury are the same thing.

it is just two different aspects. i think there's a lot of -- i think there's a lot of truth in that. that explains why the fed wants to decrease or has wanted to decrease the federal deficit by buying a couple of few trillion dollars of treasuries. another piece of this is the fannie freddy mechanism. it is to the tune of $1.8 trillion. i think it's helpful to think about it all as one big government financial operation. when you do that you see what a hugely important event it was as the panel when ben bernanke and the fed in a brilliant political

move got authority from the congress which they didn't have before to pay interest on reserves. it does benefit the banks. i think paul is right about that. more importantly it allows the fed to be a much bigger element of the total government role in the financial system and to allocate resources. so you can think about what these excess reserves are doing is actually the banking system channelling investments through the federal reserve to two favored sectors by political credit allocation. the two sectors are housing through the feds gigantic mortgage portfolio and the government deficit through the purchase of long term treasuries. my last point is to remind us the fed now owns zero treasury

bills. all of the treasury securities are long and they have taken that duration out of the market to cut the cost to the government, basically they con sol dated government financial operation. it is all funding itself short through deposits that the fed and taking all of the long funding out of the market so that it's all short funding. i want to come to your questions, ladies and gentlemen. i remind you first of all wait for the microphone to reach you. when it does tells your name and affiliation. if you feel an overwhelming desire, which some times happens at these events to make a statement before your question

and that statement has a tendency to turn into a lecture after one minute the chair will remind you that it's time to ask your question. with that the floor the open. there is a fellow way in the back here who might have just sited burt. i want to give you a chance because i was just quoting the -- wait for the microphone to come, please. >> he took away a lot of my fire by referencing the work i have done and shared with him and looking at the balance sheet on a combined basis. i think what you see -- and this leads up to my question, is that essentially since the crisis the government has reduced the average duration of the

outstanding federal debt. that is federal debt held outside of the federal reserve. my question for you all is this. now that the government, if you will, is in that position and has only just started to shall we say unwind that position -- two part question, number one, what are going to be the consequences as the fed goes through that unwinding and more of this treasury that gets held by the public. has the federal government made a long term fiscal error by not using the recent years of very low interest rates to issue long-term, low-cost treasure redebt.

how much future interest expense is the government going to take on because of the fact that he has not used this opportunity during the low rate period. >> thank you. who wants to take up either both of those questions? >> well, i think the answer to your second question is you have created an enormous investment assets. i think the fed could be selling -- they could sell all of them over the next two years and keep the treasuries which they want. i don't think it would have a lot of impact. the curve i think is going to get flatter even if it starts selling overtly. i don't think it will have much of an impact. i think the tremendoasury made mistake. why wouldn't you take advantage

of 30 year debt? >> other views? >> i could just make a different -- just add up to this a little bit. i guess i'm not fully -- i don't fully agree that treasury and fed work at combination here. treasury when it auctions debt has a very different objective. they want to make sure they can auction their debt when they need to. and they have a specific ma churchu maturity level. it's not sort of the treasury mandate. i'm not sure we can answer your question. i don't think they work in coordination fully on this. >> anybody else? >> go ahead. >> i will say they do have

operational independence. that's their chief objective. it goes back to the founding of the bank of england in 1694 which was a deal between the government of england and newly created bank which is that if the bank would lend the government money, which is equivalent, they would give them all kinds of monopolies. it has been a pretty durable deal. it was helped out the royal family a historical note. do you have a view on what's going to happen in the fed starts reducing or starts selling securities? >> i think i'll pass on that.

>> okay. no one wants to be on tv with a firm forecast. i think my own view is the market reaction to that and the terms of rising long-term rates could be more severe than people are anticipating or believing and i say that in spite of your point, chris, which is right, that the central bapging fraternity around all of the major countries, which is a very tight fraternity is all in this together. >> you know, the fed has taken spreads down almost two points. until you see the sprints widen i don't think you have a chance for longer term rates to go out. >> over here please. >> hi. first i want to say there's a plug to this and tomorrow you

have housing conference tomorrow and the next day. i think that's one thing to bring into this. >> and pinto will answer all of the housing finance questions that you have. >> no problem. >> and secondly, i think we should think about what happened. that's all about the debt. you the meetings going on right now. you're looking at 40 trillion in debt on the globe and pensions that are in trouble. going back to the series that you had going far long time, much talk was about how the policies actually forecast what the next problem will be and the fixes are actually the baseline for the next problem, do you agree? >> do we agree that the fixes for the last problem tend to create it? >> it certainly sets it up to deal with it. what they have done is divorced

monetary balance. they have got a system where they can keep using the interest to offset where that stuff goes. if there's a pension process, great. we can buy that. if that's california bankruptcy, i'm not saying that will happen. great, we can buy the bonds. >> he said it. all of them are driven by debt. the europeans are broke. so the question is what's the new layer? they have to figure that out. stop doing what he is doing and allowed markets to go up you

would see a lot of default. they will not tolerate that. >> maybe a couple of quick questions. if it is so attractive why is it only the foreign banks that seem to be the ones -- it suggests maybe it isn't so attractive for domestic banks. what would the wall teshtive have been to the two inflating reserves? >> all right. we have a three-part question. who wants to start? >> the best data i saw is that

half of the reserves are in the top largest domestic banks and about a third are in the foreign banks. >> it's not just -- >> you're right. it's not just foreign. there is plenty of large u.s. banks that own a lot of reserves. the second question -- >> what was the alternative? >> to paying -- >> [ inaudible ]. >> i don't think it actually stimulated the economy. a think lots of people think the last version might have been a pretty big mistake. so it might be you get out of the crisis quicker. find where the bottom is where peechl start buying stuff.

part of the problem where you intervene and there is all of this that people don't know where the real price is. in you never set the bottom you can't, you know, get back to a normal growth reject ri. nobody really knows what it is worth. somebody is supporting the price. you kind of have to clear the decks and get to an equal librium. >> they had to do it because they didn't have the money to pay the fed back. if they stopped at that point what we would be talking about would be much smaller. the fed didn't have this around their neck. they are tied to this world view that comes out of 40 to 50 years of using price to manipulate credit demand in this country. it doesn't work anymore.

it is the same mentality. it is overmarket intervention. i didn't work but they don't know what else to do. there is nothing in the play book. that's why the board has done this. it is very clear they no longer cascade through the market. they don't really push things any where near the external factors. it's not even close. >> other comments. >> >> yeah. i i know you can read what they said. they sterilized everything. maybe they wouldn't have needed two and three. >> but reserves like that in that time frame, it was in the a good year. that helped. they should have stopped. >> and way to summarize these is you could do something

temporary. it is sten years almost since the end of the crisis. did we answer your third question? >>. [ inaudible question ] >> i have ed and we'll come back to you. >> thank you for the conference tomorrow on housing risks. so two things were mentioned chltd i think you said something about deficit reduction through all of the money coming from the

fed. what the fed did combined with low sbroes rates which is to allow much more in a way of deficits because it was so cheap to fund them due to 500 billion that the fed was giving over a period of five or six years? comments on that. >> it came from the housing market. you have seen -- each year you see it go up. it has been record if you look at the snurms but it's corporates and treasuries today versus housing. >> right. >> and it's used for purchases. we are buying back $2 worth of equi equity. so there's no mystery. all of these classes going back are now correlated thanks to the fed. this is great. you know, we have never had this before. every major asset class in the united states and globally is now --

>> other comments. >> if you look at federal reserve flow of fubds i mean the government debt is what has taken off since 2008. household debt not so much. in a lot of ways that have moderated quite a bit. the government has taken on the job of borrowing and repolice stationing private sector. it's right there. >> i think that just agreed with your point. >> i would add so the household and business are exactly what i was showing. you can see the households have come down from 80 to 60%. the businesses are up. the government has risen. this is pretty typical of

recessio recessions. it has reach add new high. >> okay. this gentleman here, please. >> one quick comment and then a question. i think your government numbers may be accurate but note that student loans, it's a bookkeeping thing from private debt and bank debt with a 98% government guarantee and now it's represented as government debt. that 1.2 trillion you should back out of making your point. even in washington numbers over 1 trillion matter. the question i have, paul, it different. i was in congress when the fed asked for authority which was given without much public debate. at the time the balance sheet

was so minute -- minuscule that they needed it to switch. if you go all the way and run it say congress did give them that authority and they had to run the point target through the crisis, how would that -- how would we look different? >> the original argument was really acquired reserves. required reserves had always been discussed as a tax on banks. requires are tiny, $900 million. the fed sought power and they did that for the first few weeks. they wanted to pay a different rate. they went to the same rate on both of them. i don't think they ever -- it was supposed to offset the push there is in the financial system for deposits to go into money

funds. money funds zroent to pay deposit insurance premiums. it was tight ball lances. it was by paying some small amount. it was never intended to be the monetary policy target. all through the 90s the fed had done things without any changes in the law reduced required reserves had these sweep accounts that had reserves into things that didn't have required reserves. the fed had for many years tried to reduce the burden of required reserves on banks. so in terms of the going forward i don't know. i can tell you if the fed wasn't paying any interest on reserves the banks wouldn't have 2.35 trillion. i guarantee that. >> the fed won't -- the reserves

won't disappear. they are never destroyed. they are tied to those. what would happen? >> they could over reserve multiplier. >> and you would have massive inflation which paying interest on reserves cuts out the classic theory of the reserve multiplier. that's a hugely fundamentally important change which was made. i think without a lot of discussion of what was going out. >> i think it would force him to be temporary. that's what would be different about it. the operations would have been the normal -- it wouldn't have been an incentive to keep something like this in place. it wouldn't have been economic incentives to keep it in place without the higher interest on excess reserves. >> it yields down. >> maybe.

>> we'll see. >> so one of the reasons for wanting to pay interest on reserves and they asked for it early 2008 before the crisis and before the size of the balance sheet is if you're not paying interest on required reserves banks were taking all of these angs every single night to move all kinds of funds around so that it's costly to hold things. there's just like all of these unnecessary actions every night to make sure you stimweren't paying a penalty. i think that is for the reason for the request at the time. that was a day before the balance sheet got very big. so it was worth -- >> it was passed in the law earlier. >> yeah. it was very early. it was never intended to be a tool to set interest rates. it was never intended. >> and they have been arguing about that for decades.

they contemplating that. treasury fought paying interest on reserves historically. >> for the very reason paul mentioned. >> yes. >> we have a question right here. barry can't you make the that federal reserve policy has been spot on in terms of really saving us from a very catastrophic situation and that the move towards normalization is appropriate and i sense that at least you think that the last couple were inappropriate. i wonder what you think the proper course of fed action is going forward. >> well, declares success and if

i'm heading to school i think that's the worst. they came up with another name constitutional institutionally because it was unacceptable. there is a whole raft of monetary policy and prudential policy actions that should not have been taken. we never get policymakers in a room maybe with the chairs and the minority leaders of the different parties who are responsib responsible. we talk and say what do we want? it is net, net, net that really matters for the economy. today i would tell you there is less leverage in the economy. there is less growth as a result. yes. we have safer banks but we turned them into islands. we are afraid of what the market might tell us. that's our solution.

by don't have a market anymore. i think that's another way to do it. they don't have to reserve some of the decisions that have been made for 20 years to be fair. what do you do? >> other comments? >> yeah. the strategy that the board have put forward is very slow, very deliberate strategy. they hope it is so boring that no market reacts. that's their best hope. if there is some kind of financial melt down i think that will test whether they will keep going forward or they revert but it's meant to be boring. it will take a long time to get the ball laance sheet down. i don't even think they decided what that is yet. currencies are twice what they were in 2008. they are thinking they like the

ioer -- or i don't know why the e anymore because they pay interest on all reserves. they said it's really easy for us to do. we don't have to do all of that bond buying day in and day out. i don't think any of this is settled yet. i think there will be political backlash and they will have to rethink how their want to manage reserves. there is no federal funds market anymore. you know, if they want one they will have to get reserves way down. people are willing to trade them again. we are years away from that under the current plan. and they are still buying. >> they are still buying. >> they are just letting it roll off slowly. >> agts years -- eight years after the end of crisis.

>> yes. in terms of whether the send of the sector is financial stability. you don't want stability of the graveyard. this has been a comment. i guess i have a different perspective. i look at the banks. their stock prices have risen quite a bit. in the u.s. the price/book ratios are like 1.5 are some of the biggest ones. bank of america and citi are closing on 1 but they've always been sort of laggards. one doesn't -- but growth -- get growth is 7%, 8% a year. maybe it could be 9 or 10 but how much is sustainable for the private sectors. on one hand we see massive corporate bond issuance. we're seeing loan growth, banks that are viable. so i am not seeing the same sort of graveyard view that chris sometimes mentions.

>> look, it's very simple. they have negative risk to adjusted returns. the little guys make money. that's the difference between banks. >> the next question over here, please. >> hi. carl polser, center on capital and social equity. i hope this is not too much of a mad-cap question. given the increased intertwining between the treasury and the fed and the increased possibility that congress will use the fed in a political way, the question of social security -- it's facing a financial shortfall of like 20 years from now when the boomers move through it will only be raising about 75% from the workforce of what it needs to pay out. is there a possibility that the fed could come into play and some financial restructuring with long-term, low-interest credit? could that be? >> i think it's a very good question.

thank you. how about extreme monetary policy and its effects on the -- on social security and how might that play out. free association. >> if the treasury needs cash, the fed will buy the paper. the answer is yes. yeah. they've already tasted the forbidden fruit. >> we agree completely on that. there is no doubt in my mind. >> yeah. >> others? >> the next question is pensions in general after social security. okay. other questions. if there aren't any more questions -- oh, yes. right here. >> al deal, deal global associates. min mine is a crystal ball question asking you to consider. given the current state of political affairs in the u.s. and the fact that there is a

perspective change in the fed chairmanship, do you expect -- or i would appreciate your opinion as to whether or not you think what already is a close association between treasury and the fed could potentially become even more intwined depending on who the next fed chairman might be. >> good question. >> i don't think it matters. the fed is the alterego of the treasury. bob eisen, head of research at the atlanta fed laid it out. the congress doesn't make money from the fed. it's an expense, you know, they get back the treasury's money less the fed's operating costs. cfpb too, by the way. >> that's changed by mortgages, chris. >> 1.8 trillion of mortgages. >> yeah. >> we're subsidizing fanny and freddie. >> that's right.

other points? about new chairman of the fed? relation between fed and treasury? any other part of the government. >> the current administration seems to be somewhat unorthodox, to put it nicely, so i mean, i don't know. it's hard to say. i mean, historically this notion of fed independence doesn't hold up. it just doesn't. yes, volcker comes along, does something different. okay. yes, there is sort of this aura of operational independence and a degree of operational independence. but, over the long haul, they're not independent. >> no. >> you remember what former fed chairman arthur burns said, which was we can't exercise our independence or else we might lose it. >> that's right. >> other -- before i give burt a second chance. other questions? >> okay. wait for the microphone. >> thank you. this comes back to the fed and

new appointments to the board. ran randy quarrels has been confirmed to be vice chairman for supervision as a result, of course, of dodd/frank. what are your thoughts as to -- is there going to be an increased emphasis on supervision and how is that going to interact with monetary policy now that supervision has to some extent been elevated by virtue of having this new vice chairman for supervision? >> you want to take that? >> i suspect supervision will be de-emphasized compared to the t turillo years. one of the big problems with the dodd/frank act, in my opinion, is that so many of the powers and regulations are not tightly

conscribed. you can be pedal to the metal under one administration, fell on the brakes the next administration, depending on who is in charge. it doesn't constrain the regulators enough. you don't really know what the law requires them to do. and i suspect the pendulum will swing from the turillo years when we had the financial crisis that some of my colleagues predict has been imminent for the last four years every week, yeah, eventually we will. we'll, you know -- the banks are probably less exposed now than they were. but two, three years from now, after this change in regime, who knows. it could end up badly. any financial crisis would end up badly. i think we're in for a change. i think the pendulum is swinging. i think part of the reason -- i

think the democrats will probably come around to understanding this when there is a new cfpb chairman who is a republican and who undoes the things the last guy did. because there is so much wiggle room in these laws, they'll grow to dislike the dodd/frank act when the trump people, if he ever does nominate anybody, if they ever get put in power i think it will come full circle, that they'll decry it, and how are you doing this, and the same thing you heard from the republicans when people thought the last administration was way too strict. so it will come full circle, i think. >> other comments? chris. >> yeah. i think it's already under way. the enormous leeway in terms of guidance and statutes is very powerful. it's being led by treasury in cases where there is no appointee in place. treasury just does it with onb via fiat. it will manifest itself in

reduced costs for banks and non-banks, especially in the mortgage world. when richard cordray leaves office there will be a big party on the mall. he increased the costs for lending and services and one in four family mortgages like 300%. and there are many, many firms that are on the verge of failure in the fha market today, and the hurricane, i got to tell you, has not helped. there has been a whole series of interest rate shocks and external shocks from weather that are going to decimate that market. and i think people will have to pay attention to this, you know. we have to actually sit down with the regulators and figure out a way to make money. for the last eight years it was all punishment. they weren't concerned with whether the industry could actually make money. that will be a big change. it will make revenues grow, but earnings will be better. >> other comments? okay. other questions.

hearing none, we thank you all for coming very much, for the great questions you asked, and let's thank the panel. [ applause ] >> thank you, alex. appreciate it. >> thank you. sunday night an afterwards. >> over 90% of the cases end up in settlements. what does that mean? that means that the woman pretty much never works in her chosen career ever again, and she can never talk about it. she is gagged. now, how else do we solve sexual harassment suits.

put in arbitration clauses and employment contracts which make it a secret proceeding so, again, nobody ever finds out if you file a complaint. you can never talk it, ever. nobody ever knows what happened to you and in most cases you're terminated from the company and the predator, in many cases is still left to work in the same position in which he was harassing you. so this is the way our society has decided to resolve sexual harassment cases, to gag women so that we can fool everyone else out there that we've come so far in 2017. >> former fox news host gretchen carlson talks about sexual harassment in her new book "be fierce, stop harassment and take your power back." she is interviewed by sally quin. watch "after words" sunday night at 9:00 eastern on c-span 2's book tv. a hearing looking into

rising prescription drug costs. a representative from the prescription drug manufacturing distribution and retail industries will testify before the senate health coverage. live coverage here on c-span3. it should start in just a moment.