preserve the currency's value and to prevent regulation. and if it does that, that's quite enough. and in order to do that the fed has to be independent. techically it's a creature of congress, and they could stimulate the supply growth.ak >> it jsut will, to get them -- just will, to get them past the next election. we constantly have loose money. when the fed is allocating credit when we make this a public ul-- utility, the cost and supply of which is determined in washington, i don't think the fed should be

independent. >> how do you feel the economy is going right now? >> so little of the stimulus money has been spent. has been spent, 10%, it can't be blamed on the stimulus. markets go up and down. in the early years of the last century someone saw jpmorgan on the street, and said, mr. morgan, what will the market do. and he said fluctuate. and it's down now and it will be back. my worry is this, stimulus money, they are throwing trillions of dollars into the system, is like a defibrillator, it will restore the pulse of the country. but you can't live on a defibrillator. and the problem of throwing

all of this money will cause inflation. and just as we get a heart beat and get the green shoots of the economy coming up, high-long-term interest rates dictated by inflation premium will snuff out the vigor of recovery. host: next question, this is frank from democrats line. caller: yes, i have a couple of points. you spoke of the stimulus package, you said the idea of only spending about 10-20%. host: yes, sir. caller: yes, but yet you are forecasting -- i mean, all of these economic issue on the horizon.

i mean, don't you think that -- host: lost, i think he got anxious about expressing his thoughts. next caller is from washington, d.c. and this is daley. caller: yes, ma'am. thank you c-span, as usually i call on the radio and it's very educational. host: thank you. caller: you're welcome ma'am. i have opinion about health care plan, mr. wills is proposing. mr. wills, i don't know it amazes me why you don't understand the american working class and middle class public interest. you purport and say senator

mccain's plan for the health care, it's not the american working class and middle class people want. we want the public health care which provides fairly and affordably for the working class and middle class public. sir, you as a congressman, we provide you by our tax money, the base insurance for yourself. how can you provide the same plan what you have for the american class working people, we are working hard, we are paying taxes, we don't get what we deserve. we are not asking a favor, this is our right. health care is a right and education is a human right. you provide public education, why not you provide a public medical for the working class

people? guest: well, the caller purports to know what the working class and middle class want. i think he's mistaken. again 80% of the american people say their health care is good or excellent. and second, you hear a fundamental divide between the caller and mine, everything desire is a right, it's an entitlement. health care is a right. well, a right is an enforceable claim. and it's not a right in this country. housing is important, it's not a right. and it seems to me we should probably avoid casting every policy choice in this country as a right. because this right talk makes it difficult to split differences. host: warren, ohio, good morning. caller: good morning, first of

all abc and the white house there will be no opposite and nobody fair. money won't come out [inaudible] and c-span needs to talk about [inaudible] and martha stewart. and can i disagree on iran and korea. and i think that iran is more dangerous and they get their food from china. iran is funding hezbollah and iraq, i think they are more dangerous. guest: the caller may be right, they may be more dangerous, and he's certain right, they are more dangerous. host: this is martha from maine. caller: yes, this is martha

clark, and i would like to ask mr. will, why do you include insurance companies to the health equation. they bring nothing to the table. they make money and prevent health care. guest: that seems to me as a eccentric view of the current function of insurance companies in the country. i don't know how to grasp they prevent health care. are they trying to make a profit? yes, and you make a profit by providing what people want to buy. and therefore the market is benign to give products and in this case health coverage that people want. and those countries that thrive are doing just that. host: what are you reading

this summer? guest: elmer blore has a new novel and i am listening on tape the history, called the waking giant. lots of stuff. host: there are predictions that books will go to all news. guest: i like a book in my hand, but i am a fossil. host: with regard of newspapers, and what do you think of the business and the journalists being replaced by much coverage on the internet? guest: it's stunning and you can't put it on the screen and

expect the same revenues. the technology driven part of this change in the newspaper business happens to coincide with and gets confused with the problems caused by the economic problems. the. the department stores are great advertisers and that's collapsed. and it's hard to know what the shape of the crisis would be did it not coincide with the economic downturn. and it's clear that it subtracts the economic downturn and these make it different. my daughter is 28 years old and if she moved to los angeles, she wouldn't buy the "los angeles times", it wouldn't occur to her. she would go online and do it that way. the collapse of this advertising is an enormous part

of the industry. host: newspapers and television, and the internet is dynamic. and your columns probably get comments being posted around the country. do you read the comments? guest: if they are called to my attention, but i would do nothing else if i followed those out there on the internet. host: when you read them, do they cast nuances? guest: sure and i respond to them. host: we have one more caller, reed. caller: good morning george, i am trying to get more understanding of the economic downturn problems and try to get to the accountability on wall street but get us accountability on the i.m.f. procedures and who is our world

financial broker? and who are we really indebted to and who have we had to pay back, that i feel like the first bush tarp stuff is about. thank you. guest: the caller has a good point, it's a problem of transparency. and there are a lot of money and that from south carolina are sloshing in the system, and we are not sure who is in charge of it. and it gives people a high anxiety that will provide a public outlet. host: we have joe. caller: hi, how do you factor public reform? guest: you are right, defensive medicine, doctors ordering tests to fend off the trial bar

if something goes wrong and no one knows how much, let's say 20% to the health care bill in the country. now the president talking to the medical association the other day, and tip-toed up and said, i am for health reform, and with the boo's, but against capping awards under malpractice. that means he's not really for very much tort reform. and in the fact that's not surprising because the trial bar and lawyers are huge contributors to the president's party. host: as we close here, give people a glimpse into a day of your life. guest: when i first started writing a column, i asked my friend, bill, do you have trouble coming up with things

to write. and bill said, the world annoys me three times a week. and the world annoys me five times, or the columns i write. i think that the happiness of the columns reflect the public, and it's a great time to write. host: how do you stay up with it all? guest: read incessantly, thank you. >> we will bring new comments from ayatollah khamenei. he will be speaking at the evening university about the

disputed results of the election. then, at 7:00, it is for washington journal. we will talk about health care with mary anges carey and earl blumenauer. then we will talk to james hackett. "washington journal" is live every day at 7:00. >> "book tv" has nonfiction authors on c-span 2. from the garden of eden until today, eduardo galeano talks to john denges. john talbott talks about the

recession adn what it will take to recover. and jay williams on capitalism as teh best way to -- the best way to ease [unintelligible] david kessler talks about how americans can control theri eating habits -- their eating habits. booktv.org has streaming video, archives, and simple ways to share yoru favorite programs. >> charles evans of the cfr talked at the executive's club of chicago. he became the president in

2007. this is 45 minutes. >> thank you. that was a warm introduction. and thank you for inviting me to speak today. i have spoken to this group before and this is a great turnout. when she asked me to speak, i did not hesitate to accept the invitation. it is important to use every opportunity to help people understand the actions that we take. a few weeks ago, ben bernanke was the commencement speaker and his -- his message was simple. the flexible and open minded in dealing with the fact that life is unpredictable. he quoted john lennon, who said, life is what happens when you are busy making other plans.

i would like to promote the beatles as well. it was paul mccartney who said, yesterday, all my troubles seemed so far away. we're often reminded of ringo starr as we get by with some help from our friends, and i am not aware of any hidden messages, but some of the statements made more sense if you read them backwards. now to a more serious subject. following the worst financial crisis of the last 70 years, we are experiencing a recession that will surpass those of the 1970's and 1980's.

the response at the fed has been to look for programs different from the past. these programs are put in place for these exceptional circumstances. they will have to be changed as we returned -- we return to normal. this morning i would like to discuss what underlines these policies, and some issues that we must address. these are my views and not necessarily those of my colleagues. in the current crisis, traditional monetary policy has reached its limits. one obvious way is that the federal fund target rate has been taken to essentially zero. they cannot do this when further accommodation is warranted.

the second has to do with the functioning of the financial markets. participants seem to align the risk adjustment along all the markets. this allows this to flow through a cross the entire range of maturity. the disparity and the rates across the markets show that this is not taking place as usual. he did -- even before the target was constrained, we found that we could not affect the interest rates that mattered the most to stimulate this as much as necessary. the fed has turned to nontraditional policies. the first group is expanding on something that has been part of a policy, the discount window lending with short-term loans to

depository institutions. ever since 2007 the fed has used this as a source of liquidity, lengthening the terms of the loans and lowering the discount rate. the policies consist of new lending facilities, and you can think of this as a discount window that is not for the depository institutions. and there is the large-scale purges, that can be seen as an extension of the market operations. the fed does this on a vastly different scale. there are a number of particular programs, each of them with their own conditions, the nontraditional policies may seem like acronyms, the alphabet

soup. but there is a method to the madness, and i will highlight what guides the thinking. the first is insurance. do not put all your eggs in one acronym. the second is innovation. the third is size. in an environment of great uncertainty, make no little claims. i will discuss each of these before i talk about the return to traditional policies. to understand insurance, you have to understand the first rule of risk. each of these is a challenge to the mandate of the financial system and price stability. diagnosing each risk raised

difficult questions. we saw failure in parts of the financial system. how art is going to affect the rest of the economy. this will begin to deteriorate significantly. finally, prices declined for the first time in decades. what we enter a time of deflation? the diagnosis was surrounded by uncertainty, but the remedy brought its own measure as well. which treatment was appropriate and could be used in a timely fashion. under what circumstances and for how long should this be applied. how should the treatment be scaled back? the fed was adopting an approach for the multiple

dimensions of uncertainty. rather than rely on any single tool, we put in place a number of different remedies out -- remedies in would succession. i will not retrace the list of complete programs. i had almost forgot about some of those things. these programs have been covered extensively, but what -- one program demonstrates the second precept, the need to innovate as circumstances change. let's look at the loan facility, the market for asset backed securities has played a vital role in providing loans for businesses. the market was shut down in 2008

after the failure of lehman brothers. the fed announced the formation of this in 2008. this provides loans to investors, with the asset backed securities, but the securities as collateral for loans. the backing was for the treasury services instrumental in being able to do this. we modified the facility and the total dimensions, even the geep -- before they began their operations. there were the securities backed by the simple assets, they were familiar in the market participants. then we moved on to the longer instruments, and eventually the only eligible securities were the originated auto loans, and

small-business loans guaranteed by the administration. in april other securities were made eligible, by the mortgage inventions, the key advantages, and dealer inventories. eligibility increase to the mortgage-backed securities. initially, securities were eligible only if supported by new loans. the intention was to bring the market back to life, by directly financing the investors willing to purchase this, and finding the loans behind them. in 2009, the fed said that this could go to legacy assets, to stimulate the extension of new credit, by using the balance sheet pressures. finally, the maximum maturity was extended from three years to five years, and the maximum

size in february of the total operation was $200 million -- was increased to one trillion dollars to match the list of securities. this has generated two opposite concerns. one is that the federal requirement was too conservative and unlikely to fund large volumes. the other is that the central bank is taking too much credit risk. i think that we have a good balance between these concerns. we have taken action to limit exposure to credit risk, through the stringent requirements, substantial cuts and the direct support of the treasury. this is not a substitute for the markets that were existing before the crisis, and it will not revive them to the former level of activity on the back of the federal reserve system.

the goal is to bring the markets back to life by mitigating what they are experiencing in turn this -- -- do this in a less disruptive fashion. we see evidence that this is working as intended, the asset backed securities have come down. and much of this has been supported by the loans but some investors are entering the market without the support and this is a good sign. the third relates to size, until recently the monetary policy change in the small steps, some said this was policy gradualism. the response has moved beyond this. in january 2008, the cuts were one indication was one of the indications -- and when the notice was given that this would

be expanded, we announced an increase in the size of another program, and these actions taken together represented a substantial escalation of the non-traditional policies and will probably increase the size of the balance sheets well above what it was until one year ago. this is appropriate given the risks that we were facing. the dire forecasts and the uncertainty surrounding the tools. we will determine if the actions were too much or too little, or just right. we have moved swiftly for the nontraditional policies by some of them have taken time to implement. and just as the traditional policy is well known, the

traditional policies also take time to affect economic activity. i expect to see further deterioration in some areas of the market condition, before the policies gainful attraction. this would not imply that we have misjudged the size of these actions, and the unemployment rate will continue to increase into 2010. it would take a significant deterioration relative to this to review -- to view the current policies as an adequate we will be able to look into the size of the actions. if this is not what we anticipated, we would face a choice between making the terms more attractive or finding another risk. we will need to keep in mind the same level of