[applause] >> the commander of u.s. forces in afghanistan and the u.s. ambassador to afghanistan, will testify at two hearings tomorrow on afghanistan strategy. in the morning, they will be at the house armed services committee live on c-span 3 at 9:30 eastern. also live on c-span 3, their testimony before the armed services committee. both hearings are also on line at cspan.org. later in the week, they will take questions from members of the house and senate foreign relations committees. >> the senate is in at 10:00 a.m. eastern for more debate on

health care legislation and an abortion amendment. to get the latest on the bill go to cspan.org/health care. we talk with a conventional quarterly reporter about the details. .

>> the since to be holed up. what took so long? >> centre maulson and democratic leaders wanted to get rid of that last week. democratic leaders wanted to dispense with it. centre hatch said that anti- abortion interest groups have not had sufficient chance to review the language of the amendment and sign off on it. >> can you name democrats that have indicated that they may vote for this amendment. >> that are two of them. centre maulson and senator bob casey. -- centre nelson and senator bob casey -- senator nelson and senator bob casey. they said they like the language of the bill as it is. >> what are the possible wil implications. >> it is likely that democrats

will have simitar nelson's vote on the bill. if i could go ahead and answer your other question, signature nelson said he will not sign the bill unless some sort of more restrictive abortion languages added to it. >>-- languages added to it. >> -- language is added to it. >> when the more liberal senators come out in these meetings, they say that things are moving well. senator chuck schumer of new york says he thinks that things are going well and moderates are not so sure. most importantly, the public option. >> how does it look at getting it done by christmas? >> ifill. we have heard the senator reid is trying to pull together a

manager's amendment which is a final package of changes to the bill. his spokesman told us yesterday that they hope to start filing cloture petitions. these are moves to in the debate on the bill. >> we thank you. >> coming up, federal reserve chairman ben bernanke discusses the economy and then a look at consumer privacy. >> c-span's 2000 can student can contest this year. the top prize is $5,000. it just creates a five-eight minute video on what -- one of our country's greatest strengths. it must show varying points of

view. winning entries will be shown on c-span. grab the camera and get started. go to studentscam.org more info. >> federal reserve chairman ben bernanke says the economic recovery still has a long way to go, adding that the fed would keep interest rates at record low levels. this is about 45 minutes. >> it is nice to be here and i am pleased to have the opportunity to speak. having faced the most serious financial crisis and the worst recession since the great depression, our economy has made important progress. although the economic stress

faced by many families and businesses remains intense, with job openings scarce and credit hard to come by, the financial system and economy have moved back from the brink of collapse. economic growth has returned and the signs of recovery have become more widespread. understandably in a situation is complicated as this, people have questions about the current situation and the way forward. taking inspiration from the ubiquitous frequently asked question lists on internet sites, i would like to address four important faq's about the economy and the reserve. where is the economy headed? what is the federal reserve doing to support the economy and the financial system? will the federal reserve's activity lead to higher inflation down the road? what can we do to avoid a similar crisis in the future? to understand where the economy

is headed, we should look at where it has been recently. our economy and all the world's major is -- major economies were reeling from the effects of the devastating financial crisis. policymakers here and abroad have undertaken an extra very series of actions. these policy intervention succeeded in averting a global financial meltdown that could have plunged the world into a second great depression. although a global clericalism was averted, the crisis never the less had widespread and severe economic affects. the major unemployment rate currently stands at 10%. we've seen some pickup in economic activity reflecting the waning of forces. the collapse of final demand that accelerated in 2008 left many firms with excessive

inventories of unsold goods which led them to cut production and unemployment. this phenomenon was evident in the motor vehicle industry where lawmakers, a number of whom work facing financial pressures suspended production at many plants. by the middle of this year, inventories have been sufficiently reduced to encourage firms to begin increasing output. contributing to the recent upturn in the gdp. although the working down of inventory has encourage production [unintelligible] it is encouraging we have seen some evidence of stronger demand for homes and goods and

services. in the housing sector, sales of new and existing homes have moved up over the course of the year and prices have firmed. the inventory of unsold new homes has been shrinking. reflecting these developments, home builders have someone increased the rate of new construction. a marked change from the steep declines that had characterized the past two years. consumer spending has been rising since mid year. part of this increase reflected a temporary surge in auto purchases that resulted from the cash for clunkers program but spending in categories other than automobiles has increased. outlays for new equipment and software are showing the tentative signs of stabilizing

and improving economic conditions abroad. although we have begun to see some improvement in economic activity we have some way to go before we can be assured the recovery will be self sustaining.

also at issue is whether the recovery will be strong enough to create large numbers of jobs needed to bring down the unemployment rate. economic forecasts are subject to great uncertainty. my best guess is we will continue to see modest growth next year sufficient to bring down the unemployment rate but at a pace slower than we would like. a number of factors support the view the recovery will continue next year. financial conditions continue to improve. corporations are having relatively little difficulty raising funds in the bond and stock markets. assets have recovered significantly in a variety of indicators suggest fears of clubs have receded. monetary and fiscal policies are supported. i have mentioned what appeared to be improving conditions in housing, consumer expenditure, business investment, and global economic activity. the economy confront some formidable headwinds that seem likely to keep the pace of expansion moderate. despite the general improvement in financial conditions, credit remains tight for borrowers, especially bank dependent borers such as households and small businesses. in the job market, the analogue contracting at an earlier pace, it remains weak. household spending is unlikely to grow rapidly when people remain worried about job security and have limited access to credit. inflation is affected by a number of cross currents. higher rates are contributing to a slowing in underlying wage and price pressures. long-running expectations are

stable. commodities prices have risen. likely reflecting a pickup in global activity and the depreciation of the dollar. we will continue to monitor inflation closely, our net remains subdued for some time. the discussion of where the economy is headed brings us to our second question. what has the federal reserve been doing to support that economy and financial system? the federal system has been doing [unintelligible] began the process of easing monetary policy in september 2007 shortly after the crisis began. by mid december 2008, our target rate was low as it would go within a range of 0 to .25 percent. our efforts to support the economy have gone beyond conventional monetary policy. i have alluded to cooperation with the fdic and other domestic and other authorities in an effort to stabilize the global banking system. which verged on collapse following the extraordinary

events of september and october 2008. we took strong measures independently or in conjunction with other agencies to help normalize key financial institutions and credit markets disrupted by the crisis. among these were the money market mutual fund industry in which large numbers of american households and municipalities make short-term investments and the commercial paper market which many firms tapped to finance their operations. we also established an extended special arrangements with other central banks to provide dollars to global funding markets, as we found disruptions in dollar-based marketss abroad or spilling over into our own

markets. we have played an important part to restart markets for asset backed securities. by working to revive these markets which allow banks to tap the broader securities market to finance lending, we have helped banks make room on their balance sheets. in addition, we have supported the overall functioning of private credit markets and help to lower interest rates on bonds, mortgages, and other loans by purchasing more beverages -- mortgage related securities. our objective has not been to support specific institutions are markets for their own sake. recognizing that a healthy economy requires a well-financed -- functioning market, we moved with the aim of promoting economic recovery and opportunity. in that respect, our means and goals are consistent with the functions of a central bank and with the mandate given to the

federal reserve by congress to promote price stability and a maximum employment. in addition to easing monetary policy, we worked as a bank supervisor to encourage lending. in november 2008, we joined with other regulators to urge banks to continue lending to creditworthy borrowers to the benefit of the banks and the economy. we provided guidelines to banks for working constructively with troubled real-estate loans. we live in examination of 19 of the country's largest banks and exercised [unintelligible] this assessment was designed to ensure these banks which collectively hold two-thirds of the assets of the u.s. banking system would remain well- capitalized and able to land to

creditworthy borrowers even if economic conditions turned out to be worse than expected. the release of these results in may provided new clarity about the bank's condition. a turning point in the restoration of confidence. in the months since then, with encouragement of the federal banking supervisors, many of these institutions have raise billions in new capital, improving their ability to withstand future losses and extend loans as the demand for credit recovers. we have also continued our efforts to ensure fair treatment for the customers of financial firms. during the past year-and-a- half, we have overhauled the regulations protecting mortgage borrowers, credit card holders, and users of overdraft

protection plans among others. in navigating through the crisis, the federal reserve has been aided by the regional structure established by congress when it created the federal reserve. the more than to touch -- 270 leaders who serve on the boards of the 12 reserve banks in 24 branches provide insights into economic and financial institutions. the structure ensured our policy-making is informed not just by a washington perspective for wall street perspective, but by a main street perspective. our reserve banks and branches have deep roots in the nation's communities and do much good there. they have to give a couple examples, assisted organization specializing in foreclosure mitigation and worked with nonprofit groups to help neighborhoods hit by high rates of foreclosure. they, as well as the board, are involved in financial economic education, helping people to make better financial decisions and understand how the economy

works. the federal reserve's actions in combination with those of other policy makers here and abroad, have helped restore financial stability and pulled the economy back from the brink. because of our programs, auto buyers can obtain loans and college students are financing their educations through credit they likely would not have received, and home buyers secured mortgages. these improvements are in terms supporting a broader economic recovery. the scope and scale of our actions have left some uneasy. our asset purchases and lending caused the federal reserve's balance sheet to more than doubled. from less than $900 million before the crisis to $2.2 billion dollars today. well the actions to combat the crisis lead to higher inflation down the road? the answer is no.

we are committed to keeping inflation low. stable inflation [unintelligible] inflation could move lower from here. as the recovery strengthens, the time will come when it is appropriate to begin withdrawing the monetary stimulus that is helping stimulate economic activity. we have been giving thought to our exit strategy. we have the tools to withdraw stimulus in a timely and effective way. our balance sheet is adjusting because improving financial conditions are leading to a reduced use of our facilities. our balance sheet will shrink overtime as the mortgage-backed securities and other assets we hold mature or are paid. even if our balance sheets days [unintelligible] will be able to raise our target short-term interest rate

and tighten financial [unintelligible] are properly. an important role for adjusting policy will be the authority granted to us by congress to pay banks interest on balances they hold at the federal reserve. when the time comes to tighten policy, we can do so by raising the rate we offer banks that hold balances with us. banks will begin to make overnight loans at to a rates lower than they could earn from the fed. interest rate we pay will be lower than the rate. additional upward pressure on short-term interest rates can be achieved on reducing the supply of funds that banks have to blow to each other. .

we can induce banks to lock up their accounts with us, making those accounts and available for lending in the overnight market. if necessary, we always have the option of reducing the size of our balance sheet. as always, the most difficult change it for the federal open market committee will not be devising the technical means of unwinding monetary stimulus. rather, it will be the challenge that faces central banks in every economic recovery, which is correctly judging the best time to tighten policy. because monetary policy affects the economy with a lag, we will need to base our decision on our best forecast of how the economy will develop.

we currently expect inflation to remain subdued for some time. it is reassuring that longer- term inflation expectations appear stable. nevertheless we will keep a close eye on inflation risks and will do whatever is necessary to meet our mandate to foster both price stability and maximum employment. as we at the federal reserve and others work to build on the progress already made toward securing a sustained economic recovery with price stability, we must also continue to address the weaknesses that led to the current crisis. thus our final question this afternoon is -- how can we all for a similar crisis in the future? -- how can we avoid a similar crisis in the future? a look sources of the crisis were extraordinarily complex and numerous, a fundamental cause was that many financial firms

simply did not appreciate their risks they were taking. there ms. management systems were inadequate and the capital and liquidity buffers insufficient. unfortunately neither the firms nor the regulators identified and remedied many of the weaknesses soon enough. thus all and it to regulators -- all financial regulators including the federal reserve must undertake unsparing self assessments. at the federal reserve, we have extensively reviewed our performance and moved to strengthen our oversight of banks. working cooperatively with other agencies, we are toughening our banking regulations to help constrain excessive risk-taking and enhance the abilities of banks to withstand and it's a stress. for example, we have been among the leaders of international efforts, through organizations such as the basel committee on bank supervision, to increase the quantities of capital and liquidity that banks must hold. i mentioned the scap, otherwise known as the stress tests. we are applying the lessons learned in that exercise to reorient our approach to the supervision of large, interconnected banking organizations that are critical

to the stability of the financial system. we're taking a more macroprudential approach, one that goes beyond supervisors' traditional focus on the health of individual institutions and scrutinizes the interrelationships among firms and markets to better anticipate sources of financial contagion. to do that, we are expanding our use of the kind of simultaneous and comparative cross-firm examinations that we used to such good effect in the scap. the federal reserve possibility to draw on a range of disciplines was essential to the success of the scap, animal to the book -- and a multidisciplinary approach will be a central feature of our supervision in the future. we are complementing our

traditional onsite examinations with enhanced off-site surveillance programs, under which multidisciplinary teams will combine supervisory information, firm-specific data analysis, and market-based indicators to identify problems that may affect one or more banking institutions. although regulators can do a great deal on their own to improve financial oversight, but congress must also act to fix gaps and weaknesses in the structure of the regulatory system and address the very serious problem posed by firms perceived as a "too big to fail." no firm, by virtue of its size or complexity, should be

permitted to hold the financial system, the economy, or the american taxpayer hostage. to eliminate the possibility, a number of steps are required. first, all systemically important financial institutions, not only banks, should be subject to strong and comprehensive supervision on a consolidated or firmwide basis. such institutions should be subject to tougher capital, liquidity, and risk-management requirements than other firms, both to reduce their chances of failing and to remove their incentive to grow simply in order to be perceived as too big to fail. daughter aig nor bear stearns was subject to strong consolidated supervision. the federal reserve, as the regulator of bank holding companies, already supervises many of the largest and most complex institutions in the world. that experience, together with our broad knowledge of the financial markets, makes us well suited to serve as the consolidated supervisor for systemically important nonbank institutions as well. in addition, our involvement in supervision is critical for ensuring that we have the necessary expertise, information, and authorities to carry out our essential functions of promoting financial stability and making monetary policy. second, when a systemically important institution does approach failure, government policymakers must have an option other than a bailout or a disorderly, confidence- shattering bankruptcy.

the congress should create a new resolution regime, analogous to the regime currently used by the fdic for failing banks, that would permit the government to wind down a troubled systemically important firm in a way that protects financial stability but that also imposes losses on shareholders and creditors of the failed firm, without costs to the taxpayer. imposing losses on creditors will help address the too big to fail problem by restoring market discipline and leveling the playing field for smaller firms, while minimizing the disruptive that that is on the financial system and the economy. third, our regulatory system requires a better mechanism for monitoring and addressing emerging risks to the financial system as a whole. because of the size of our financial system, that task may exceed the capacity of any want regulatory agency. the federal reserve therefore supports the creation of a systemic oversight council made up of the prince of financial regulators to identify developments that may pose systemic risks, to recommend approaches for dealing with them, and to coordinate the responses of its member agencies. to close, i would again note that in the fall last year, the united states, indeed the world, confronted a financial crisis of a magnitude unseen for generations. concerted actions by the federal reserve and other policymakers here and abroad helped to avoid the worst outcomes. nevertheless, the turmoil dealt a severe blow to our economy from which we have only recently begun to recover. the improvement in financial conditions this year and a resumption of growth over the summer offer the hope and expectation of continued recovery in the new year. however, significant headwinds remain, including tight credit conditions and a weak job

market. the four reserve has been aggressive in its efforts to stabilize our financial system and to support economic activities. at some point, however, we will need to unwind our accommodative policies in order to avoid higher inflation in the future. i am confident that we have both the tools and the commitment to make that adjustment when it is needed and in a manner consistent with our mandate to foster employment and price stability. in the meantime, financial firms must do a better job of managing the risks of their business, and regulators -- the federal reserve included -- must complete a thoroughgoing overhaul of their approach to supervision, and the congress should move forward in making needed changes to our system of financial regulation to avoid a similar crisis in the future. in particular and importantly, we must solve the problem of "to be to fail." in sum, we've come a long way from the darkest period of the crisis, but we have some distance to go. in the midst of some of the toughest days in october 2008, i said in a speech that i was confident that the american economy with its great

intrinsic vitality would emerge from this period with renewed vigor. i remain equally confident today. thank you. [applause] >> we have time for a few questions. i have some that have already been submitted and others can some other questions. first, any chance just between us on where interest rates might go? [laughter] >> they cannot go much further down. >> if the -- [laughter] >> we will continue to look at the autonomy and update our up " -- an outlook and look at their.

but we're still looking at the extended period, given that the conditions remain low rates of utilization, and stable long- term inflation expectations. that remains where we are. we will take a look at the economy and there are signs of strength recently. we will go back and talk about that. >> any real prospect of a double-dip recession? >> economic forecasting is very difficult. obviously we cannot give any ganges' about that or for a stronger recovery next year. as i said in my remarks, i think the most likely outcome is a moderate pace of recovery. there do seem -- there do seem to be enough force is employed to sustain the recovery going

into next year. there are headwinds like tight credit and high employment -- high unemployment. but again, we will keep falling developments and adjust the policy appropriately. >> if your recommendation had been in place at the time of lehman brothers, with that had been handled differently? if the council had been in place then? >> as far as the council is concerned, the goal of the council would be to address systemic risks -- emerging risks before they become rigid before they become so critical. the council with a macroprudential perspective would have done its work well before things came to that pass. certainly by the time of the crisis in september and october

of last year, we were well beyond the point of arresting the risks before they became apparent. what would have made a great deal of difference last fall would have been having the resolution regime i talked about, if we had been able to wind down that firm and others that would allow them to fail, avoiding tax payer intervention, but not have had all the adverse consequences on the financial system that we saw. that would eventually better than what we got. >> indeed use on the legislation from congressman paul on auditing the federal reserve? >> my views are known. let me make a point that is important -- the so-called alt it -- all at -- is used by people to talk about financial books, looking in numbers and financial reports and

statements. that is not what this is about. the federal reserve fully agrees that the congress should have access to all aspects of our financial transactions and are financial operations and controls. the congress has every right to make sure that the the fed is using the tax payer money effectively and safely. but in this particular contest, it means a policy review. if this bill were passed, it would repeal an exemption passed by the congress in 1978 with protect monetary policy from an immediate review by the general accountability office to assess whether that policy was the right policy or not. every other aspect of our policymaking, our supervision, everything else is subject to gao review. essentially all of our financial books are open to the congress and to the gao. the thing we're concerned about is the independence and the integrity of the monetary policy process.

our concern is that we would take some action on monetary policy that would be unpopular in some quarters, and that congress by ordering the gao audit of that action would be signaling strongly to the markets and the public that they disapprove and they are putting pressure on us not to take that action. we think they're reducing the independence of the fed would be bad for markets, bad for inflation expectations, and bad for the dollar. >> do expect the federal reserve to get all the money back that he has injected in terms of loans to corporations? >> yes, i do. i think we're in very good shape. in fact, the actions that we took were not for profit maximization by any means. but i do believe that we are going to get back all the money, and indeed we will be showing the taxpayer a fairly

significant extra income. >> when you are minding your own business at princeton, did you have any second thoughts about coming to washington? [laughter] [laughter] >> id has been a very interesting experience overall. kenyes once said that economics -- economists said this -- should aspire to be as useful as a dentist. it should not be studied in ivory towers. it should be applied in the ways to help the public and make things better. it is my objective to bring my knowledge, by research on the great depression, on financial markets, and the economy, to do the best i could to bring that to the policy-making arena. and in that respect, i do not regret coming to washington.

>> in your academic research, is there anything you have learned in washington that would make your research wrong or right? >> as i mentioned, i study the great depression of the 1930's. the world is certainly much more complicated. financial markets are more complicated. we have major institutions, financial instruments much more complex. the whole structure and nature of our financial markets are different. they're more interconnected, more complex than was the case in the 1930's. nevertheless, the basic lessons of the 1930's still apply here, and they were essentially two. the first was that the federal reserve in 1930's made the mistake of being entirely passive on monetary policy. it took no action. what happened was that as the banks failed, the money supply

contracted and the economy went to eight to% per year deflation, which made it unattractive to invest and gay people incentives to delay purchases. -- and gave the people incentives to delay purchases. i believe that we took that lesson and we've been very aggressive in cutting interest rates and making sure that we stay away from inflationary cycles, providing the necessary support for the economy. the second major lesson was to not let the financial system collapse. in the 1930's, many people think about the depression as being the result of the 1929 stock-market crash. that was a major event, but between 1929 and 1930, the downturn in the economy and in the stock market was not all that different from other recessions. not that different from the beginning of this recession. what changed the depression from our regular contraction to the great depression was the extent of the financial crisis which gathered steam in 1931,

particularly the collapse of large banks in europe which then spread around the world for the collapse of the financial system which created huge amounts of financial instability was a major factor that drove the world economy, not just the united states, into a deep depression between 1931 and 1933. it was the stabilization in 1933 and leaving the gold standard which led monitor policy become more supportive, that caused the u.s. economy to come back. in that respect, our actions to prevent the collapse of the financial system, including the entire global system, was essential to avoiding a similar economic outcome in this decade. of course, a big problem was

that we did not really have all the tools that we needed to wind down systemically critical firms in a safe way for the broader economy. that is why it is so essential for congress to give tools not to the federal reserve -- i think it would be better managed by the fdic and the treasury -- to avoid these situations in the feature was not creating moral hazards and other problems associated with the failure of large firms. >> let's go to the audience. with a former member of the federal reserve here. >> [inaudible] >> one question. [laughter] >> [inaudible] our plan to address several key questions, including the role

of the federal reserve in combating the current federal crisis. this deals with bear stearns, lehman, an aig. why did the federal reserve not

save lehman's? who made that decision? why was it made improperly? why was the decision may not to save lehmans? what was the role of the treasury? [inaudible] why did the federal reserve and save aig? he made that decision? [laughter] i also tried -- i would also tried to talk about the expansion. [inaudible] [laughter] [applause] >> i bet you thought when the former governor was called on, that he was a plant, right? [laughter] as you know, the federal reserve and the treasury and

consultation -- we always bowed to the president and congress whenever possible -- attempted to avoid the systemic collapse of our financial markets, our financial system. we were extremely concerned that the collapse of these large interconnected firms in a disorderly way would have adverse effects on the broader economy and the global economy. i think the evidence is that we saw following lehman that we were right. the collapse of these firms is very destructive. we're very consistent in their best to save and protect the system from the collapse of these firms, all of them. the reason we did not say lehmans was not a conscious choice, but as i have said many times in public, given the aloud -- the limited powers that

we have, the lending authority against collateral, we were unable and did not have the tools. it was not a conscious tool -- a conscious choice is something we could not do. that is why it is so essential, if we're going to avoid this type of crisis in the future and avoid the very unpopular and deservedly so bailouts associated with it, we have had a better system. congress is working on that and i very much support that approach. >> let me ask one more question. what is the best thing about being chairman of the federal reserve board? >> i get to go to the security lines at the airport. [laughter] much more quickly, and i can take a long 3 ounces of fluid that by one. -- if i want. [applause] >> on the behalf of the group, and i want to give you this map of the district of columbia.

it might buy like the 28 -- in might violate the $20 limit on gifts that you have, but not by much. [laughter] [applause] >> we are adjourned, and you very much -- thank you very much. >> of the 787 billion, more than $300 billion has been committed to states. that is up $1 billion from last week. $145 billion have been paid out for state projects.

>> american icons, three original documentaries from c- span, now available on dvd. a. you need journey through the iconic homes of three branches of american government. cbs was a detail of the supreme court through the eyes of the justices. go beyond the velvet ropes of public tours into those rarely seen areas of the white house. explore the history, art and architecture of the capital. one of the -- one of america's most symbolic structures. 83 disk dvd's that is $24.95. order online at c- span.org/store. now, a forum on how technology is affecting consumer privacy, including the effects of

information sharing. this is a little more than three hours. bu>> good morning, everyone. i know that is going to be difficult because we are in cramped quarters. thank you for your patience going to our security live. i know that you appreciate the importance of security. please understand that we are delighted that you could be here with us today and you withstood the test of the long line. miami attorney and a member of the round table team. i am very pleased to welcome you

today. i have some logistics' and housekeeping announcements. the good news is that your fellows that you may have left behind in the line will not be missing anything substantive right now. terribly important, but not substantive. we have food and beverages coming. we understand that the security line will pose issues for you, so we are arranging to have that stuff delivered. hopefully there will be opportunities for you to get snacks and beverages to stop side of the hallway. we have a list of other eateries if you're brave enough to dig yourself out side. still free to do that he could pick up that list at the table where you check him. the restrooms are through the lobby, but go back through the hall you were standing in and take a left and the men's and women's rooms are right there. when we begin, we are going to

have panel discussions. our panelists will be a raid here. we would like to involve you in the discussion as much as possible. we will need to do this in an organized fashion. we have a question cards that are available. if you have not received one and are interested in getting one, you can raise your hand and one of the paralegals will bring you a question card. we will collect it and bring it to the moderator of the panel and with a strong tailwind, we will finish with q&a time. people who were watching on the web cast should be free to e- mail to the address privacy roundtable@ftc.com. in one that goes outside of the ftc without a badge will be required to return through security. you'll have to go to the magnetometer and the x-ray

machine. if you spot any suspicious activity, please report it to the security staff. in the event of a fire or evacuation of the building, please leave in an orderly fashion. we will proceed across the street, across new jersey avenue to the georgetown law school and to the right hand side of the building. at that time, if you could check in with one of the ftc staff so we know that you have arrived safely, we would appreciate that. if there are ftc staff in the room, i hope you'll be kind enough to give up your seat so that our guests me take your seat and a return to your desk and watch on ftc live. this is obviously an extremely well attended a vent and you're delighted that you could be here. if you could do that.

we are investigating the possibility of overflow seating and we will let you know at the first breakout that is working out. thank you for those of you that are willing to stand at this point. with that, i would like to introduce the assertion director of the division of privacy and i did to protection. >[applause] >> thanks to all of you for coming. is a pleasure to see so many of you in the audience. it is great to see familiar faces and it is great to see some new faces and regardless of whether you are a key player at the ftc, or this is your first event, and we are fortunate and that that we have amassed some bright minds. speaking of those attributes, i think that our first speaker in bodies and.

he is a creative thinker and he has a lot of energy and enthusiasm. he is no stranger to privacy issues. since he started at the ftc in 2004, he has spoken on a host of privacy issues including behavioral advertising, data security, pretax thing, and i remember the first conversation i had with the chairman. let me introduce the chairman. [applause] >> thank you very much for that kind and undeserved introduction. as i look around the room, i see so many privacy people here.

i think this is born to be a terrific workshop. we will learn an enormous amount and you will help us do that as we try to think for this box of these complex issues. i recently spoke on a panel. one of the intellectual fathers of the federal trade commission who is also a world-renowned reformer. in 1890, he and his partner of third -- an article on privacy. but " -- of the roadbed numerous mechanical devices say that what is whispered in the closet will be a set from the housetops.

their work was enormously influential and prophetic in helping to shape american jurisprudence over the course of which would give century. the feat in continued, where he wrote that the right to be led a loan, the 1960's, as america started to lose faith in government, with abuses of government surveillance powers, together with the advent of the computer age, created more around privacy rights. the privacy act and the fare information practice principles

i would add argue that we are at another -- i would argue that we are at a crossroads. we would take a broader look at privacy at large and let me explain why. one of my advisers is about to buy a home computer with a quad corp. chip running at 2.66 gigahertz. it costs under $2,000. in the early 1990's, a slower supercomputer cost about $2 million. these advances have created extraordinary benefits for consumers and had tremendous implications for privacy. the computer calls for data collection appears to be approaching zero. a data storage costs are lower, too.

the complement's unbelievable advances in chip technology. companies can store and crunch massive amounts of data relatively cheaply. these developments have allowed companies to collect data about consumers in ways that were never conceivable before. behavioral targeting is one of the many ways that companies can use data to try to find out which addresses arent able to respond to a particular and. many know that the number of speakers spoke about the importance of revenue from targeted journalism. there are benefits to companies and to consumers such as moral the advertising, but as we all know, costs in terms of privacy.

those words still reverberate today and maybe more so than women -- that when he dissented. consumers have to grapple with this brave new world of information without analogies and without a real understanding of the ways in which their information is handled or transferred. his take internet advertising. how many consumers have ever heard the names? how many people understand the networks' role in the internet ecosystem? how many people understand what a cookie is, much less what a first party cookie from a third- party cookie is. if britain mortar retailers

tracked a consumers meanderings around the mall and the way consumers track online -- to ask the question would be to answer it. companies are grappling with privacy as well consumers opted him and were paid $10 for participating. the gist of our case was that while the extent of tracking was described, that was not sufficiently clear where prominent given the extent of the information track which included online baking statements and a library borrowing histories. consumers did not consent with an adequate understanding of the deal that they were making. the moonobody argues the point.

it to the contrary, they probably did not know exactly what they expected to learn from this data. that's just demonstrates that all us are still feeling our way around what respecting privacy really means. people have asked me to get from this workshop and where we are headed. i can honestly say that we do not yet know. our minds are open and we feel that the approaches we have tried have not worked quite as well as we'd like. but it could be that this issue is a lot like churchill's description of democracy and he said that democracy is the worst form of government except for all the others that have been

tried. still, we are going to try to look for the issue of the privacy issue to try to think it through in a way that is better for consumers. . . . narrow the -- -- the areas of

confusion and empower consumers? kohen should we utilize more opt-in -- i've been a supporter of that for quite some time. should we treat categories of the affirmation, such as personal health records or personal financial information, differently? and how we treat our bubble categories of consumer such as children? we hope that we can find that over the course of the next six months, and the experts so graciously appearing in today's discussion, that that will start assault on the course of answering some of these questions. i see my distinguished predecessor here. we're delighted that you could be here. let me thank a few of the many people who have worked so hard to make it days are reality. i will not list everyone but let me acknowledge some of the key staff members.

loretta, if you could stand up unless you are already standing up, then raise your hand. loretta garrison, peyter mcgee, katie, who started a soft, michaele rosenthal, just a stretch, -- jessica stretch, you aren't in the front. of course, the deputy director jessica rich, david, the architect of so many things in the bureau in terms of protection. we're delighted you came over from georgetown to be a part of the commission. also, jeffrey rosen, standing over there in the corner. he is helping us think through these issues with a slightly

different but incredibly informative perspective. we're done lightly you are part of the group that is digging through privacy of online. i want to thank you all for the selling such a stellar cast and an accomplished group of thinkers on these issues. and with that, let's get the ball rolling. are we going to be revealed the ecosystem charge today, this morning? that is going to be very exciting. a number of exciting announcements. thank you so much. [applause] >> thank you, chairman leibovitz. i would now call to the podium mr. richards met who will describe the data flow charts that are in your packets, as well as the personal data at the system that is on the wall to the right. -- ecosystem that is and the wall to the right.

and it panel one could take their seats so that we can be ready to go as soon as mr. smith insists his presentation. -- finishes his presentation. >>, i think the ftc for the opportunity to speak here today. my role is to set the stage for the workshop and to talk about some of the technology behind data collection and data use. as we all realize, the flow of data makes our world of work. it is a fundamental if park -- a

fundamental part of our economy and everything we do every day. a simple economic transactions such as making a cell phone call or buying something online, it all impulse the collection of data and the use of data by multiple vendors, simply to make a cell phone call might involve five different companies to collect data as part of making and completing that phone call. what i hope to do in the introduction is to look behind the scenes of little bit at some of the technology that makes all of this happened and some of the business relationships that make this happen. the issue of data collection has been around forever. today, the issue, as the chairman said in his introduction, very interesting to hear about starting out with brandeis, it is technology- driven. we see more interesting uses of

data and more collection of data, the explosion of collection of data, due to technology. many people in the room can realize this by thinking back only 15 years to the first time they owned a cell phone or use a web browser or had a credit card swipe with the magnetic swipe instead the embossing machine. those are the implications of the technologies that are driving this data collection ecosystem. one illustration of technology that i want to point out -- this is a technology, made in 2003. -- this ancient technology, made in 2003. you could buy all 1 gigabyte hard drive today for around $150.

these used in computer servers to hold information about what we're talking about today, the data collected as part of transactions. what is one terabyte of data? that is the equivalent of 1 million of typed text. that can be held in one hard drive. we make hundreds of millions of these hard drives per year. as the chairman has pointed out, it is practically free to stored data. it costs more to delete data off of these drives them to keep it. we have to fill all these drives up and we are as part of this data collection ecosystem. the other part of the technology advanced that we are aware of is communications technologies.

there are two important places that as happening 31 is of course the internet, which is also allows us to commit -- to connect all of these computers and hard drives together to collect data. we'll watch the internet becomes something that was in universities to something that we all use. we used to connect up to the internet through modems, and now we do it through cable connections and dsl connections or wireless connections. that is the other important communications network that we have, the wireless phone network, which allows us to collect data at really in the location. -- any location. this is the personal data ecosystem, an attempt to look beyond the curtain had a very high level of how data is collected in our world.

the purpose of the chart is to show from a consumer perspective what they see as data collection and things that are happening behind the curtain. one thing i wanted to say about this is that it is obviously very simple compared to what is happening in the real world. there are literally thousands of vendors part of this data collection ecosystem. so it is more complicated in this diagram. it is a high level chart and it does not get down to some of the nuances and complexities that actually go on in the real world. in the ecosystem, we have the data supplier, the consumer, that provides the information as part of going about their daily lives to a variety of what we

call up data collectors here. they can be all sorts of organizations, businesses that we interact with every day, they can be in the area of medical -- our doctors or pharmacies, the government collects data, and a whole variety of folks who as part of our daily lives we provide information's to. he could be direct to an application for credit or it can be in direct, through, say, taking a cell phone call. they provide services to us. then we move out one level to an area that allow consumers are not really familiar with, to the data broker level, where it there is a variety of sources, putting it together, aggregating it, for the purposes of selling it. this is an area that consumers are only vaguely aware of.

and then to the outer circle of the chart, we see all the different -- some of the different uses that the users of this data, who by the aggregated data -- marketers are banks -- the use all the information collected through the day your broker services. -- the data broker services. coming back to the consumer, there are a variety of services that happens from the data users to this aggregation of data. it can be the extension of credit and advertising, a whole host of things that the data users bring back to the consumer. in some cases, the consumer is aware of the services, and in some cases, they are not particularly aware of them. the one thing that is important here is that we have primary

user data and the secondary uses of the data. if i buy a house and pay property taxes, a lot of people do not realize that information about my house is used to characterize me for marketing uses. we also look at today is some specific examples of uses of data in everyday transactions. this is one that is personally applicable to me. i had to start taking pills to regulate various health issues. one of the things i have to do is get my prescriptions filled at the local pharmacy. here we have all part of this ecosystem, how bad is used to perform this service, some of which i am very aware of and sometimes less aware of. the basic economic transaction begins the use of the doctors

providing the prescription. i take it to my pharmacy, where information is entered into the computer about myself as well as mine prescription. you get what prescription that can be renewed up to a year. it is up to the pharmacy and their computer systems to keep track of those refills. one of the benefits i get as a consumer is that i do not have to go back to the doctor for every prescription. so when the pharmacy fills a prescription, they enter the data into their computer systems, and one thing they do -- a new service the pharmacy is providing now -- they will call me on the phone when it is time for me to read fill a prescription. it is one use of data. that is the marketing program as far as the pharmacy goes, but for me, that is a convenience. data flows out of the pharmacy,

paying for my bills with the health insurance companies. but also, there is a hidden, behind the curtain activity where various prescriptions go to the pharmaceutical analytical companies that analyzes all the different prescriptions that people are buying for a variety of purposes. one can be disease tracking. another can be for information for media. another area of relatively controversy all is the area of marketing to doctors. had these aggregate statistics -- out of these at a -- out of these aggregate statistics, some are specific to the doctor in the information is sold to pharmaceutical companies and pharmacies to market back to doctors. this is an area that has been controversial. the idea is that the pharmaceutical company faces

their markets -- their marketing to specific doctors based on the prescriptions they had been developing. @@@@@@@ @ @ @ @ @ @ @ @ @ @ @ @ it is a voluntary activity. you get an account, and from there you say to that website

who your friends are. that creates an area where everybody can communicate. some of the information you provide as part of that social networking is made public in can be used by anyone. if you google people, some of the first things you will see our protocols -- are profiles at places like facebook and link in. l. ink -- facebook and linked in. another aspect going on behind the curtain in the social networking site is the use of information that you provide as part of your profile as well as part of your discussions with france, the advertising aspect. you are being targeted with

advertising as you use this site based on all the information available either in the profile or on the forms. another area that becomes interesting, many of these websites support features known as third-party applications, where the web site to allow other parties, other software developers, come in and provide content and games that run within the context of the social networking website. these applications are supported by advertising. what people are using this web sites do not realize at this these applications have some access to personal data collected by the web site. that is being pulled off in used for advertising purposes and other purposes that are not clear. the last area of one look at this morning -- i want to look at this morning is the

collection of data, a very important one, much more important of the last three or four years, mobile phones or smart phones in particular. a smart phone is basically a computer that is portable, and just happens to have a cell phone attached to it. the key thing about the computer his that he can communicate through the internet through wireless connections. we are able to collect data or observed data with that the vice had any place and any time. -- with that device at any place and any time. a key feature of those devices is to find out where they are, locate themselves on the map, at any point in time. they use a variety of technology to do that, including gps, like

by, and sell towers. -- gbs, wifi, and cell towers. you have communication networks that allow you to call home, and you have something that provides location. we have companies out there developing an interesting hosted applications using these technologies. it is the next level of data collection, if you will. on the chart here, we have shown a couple of different applications using smart phones. one of the mobile coupons applications, walking around, you can run this application and it will provide coupons for businesses in the area that you are currently at. you download the application to the cellphone, and you also provide personal information to the vendors who are providing

coupons, and the application runs, and as you execute it, it will provide you with a variety of coupons. hear the kind of coupons i am interested in, you can say. excuse me. i still have 30 seconds. sorry about that. you say what kind of coupons you like, restaurants, bars, whatever, and the types of coupons that are available to the coupon provider are there. another more interesting application, one that seems to be targeted at the younger crowd, i am not sure i would want this, the mobil grand locator. it provides the net -- the mobile friend locator. you sign up with this service by downloading an application, it shows you on a map where all

your friends are, who have signed up for the service. it is friday afternoon and you want to get together for dinner that night. you can see who is close by and then be up. -- meet up. is a free service said there is advertising that goes on behind the scenes -- it is a free service so there is advertising the goes on behind the scene. in addition, one of the services we look that allows you to also upload your position to your social networking homepage. so not only people with phones can figure out where you are, but your friends who were followed new on a particular social networking web site. an advertising can then be provided on the web site based on your location. is a level of surveillance that people would be surprised -- if you go back 20 years, that they would accept. but people who want to participate in it can.

with that, i would like to move on to the first panel. thank you very much for the opportunity for speaking. . or the information sheet up front about how to get connected to the wifi. i would like to thank everyone for coming. i would like to thank professor rosen.

he is one of the leading experts in piracy. he is the legal affairs editor at the "new republic" and he is a senior fellow. we are happy to have him here for the issues as we are ready to explore this moratorium. we are also happy to introduce the other panelists. we see the professor -- the director of the consumer federation. we have jim harper of the cato institute. we have the director for technology. we have the microsoft corp. director, the director of policy at intel. richard prucell of the policy group.

he could not make it here, and we apologize. we have a couple of words that we would like to talk about from the first panel, about how the panel is likely to go. there have been many dramatic changes to this lifestyle. there are tremendous assets, with the internet expanding with more access and content, more information and communication and services. at the same time, consumers are becoming increasingly concerned about technology -- how technology may be used to get information about online behavior. to segment them with the special categories based on this activity, and using them in ways that they do not know about or may not understand. they have been gathering information about consumer habits and interest in

activities in the offline world. the surveys, the contests, and the information. this collection of all flight information is now being -- of offline information is now being part of the online information. web sites offering web sites for specific problems. reading habits and search queries. the opening panel on privacy is to explore this dramatically changing landscape, looking at the way that the information about consumers and their lives are gathered and analyzed. this is for marketing and other purposes. we will talk about the ways that information may be compiled and use, and we will ask the analysts about the usage of information. we have more on how these great

benefits and risks for consumers. rather the information of -- in these activities is subject to the existing rules and the loss. whether there is a limit to how long companies may maintain information and how they may use information. whether or not consumers are aware of the extent of the data collection. and whether they will exercise control over this. the format is a little bit different than usual. rather than having each panel have remarks, and the palace will have the opportunity to discuss these questions to engage in a dialogue. we have staff members with index cards and if you have a question, please raise your hand

if you have a question. and the web cast audience members may also submit their questions. professor rosen will be leading with the first scenario and he may also have some remarks. >> thank you so much. i am delighted that they have begun this roundtable series on restoring privacy and i am honored to be part of this. i was so happy that the chairman sited a man who was not only the patron saint of the privacy law, but also the ftc. he would be very interested in turning their attention to this subject. we know that the new technology is supposed to privacy. they said that this was the kodak camera that made him concerned about what used to be whispered in the closets was now

shouted from the rooftops. it was a different technology, mainly wiretapping, that made it possible to listen in. he predicted the creation of the internet, and that there would be a way to extract papers and secret desk drawers, and introduce this in court. this was remarkable. he was wanting to include a reference to a new technology, mainly, television. he was persuaded to take this reference out by his friend who thought it would sound too much like science fiction? this led to him to remark that he was a genius, but he was not friendly.

in his defense, he said that the constitution should be translated for these new technologies to protect as much privacy in the age of wiretapping and electronic age as this had in the colonial era. he was also deeply sensitive to the role of government regulators. by bringing new constituencies to the table, labor and business and government, it was interesting that he hated the word consumers. a thoughtful balance between the competing interests could be struck. that is why i think that he would have approved of the efforts we have made here today. we are going to proceed by way of this scenario. the danger of privacy -- they make this debate so relevant. i will begin with a scenario

that many of you will recognize. and i will ask the panelists to talk about this. we will talk about the other scenarios. @@@@@@@@@ @ @ @ @ @ @ @ @ @ @ @ after searching for japanese child's life -- child slavery and pornography. this led to the chairman of aol resigning. there was also a list of who was watching what on youtube.

the judge asked for the internet protocol addresses of everyone who was watching this. in the face of privacy concerns, by, and google -- viacom and google came up with another plan. what i want to ask the panelists is, what concerns do we have that the searches will be given to the world. when i was talking about privacy, we were talking about my kolinsky -- monica lewinsky. she was worrying about the snippets of information that would define her to the world. the search terms, and youtube videos, they seem more brought in the ability -- they seem to be more broad in the ability to judge as out of context. what do you think about these disclosures.

>> what people are afraid of is the continuum of harm. this is starting with embarrassment, disclosure, perhaps to their own family about things that they have been searching for. people forget that we do not seem to have a computer that only belongs to us. there is a broad feeling of people who should be involved. people have concerns that they will be labeled or identified, and that this piece of information will be combined with the other data. when you talk about the search data, over time, i'll get back to this in a minute. i think that this is not the case. if you are talking about searching for information over time, you may be talking about any other kind of surfing data. can you bring this back from another individual, this kind of

data. can you get a sufficiently rich profile that would identify this person once you have this range of information -- identify this person? afford this. i have liability and cannot do that. i would rather pay the lawyer just to put up a very complicated privacy statement and i will be covered. but i am covered, this is insufficient. we have to encourage the companies to start taking on a more courageous role in not only educating the workforce, that has only just begun in the recent few years. we must talk about the realistic use of the applications that they are putting forward on line. and spending the money on this. it would really work to do this.

we will hear how this is beginning to take some traction in the marketplace. if it takes informed people an entire day to plot out how this may work, then how are we going to be able to, in a very short and limited time span, how can we communicate with the implications of that are going to be and the suggested actions that they will take? we have privacy by default with these comments, as well as privacy by design. this is very complicated. money has to be spent, and time has to be dedicated. >> i want to give you a chance to comment as well, jim. and if any of you want to interject on the panel, just raise your name tag.

@@@@@@@@@ @ @ @ @ @ @ @ @ @ @ @ exist and how we will address them. these are two errors that taught different communities different things. we all want to be the first at any meeting about privacy. you can identify the data, like with yahoo! we talk about how begin was working. the broader -- beacon was

working. the broader lessons are moving out across the business community and the consuming community. they are helping to navigate the way forward. it is mistaken for us to -- as good as we are at this -- to be intellectual about what people want, and decide how to present the problems that are on these elaborate flow charts. there is a process of figuring this out. if we step back and we understand that trial and error is an important part of guiding us, this would be a great help. we have to look to the consumers to decide what they want, rather than cutting short this process. >> you had a comment that you wanted to make? >> i want to have a slightly dissenting opinion on this. these are very good things and

important things. i say this, knowing that education can work. [unintelligible] sometimes, education can help the consumers get close to the privacy preference. i see no control transparency as a necessary provision. there is a wealth of behavior is in the base showing the gaps in what consumers want. and they will be easy to achieve with this state. this is first of all a problem with the isometric information. maybe we can work on the problem

of education and transparency. there are other problems with simple transparency in education. this is a problem of being bound in our cognitive ability. and there are cognitive operations that affect decision making, and making people do things they later regret. this is often they're in the case of privacy. because the privacy is long- term. we do not fear the immediate loss. we usually have this later on in time. this has been proven again and again by researchers. we are very bad at making decisions. the benefits are immediate, but the costs are much better in time. it seems that they are coming through in terms of the value, and the high-frequency policies.

this is very high in value, and very dangerous. somebody may be arrested for a case of mistaken identity. in both cases, this is difficult to deal with because when there is a case of high vulnerability, with this system, [unintelligible] this may be even lower than this. the cost may be more. we understand this because we are not certain how the cost will relate overtime. over a long amount of time, we can give you an example. smokers realize that smoking causes cancer. they know that the cigarette increases the probability of developing cancer. but the challenges that the next

cigarette will be part of a longer chain of the cigarettes that you'll be smoking to the rest of your life. -- you will be smoking for the rest of your life. we are not moving to the next level, acting on that concern. >> i would like to let everybody jump in here. we are on a tight time frame, and we will move on to the next scenario. but if you find the opportunity to raise an idea in connection with the next scenario, please do this. >> the third scenario is from the list brokers. imagine that you are suffering from depression. in the course of your research about depression, you look for the help that you need. and then you are given pictures on line, pressuring -- promising a cure for your mental health

problem. there is a list that marketers can purchase to find people just like you. this is an actual description of the list. >> we have brought together this group of individuals with wide- ranging mental health issues. there may be a great burden on the individual, making them receptive to any campaign that may offer some assistance or release. depression is not the only category on the list. there is also anger, anti-social behavior, bipolarity, and stress. imagine that you have a weight problem and purchase products targeted to obese people in the past. you may find a marketer that promises that this is a great prospects for other nutritional products. these weight-watching consumers

will try anything. these are only two examples of theniche -- of the niche marketing. there are other categories that are available. it is easy to raise questions about this, but other benefits for this list? do people suffering from illnesses benefit from getting relevant information? why is this not a great thing? >> this is not a new concern. this concern has long existed with telemarketing, and mail marketing. i think that the internet is making the concern greater because of the increased ability to gather and segment information about consumers. this is information that the consumers are not knowingly providing for that purpose. they are providing this for another purpose entirely.

this can be used to take advantage of extremely vulnerable consumers. we have a category of information, information that is so sensitive that this should not be collected. this can be used for -- this should not be used for marketing purposes. if the consumer was looking for health-related information, they would get advice from the doctor and they would anonymously search the internet for that kind of information. i do not think that whatever the benefits are of this marketing, whatever they may be, outweigh the privacy concerns that they are raising. and also the concerns for things like fraud and abuse of a vulnerable population. >> can you give an account of

what the benefits may be? >> i can give you a suitable account. what this illustrates is that advertising is tacky, and advertising about advertising in super tacky. [laughter] we really should be careful about assuming the results. for a very long time, i have been a skeptic, or have tried to warn the community about advertising about medical conditions. think about diabetes. this is suffered by many people who are lower on the economic spectrum, who may not be good about getting to their doctor on time or taking their medication. advertising may play a role in advising them about new treatment. this may be easier to take or more sheep. -- cheap. i would not be in the way of

allowing the advertisers to reach these communities. these abuses are very obvious but when people fail to get a new medication because we decided that they should not get advertising, this is a silent harm that may be greater than the risks that we know about. >> lesley, the harms and benefits. the talk about the second approach, with particularly vulnerable consumers or categories of information, what is the cost of these benefits? >> we have to look at the sensitive information. it is not good to look at the sensitive consumers. we are not making rules that we will impose on people. i agree that this should be banned altogether, but this is the kind of circumstance that you must have to have a serious, robust consent that is rarely provided.

consumers often put a lot of information online about their health conditions. there is a segment of consumers and if you go to people like me on those sites, people who believe aggressively that it is important to share their information, i have been struck by some very interesting conversations from the privacy experts. there are some different ideas about this. i think that because there are people who want to share all of this information, publicly, that we should somehow -- you have to have a by neri choice here. -- binary choice here. some kind of advertising may happen, but this has to be a very serious kind of consent. i was very skeptical about how you make this happen.

i am worried because when you do this in certain circumstances, the lack of transparency about making a decision, if there is a particular place you get the offer or if you are comfortable hearing about health. people may be advertising and this may not be the kind of potential harm as the information being advertised over time. i have experience, with an ad served to me about a condition in my family that is not diabetes, and not likely to show up. this was incredibly invasive. i did not feel like going to the advertisement rather than the medical literature that led to this. i did not think that this would add much. >> we can imagine that some

kinds of marketing would promote a consumer backlash. let me ask michael, is there a standard that should apply to these businesses to a preventive -- to prevent niche marketing? >> some of the panel have already suggested this, with the different categories of different populations. there are simply responsible practices and irresponsible practices in the advertising space. we all should -- shook our heads at the practices targetting vulnerable populations. we spoke about the restrictions on advertising to children because they are particularly vulnerable as potential consumers. and there are others as well.

it is difficult to draw a line that says, this category of advertising should be off-limits for the reasons that people are talking about already. and there are the boehlert categories of people that should not be targeted. -- and there are the vulnerable categories of people that should not be targeted. you should make certain that they are not getting advertisements for alcohol or inappropriate products. this comes down to responsible practices against irresponsible practices. this is difficult to write down in rules and regulations. >> what is not on the table is paternalism. this goes into the transparency debate that we were having. the man who said that sunlight is the best disinfectant believed that when consumers get information about the underwriting commissions by investment banks, they would

#dk7r@ @ @ @ @ @ h@ @ @ @ @ @ @r sometimes we allow parents to make decisions about children's toys. getting them some understanding about the age-appropriateness of the toy. we do not, as of yet, say that we will let the parents make a decision about the lead that will be in the toy. the decision may be based on

cost or functionality. there is the concept of, there are irresponsible behaviors. it is not a leap to say that this should not be legal. how do you do that without capturing behaviors that are not irresponsible, or they may not be irresponsible over time because of changes in the environment. this is arguing for not just thinking about one regulatory process, but a process where you have different levels of regulation. we have had this for a very long time with the higher-level principles. people get together for the individual situations. how do you realize these decisions? how you realize the priority is not one component of those principles, with certain technologies or certain ways of delivering this. how much should you have to rely

on the other principals? >> we ask you to propose another model of regulation. is there any question about niche marketing? you can cut the knot for us. >> i think that what he has said are very well-said and well-taken. people will need to, first of all, those people who are collecting information have to have a clear guidance about sensitive data and the lack of cohesiveness among multiple jurisdictions makes it difficult to understand what sensitive data is. this matters in a culturally- specific kind of area.

there are some bass lines and we have to be more vocal and more specific, -- baselines and we have to be more vocal and more specific about what sensitive the information is and how this needs to be treated. and read-using the data is another thing that -- reusing the data is another thing that we are speaking about. this should be off the table. we can start the real argument once this is gone. >> for the fourth scenario? >> is it possible to say one thing? >> absolutely. >> we are talking about data brokers. because there is no free credit report and constrictions on what can be collected and who will have access to this, and for what purpose, this places all the information that is collected about consumers, but

especially sensitive information, in a perilous position. >> i wanted to interject before this scenario with one question that we have gotten. the question is, can the retention work if we maintain the copies and the archives of information, with an audit trail for business decisions? and to recover deleted data. i wonder if david or michael can address, as the two industry representatives, parts of this question? >> the policies that are adopted around retaining data may work and they do work. companies like my own and others have adopted limitations in some

scenarios you have to have the trail of data. we can use this for improving products and services, but within each scenario, it is rare that you need to keep the information forever. you look at the needs of the business, and the ways that you can minimize the data, and protect privacy as you are retaining this. and you do not retain this any longer than you need to. >> this is a risk assessment process? >> it is important to think about because we also need to look very carefully at any of the requirements that force companies to retain data, any longer than the company would normally need to to accomplish what they're trying to do. to allow companies to be able to retain the data for a short period of time, and to minimize

the collection to begin with, -- so that they do not even have the information. this is not an issue of secondary use. we all have received a number of security breach notifications every year. having this creates an opportunity for there to be a breach over time. >> i will get into another scenario, which we started to talk about. you were saying something that was addressing this. this involves the credit content. you charge something in a store, and then you call the credit card company to dispute the charge. perhaps something that you purchased was defective. but the merchant would not agree with you and would not give you a refund. he added you to badcustomer.com. .

>> there are lots of secret lists as well. there is a list maintained by long distance telephone companies of deadbeat customers. there are lists of people who have abused the bank accounts, and in many cases they are not

covered by credit report act requirements, so not only is there limits to their collection of that information and who can access and how it can be used, but there is no right of consumers to access that information, to correct it, to delete it. i would say this is a right that should apply to market lists as well as bad customer lists. it is important for us to decide whether it is fair to have these lists and if is to give them to consumers to protect them. >> we talked about vulnerable types of consumers. does this type of list create concerns about potential socio- economic distinctions being made with certain consumers,

whether they are entitled to specific benefits or services? >> i would love to answer that. anytime you can separate the people of their characteristics, you can make decisions about them for a variety of criteria based on all sorts of criteria that we in our public policy deemed to be undesirable, making decisions about people, for instance, according to their race or ethnicity or gender, but because this is done invisibly, if you get offered a certain price that is different from

someone or terms that are less advantageous, unlike when a notice custody delivered to you because of a particular thing, you do not know that. there is no way for you to know it, and the populations we are concerned about are the least likely to be able to do anything about it. >> did you want to add something? >> the key has got to be accessed rights, and i do not think this is aimed at particular populations. obviously agree but we need a baseline law, and a key part

test to beef access and correction, and that has to apply to everyone. that is the key element. you will always had of people more able or less able to exercise those rights, but you have to have them as a baseline, and you have companies make it easier and better, and we expected to know more than we do. i think it does not. we are all having conversation with companies that have fairly transferred crosses. -- transparent processes we do not have the tools to truly investigate. i suppose you have subpoena power and ought to use it more often, but on questions about what is the other -- what is

this data being used for, i think is of to the ftc to use whatever we have and use public policy. we talk about facebook compared to traditional long-term decision to refuse privacy, so we have a missing piece, and the missing pieces understanding the practice. it is not just consumers. i do not know that any of us do three of the year driving this 5 what is revealed accidently. we have to come up with another way if we're going to develop whether it is law. we have to give a different information base which we do not have. >> i think the rest of the program will address some of the

issues you have discussed. i want to give you a chance to comment. >> it is easy to argue we should do away with trial and error learning, but it is pretty un- soho. we can do away with a lot of benefit. >> i just thing the best way we should do this is trial and error. let's keep talking. >> i was interested in making a brief comment. the fair credit reporting act pre-empted state tort law as to credit bureaus and prevents people from suing on the basis of defamation or interference with prospective economic

damage. over the past 30 years this could have done quite a bit too turned the credit industry and a more favorable way. >>pre-emption. >> deal. >> let's move to the next scenario >> would have to do with mobile technologies. when they send targeted ads, they can track your physical locations and theme and face on your recent past have it. when you walked us mcdonald's you might receive ads for salads instead of hamburgers, or you

might receive distressing and formed big macs. imagine you have activated your credit cards. an anonymous message in the hopes that your feeling generous. i want to us with the benefit of these five might be. his form of social networking was to invite people of to the chilly connecticut avenue apartment, and officials would sit with him and discuss athenian democracy the you want to give a sense of what this

might be hamas >> no, i want to raise additional concern that has not been discussed yet today fear rick of you refer to it obliquely in your opening, so let's pull back the curtain. i think richard smith did a good job pulling back the curtain most of the way, of life: 5 rest of the way and discuss government access to this data -- but let's pull it back the rest of the way and discuss government access to this data. they are using it to go after paying patients and doctors who prescribe. the cloud is a huge repository of data that they are beginning to discover for their purposes, and i think it is very important not to think this is a problem between corporations and consumers but between citizens

and governments. now there is an important concern that should be raised in this context like anywhere else. kris released a report recently that one wireless company shared 8 million that the coins with law enforcement over the course of the year. mobil companies collect 600 billion data points per day about their users. we're just reading to learn how to work with it. when this kind of data is available to governments on the terms it is now, that is a surveillance system we are barely able to imagine, but it is very significant. that is important, how it is accessed by government. the rules around that are very

important. >> he is afraid of government surveillance. can you offer a more wholehearted defense of what this might be emma >> it is kind of cool -- might be? >> it is kind of cool. if you're getting the ad at the time you might actually use it. i am not going to say it is a bad thing. i think it is a good thing, but like so many things we have talked about today, there is a profound privacy indication, and all the protections we talked about with transparency and user choice and data retention, they are really important it is one thing to know where your customers are now so you can show the relevance ad.

it is another thing to show them a map of where they have been for three years. that the retention is very important. >> they focus on the miss use or potential misuse by the government because of storage. is there some harm to being targeted on the basis of your preference? >> [unintelligible] the point i want to make is this scenario is a good example of what i was referring to earlier talking about technology. they allow a ninth nice -- nice balance.

reserve line of rhythms developed in the 1980 costs devlin to research. we do have technology that allows the to authenticate the transaction. we do have the technology. the challenges how to bring the technology out of lab and into the marketplace. the regulations try to push the market into adopting this technology, and it definitely works for get >> these technology solutions are helpful. what about a risk-based

approach? what are the regulatory approaches to this problem? >> what you're asking about is for individual companies that will be releasing technology, are there ways it can be done in a more private way, and i think that this is absolutely right. we need to see that in terms of greater accountability, which is the idea of how are you structuring that into your individual development process until now common companies have regularly said that is something we're going to do, but i think we need to start asking the question of whether there should be some principles of accountability we should be requiring. >> how could principles of accountability be implemented specifically?

>> they need to be implemented. accountability can be reciprocal. cliff's say you have a condition where all of the tracking and profiling is off three good her reciprocal park would be as a shareholder of an organization i ought to be able to make sure there locations are open to the responsibility-from them. most often, the commercial operators who argue against privacy by default often say that does not work.

i cannot make any money. nobody will turn it on. why not? they are creeps out by it. fine, but you want to make money by not telling people, and only those who discover it and get across the feeling from it will opt out. those conditions do not work. if i am going to retract, perhaps i need to attract global company as well and make sure they are not spending their time in the bahamas or places they think they are not responsible for their duty. accountability is reciprocal. >> we have time for one more comment. do consumers want contradictory things? they both want to be able to meet up with their friends and

are shocked when the data is misused or retained? >> i think if we want to talk about how to get companies to respect consumers'privacy rights, we have to talk about implementing fair practice. location information is just another piece of information that can be used to make assumptions that could be unfounded or on wanted, no different from the other kind of information we have been talking about, although it could be really sensitive -- not just information about your mobile location but where you travel and who you travel with. that is being collected more and

more like government through airlines and other companies and used in ways that consumers would never expect, and in the comments, we pointed out the consumers are unprotected from things like a travel company going bankrupt and all of the information collected about their travel. it is unreasonable to expect consumers are going to be able to anticipate every potential use of information they unwittingly supplied or ask to supplier for a purpose, and we really need protections. >> privacy discussions can be abstract and unbalanced, or they can be illuminating and precise.

i think this panel fits into the second category. it was a panel of competing perspectives and a promising beginning for a productive day, so please join me in thanking our panelists. [applause] >> i want to add a word of thanks to jeff for moderating this panel, and we're going to have a short break. try and keep it to 10 minutes, and we will restart about five un after a love and -- at 5 after 11. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009]

.

[captions copyright national cable satellite corp. 2009] [captioning performed by national captioning institute] part of the reason that all of these amazing free services exist on the internet is partly because of the advertising that supports them. there is a lot of work to do to unpack this but i think there are going to be more experiments like this in the marketplace and it will be interesting to see how people use them. >> joe, do you have any additional information to add? >> i just wanted to suggest that while i understand what google has done with those categories it is important to realize that essentially from one consumer's standpoint those are marketing categories. first of all it appears

incredibly benign. it almost makes what some people who worry about privacy look foolish. because it says you like bicycles or you like water skiing. why would that be a problem for anybody? yes, you can be targeted for it and not targetted for it. what is not shown, google doesn't do this sort of thing. the various kinds of psych graphic, demographic activities that go on behind the screen to yield up the particular categories or the kind of things they do to grab people's financial information and link them to create profiles. it appears as if it is a simple do you like bicycles, do you like cars, south of scenario and i think it is not a correct assumption or set of projections

of what's happening in our onlined offline world. jules, do you have a response? >> my response is this. i think what we're seeing hopefully, i'll let the economists debate should the user accept it because it allows things to be free even if they don't like it. when users interact with the kind of tayloring they like whether it is choosing a book, clearly we've got some behavioral evidence that it works. the received that can any of these models -- the challenges of the ecosystem work as it is? can any of them be used in developing a feature? an honest depiction of what actually goes on without becoming incredibly complicated. i would hope they don't become a dashboard of a 767 because that

is as complicated as it gets in some of the back ends here. my argument is can we at least agree because it has prevented this from happening until now, it would be too hard to do it accurately. we need a little bit of experimentation and leeway to figure out how do you create a feature that will succeed in the market so that people enjoy it and play with it, today, both yahoo! and at&t's yellow pages went live with versions of this little symbol. you're startling to see people doing it in different ways and experimenting and we'll see if there are users that play with it, like it, turn it off, tweak it. hopefully the dind of feedback, i don't like those categories. will actually be this first step of development in the market so

we need to featurize data use instead of hoping that interested people who care about privacy care enough to read or notice or find data about them. >> joe? >> i would like to go back to looking at real world choices. we see a lot of consumers making real world choices when answering that cost-benefit question. we found a lot of consumers try to protect their anonymity by giving false emails, by deleting their cookies. you can talk about whether that is privacy or computer hygiene. i think they are going to great lengths to protect some of their personal information and then we see the market response and financial incentives and

responding and things like that. so, you know, i think a lot of these things. we also have real word experiences of data breach, of you know, security, financial security problems and a lot of this, to me, leads down to a place where we need some kind of regulatory framework that provides more transparency that talks about what kind of data is collected and what is acceptable and what is not acceptable in terms of what is being collected and how it is being used ultimately in the end as well. >> first of all, to the point about the benign nature of these categories. in our case it is they are the categories. i think it speaks to and for example there are categories in our -- google's advertising that we don't have. we don't have sensitive advertising that we use for targeting. but it speaks to the fact that

there is certainly a need for greater transparency. i also don't want to make it sound like this is an isolated occurrence. there are other companies launching this weekend. we have a product called the cool dashboard that lets you see more not just about advertising but all the information we keep about a google account holder. facebook has been a pioneer. these are going to be incredibly important. you're already seeing it. the market. you have some very sophisticated players out there. they have a great desire to -- for people to have more control and it is going to be incredibly impo wt really believe transparency and consumer choice is going to continue to be a foundation for fair information practices and how we protect people online.

>> in order to match the tools that you're providing with what consumers expect, do we have any understanding about their expectations with respect to say the company they are dealing with directly? what they expect that company to use or do they -- do they -- do we have any information about their expectations with respect to further use of that information by other companies that are essentially behind the scenes? do consumers even know about this and what would we understand their behavior to be if they did fully understand? which will never happen but assuming we did. i'm trying to get aditch shating what consumers respect with respect to information on different levels. also different types of information. if you're just going to buy a toy online that is very different than dealing with different health information.

>> studies have shown this tremendous concern and it's been this irrevocable concern because nobody has played with a dashboard and said look, it is working or not working. this bothers me. they don't know it is happening. guess what, someone tracked you all day. a lot of the things you saw i hope you found them useful. the question is can we bring some of that into public view so that users actually get their hands on it, tweak it, feel it and we start getting a good sense as here is what they like. here is what they don't like. one of the things i like about yahoo! is everybody probably knows. the sites know where you are. have some general idea based on your idea. not only are these things we think about you, we're all locked into that behavioral,

there is other stuff we care about. it seems real to us. users still kind of wonder why there are -- why there are -- how do they know that? where do they know exactly where i am? the fact that it just says hey, this is your i.p. address so we think you're generally here is just this great demistification. we don't really know what it will truly be like when people start flicking and playing and featurize datas. facebook. we have forgoten the most interesting facebook example which is a beacon. the outcry that came when facebook rolled out its news theme. you have just seen your page and all of this stuff that someone did.

it is all on your page. there was a big outcry. we were stalking all of our friends. i think if you would have asked anybody, oh, no, that would be terrible. now it is like why to we go to facebook? you need a little bit of room. this isn't an argument for or against legislation but you need a little bit of room for letting people delight users with new ways of engaging with each other and then learn how that we are not surprising them once we understand what we like. >> not to dispute what jules just said, we found for example, it is not just the online world. i don't want to color it only as an online. i don't think there is a difference anymore between an online and offline. most americans for example don't realize that supermarkets have a right to sell their data and have no idea that supermarkets collect enormous amounts of data

they collect. i want to bring up an issue that you suggested in your question. how do people know whether to trust companies. you may is have seen yesterday's piece in the times about next -- which is a company that corporations, fortune 500s contract with for discounts, for employee discounts. why not? it sounds like such a great idea. apparently this company has been collecting enormous ams of data. tying it to some extent with their credit ratings and credit card activity. that's kind of thing it would be very hard to know if anybody in the companies that work there had any clue that this stuff was going on and whether, in fact, there was a privacy policy presented to the people. so it is a very difficult scenario to imagine.

how do we know when companies are being straightforward when maybe the companies themselves haven't taken the opportunity to look. >> alan davidson, i would like to go back to a couple of things to you. you said you don't use sensitive information. can you describe or explain what you mean by that? before you get there, can you give us any sense in terms of the percentage of visitors to google, how many have gone on to the ad prempses site or the dashboard? >> on the first i don't have an exact number. i would say it is small. it is obviously very small. we're getting tens of thousands of people to visit each week. we have many, many more users. you could argue there are many different points one could make. you know, it also may be that this is something that users

probably don't necessarily interact with on a regular basis. i think that if we do this rights for a lot of our users it is the kind of thing they will set their privacy on and feel comfortable and not have to think about it again until they feel comfortable. we don't expect a lot of recurring traffic to the site. others will draw conclusions. this is an important area where there is probably where the guidance from the commission has been helpful and probably will be in the future. we don't use signals about certain categories of sensitive information that we believe are inappropriate to use for that kind of targeting. so health information, information on for example

sexual preferences, information on children, financial information we don't use. defining those is really important. we heard from an earlier panel some of the reasons why people would want to do that. we have made a choice not to. we think that is important for this kind ofing regime. this is an area where clearer guidance from policy makers set a baseline of understanding for users would be really helpful. >> if i can just push on that to understand better ux when you say for example health information. if somebody did a search for alzheimer's. >> you would not see -- you would see and anybody can go look and we hope you will go look, you can search for it and it will come up.

or you can but the -- but the fact is if you look at the category. the easiest way to know this is if you simply look at the categories you will not see something that says alzheimer's patient or anything close to that. that's the most important way we can show people directly. i think this is the power of this -- of these kinds of approachs is that people should be able to see what it is exactly at our or other kinds of information is being used about them as jules said. you know, this was hearsay a few years ago. the notion that we would show users what it is that we're using. could we do it? would they be freaked out if we did it?

i guess the reaction we have gotten is that users are pretty mature about it and some of them will be freaked out about it and that is appropriate for them and some of them have had a totally different reaction to it. this is just one small step in the market. a relatively narrow part of our business but it is a good example of what could be done. >> thank you. alan westin. you have done some work in the health area. what what what have you found about assumers' tusde with respect to their health information opposed to just buying a toy online? >> whenever you ask people what is the most sensitive information about you that can be collected and used, health and financial information are always the winners. we have done a number of surveys on how the public feels about the emerging electronic health record movement and also personal health records.

in general when we asked do the priesi risks outweigh the benefits, what do you think that the benefits outweigh the privacy risks we get an absolutely 50/50 division in the surveys that we have done. half the people feel it is the privacy risks that outweigh the benefits. but i think that as electronic health records are now unfolding throughout the healthcare system, trust in the keepers of the electronic health records is absolutely central. when promises are made and explained as to limits of who'll get to see a health record without your explicit consent or data security will be provided to make sure data breaches of health information which are in the news lately will not take

place. will the people surveyed feel that they are comfortable with and trust the people running the system? without trust, the advantages of electronic health records will never be achieved because people are not willingly give their information or subscribe to health research using their records with explicit notice and consent. i think this is an essential aspect of the whole record developments. >> thank you. joel kelsey. are there other areas that consumers are particularly concerned about or sensitive about the use of their information or disclosure to others? >> i think financial and health is absolutely the top two but i wanted to go back to actually if consumers understood the true difference between first party and third party data collectors, would their behavior change? one of the things we found is

that they are absolutely aware that companies are tracking their behavior online. they are uncomfortable with it. they take steps to protect anonymity. we found they do that and that cost-benefit analysis in their head leads them to a particular choice. largely also because they are confident that there is some kind of government protection if the data collected by them or used by them goes too far. i think i would ask ask the question in a different way. what would consumer behavior look like if they knew what third parties were able to do with their data, financial transactional information, pretty soon that starts to be combined with -- looks pretty close to p.i.i. if they knew that on one hand, there wasn't a whole regulatory framework.

maybe to hold back financial offers on mortgages and credit cards and travel, things like that, i think their relationship to first party sites would very much change and i think you know, one of the things we have to address and one of the reasons i'm glad the f.t.c. is having this debate, there is this growing tension i think between display advertising that is going to require the financial -- going to require information be collected that gets closer and closer and closer to p.i.i. in order to target information more and we really absolutely need fair information practices to start talking about what that information should -- what kinds of information should and shouldn't be collected and ultimately how it should be used. >> jules? >> just to quibble, though. if we actually explained it to the consumers their minds would explode. i'm not sure any consumer would

u.p.s. or fedex unless they care about the labor issues. they care that someone was in control and somebody was responsible. what ends up happening online all that much is that we can see some of these third party things because technology makes it visible. whether or not it is someone else who has the right to do something with it or whether it is just a technology that is completely under control or because of the nature of the contract, we throw around first, third, in ways that i think people would have no clue of it and it would make them melt down if they say hey, guess what, the website is actually operated by someone other than the person who owns it and it is stored sw somewhere and hosted somewhere. we ought to focus on who is accountable and in control and responsible for what is going on. we have lots of folks who are vendors who have the right to do

so. we have created the -- i think we need more clarity so when we try to communicate with people we tell them things that are meaningful and might make decisions based on them. >> i wanted to raise a question for you and give you a chance to respond top what has just been said as well. i think you mentioned real world scenarios that exist every day. i guess the question i have is if you were to do a study where the full extent of the tradeoffs were made known to consumers, you know, this goes to joule's point a little bit. could you provide adequate information that consumers would understand that would refleakt tradeoff that is going on. >> it would help in an experimental economic sense if we had consumers bargaining with their own money and their own realtime and obviously gave them access to other types of

relative information that is often missing in some of those polls and surveys like what other types of tools do you use that might be privacy enhancing that would change the equation. why is there no mention of -- which has 67 million download s. the number one most downloaded in fire fox history. another is no script. people are obviously doing something. maybe fire fox users are an especially unique class. the problem is in the real world they take privacy enhancing or security enhangs steps. that is not going substitute for what happens when people actually make a choice in the real world. they will just go back to social networking examples and information that is on networks that would have been unthinkable for many of us a few years ago and some of us still raises

sensitivities. i'm really concerned about what my kids put online and i take steps to try to minimize it and teach them why they should think through that decision. i think those things need to be taken into account. >> i wanted to raise a question that came in from the audience and i'll paraphrase it a bit. there seems to be a considerable support for the view that consumers may not be fully informed as to aspects of data flow and what happens to the data not withstanding some evidence of deployment of ad block or other tools and given the lack of information that consumers have about the benefits of certain activities, should we really care about attitudal evidence, what

consumers may or may not feel. do attitudes really matter if there is an information deficit? alan, you wanted to make a comment? >> if you laid the consumer surveys alongside larger surveys. it is clear that consumers are ill informed about financial affairs, home protection, medical affairs and so forth. the base has to be that we have a largely uninformed majority of consumer population in the country. second point would be that most consumers then get their signalses from the organizations that they trust to tell them what to think about and what to do in that situation. so the consumer organization or business organizations or i'd logical organizations or the aarp, etc., if that is your model then you say how can you

make privacy relate to that. the studies that we have shown show the american public divides into three groups when it comes to privacy. 35% are intense and will reject benefits and insist on strong privacy protections. others couldn't care less and the benefit is good for them and they are not worried and for 10 cents off they will give you their family history or anything else you wooten and in between, people who say what are the benefits to me? when we talk as we have been doing this morning about the consumer, i think it is useful to see that there is a pat thearn the american public

divides into which has been shown over 20 years of surveys in terms of the way in which the public divides on these issues. >> joe or lorrie, do you want to add anything to that? >> yeah, i think on a number of a levels you can interpret the dats we have collected. attitudes can be critiqued as simply a point in time but we have collected a lot of data on what people know in relation to those attitudes. what they believe in interprets of what the government does. if you lay those things one on top of another people who know very little believe the government does a lot and are very nervous. if you found out that a company is collecting your information illegally what would you do? aside from the monetary amount we asked them what would you do to executives, a little over 30%

said they would get the company to train people, teach the people of the company about privacy issues. a strong percentage wanted to put the executives in jail. 18% wanted to -- the companies down. i don't think people were on a jury they would really do this but i think what it does do is it shows a kind of frustration and anger that people have about these issues even while they believe that many companies are doing the right thing whether or not they know. they think the u.s. government is doing the right thing meaning protecting their privacy. we have done four times asked the same question true false this sort of way. if a website has a priesi policy it means that site will not share your information with other sites or companies without your permission.

every time we have requested it 75% of the people get it wrong. most americans don't realize the word privacy policy means the company will protect your privacy in terms of not sharing your information. it seems to me that label is defective and deceptive. it doesn't really mean what most americans think it means. >> i want to move on to disclosures a bit. jules, you described what you and w.p. sprmbings worked on. alan you talked about the google and preferences manager. we have heard discussions about yahoo!'s new efforts. i think at&t new effortses as well to bring additional transparency to information and management practices. i guess one question that that raises is how usable, how feasible is it to have these

multiple different systems available depending on what service you visit to manage your privacy. is it something that consumers will really be able to navigate going from one site to another! >> no, i think the answer is that industry groups need to adopt and standardize and if they are going to have real meaning to the self-regulatory programs that have been hammered out the final step needs to be adopting good standardized ways so that if they see thing it means your data is at work. different businesses may do different things behind that, different models, different features but that power button is the thing that indicates this is a smart interaction. lots of folks talk about the

advertising and don't include retargeting and remarketing. we're in a world of smart interactions and will users understand that it is not just -- but i'm getting something different than the person before. this is being used in some robust use. i like the fact that my local -- is now giving me coupons as i use the scanner and i work through tu supermarket and i'm wondering. i looked at the coupon that popped up. i wasn't on the aisle that had it. i'm wonnering is it because they know my shopping? it would be useful. i had no clue. if i assemble which dashboard was behind it i get or i want to use in or not. i want to know who knows about my shopping. i think industry adoption and

putting rules behind it means this is asserting this is essential. one effort by a couple of companies by f.p.f. will be nothing. if we're going to move the vast jeart of people and get it on the radar screen, it needs broad effort. >> we've done a lot of work at carnegie mellon. going more broadly than looking at the privacy notice in general. we find the traditional englis language privacy notice is completely unpenetrable to mideast people. we have done -- most people. how long it takes them to figure out whether l this company send you postal mail advertisements. people read a policy and can't

figure that out. we tried the notices format and some things my students have come up with. if you move to something that we call the nutrition label, a very simple format that everything is always in the same place that suddenly people are able to use it to derive information and you can give them this information and they can compare it and tell you what is different. we tried a variety of formats. do you put it in paragraphs or tables? you get little gains here and there. they are standardized both companies use the same format. you get a big win. >> are there two elements, would it be i share information with other unaffiliated companies for example or are there other things that are more important when you talk about a new

transition label that should be included? >> yeah, we have looked at the survey work that has been done over the years. it seems like some of the hot buttons for people really have to do with information sharing and the secondary uses of their information. the sensitive data types that are hut button as well. you can check it out at privacyfinder.org and you can do a search and any -- we automatically generate a new transition label for them. we have tried to highlight some of the areas that seem to be more hot button for consumers. >> something that jules said which is just that, you know, the question of whether this is sfeezeable. -- feasible. we don't really know.

the industry is going to have to get together to do more together to address some of these issues. for example, i mentioned the doubt that we created for our own dr.-based advertising and offering. i think one of the biggest legitimate cretics is it works for google but what does a consumer do with all the other information out there? we have released it in open source form. the hacker who shall remain nameless but is in the room took it and used it for a large number of other advertising networks and that is great and we need to see more of it. there is a question of whether these attitudes matter, they absolutely matter. they are a strong signal to all of us in the industry that we have to do more and better here. it is a business imperative. it is difficult.

i don't want to sugarcoat it. you can look at lor rinch e's fantastic work on the nutritional labels. how hard it is. it is not like vitamin a. they are not measurable in a lot of ways. it is going to be very difficult. i looked at her great paper this weekend. if you look at one of the labels didn't include location information. this is a dynamic environment. there are new things happening all the time. nutritional labels are hard but we have to find better ways. >> in addition to a standardized format is there something more that can be done with respect to delivery of the information? typically now you have a link at the bottom of your opening page which just says privacy policy or privacy notice and we have heard from joe about what that means to many consumers. how can we make the disclosure

more effective and have better transparency in terms of delivery? does anyone want to take that on? >> jules? >> one of the things we tested is what happens if you mouse over the dissclose your and you get a simple sentence that says hire is what's happening. a simple brief sent and then go ahead and find out a lot more. i think that is in some way consistent with where the self-regulatory regime focused don't point this to your privacy policy. to get back to my point, i don't think i've read, probably have read the privacy policy but most of us may not have in the real world out there, we know folks from getting tracked. it is in context. relevant to what i'm doing. that is the feature we need to

crack. how do i not give you that policy that my lawyer will insist has every caveat in every case, can we get a little bit of leeway so somebody can say something and give users the gist. gist is never going to be exactly accurate. if don't give them the gist we have no hope of -- we tested a particular phrase why this ad and what users said to us, you know, i get what this means. why are you asking me questions and making me click to find out what it is. if you have something to tell me, tell me whether i want more information. here is what you could want to know right now. hearing what they had to say. it was remarkable to me because i thought that would be the obvious turn. tell me. maybe i won't be able to come back. maybe there will be a pop-up and

my browser won't work. let me know if i want to know something and then i'll move on. >> consumers are a lot as a matter than we give them credit for, i think. joe? >> yeah, i think one of the things that would be interesting to talk about if every time data is appended to an existing profile that exists with -- at the risk of being ambiguous, third party data collector, exchanges, every time they append new information, either collected or bought to an existing profile it would be interesting to see what that looks like, how close it comes to being able to you know, actually point to which consumer is -- the information is being collected from and then making sure those consumers have access to the information that is being collected about them. i think going back to the

distinctions that need to be made and what information consumers care most about, i think you know google and yahoo! should be commended for trying to be more transparent and adding some types of transparency to the marketplace. i think consumers do have -- there is a different in consumers' brains toward them as a search engine and as a data network. it lets them understand how that information can be used differently when they are off of google's properties or yahoo!'s properties. i think everybody has actually said this as well. needing consistent information or consistent -- the need for consistency with regard or the strarnse absolutely crucial and i'm not sure that the companies sclebting the data have financial snes to be consistent across the board. i think that again calls for

getting away from this notice and choice model because we don't have clear disclosure or neanl standard that will give consumers consistent information upon which they can make marketplace decisions. >> i just wanted to what she could jules was saying and actually -- second what jules was saying and joel, too. so many things are happening now that may not be for example yahoo! doing it or even the site publisher. they may be a network that bought a particular person in realtime. what's happening is more and more people are served in realtime based upon ad exchanges so you're literally buying individuals or at least individual consumers' computers rather than clusters or space or

time. that is -- makes the challenge much greater but makes it very important to say you're a dynamic person. your profile may not be even -- it may be available at that moment for that particular purpose. >> adam? >> almost just cut to the chase here. i know we're short on time and get to the ultimate issue at stake here. we're talking about the need for information, disclosures, more transparency. how we get there is what is the real challenge. you know, we have to ask the question if we're going to allow ongoing experimentation with disclosures and dash boards and so on. i think we have all lived through this in this town when we have had dislohse your and product information ratings and content in the field of child

safety. we had a debate. should we have a one-size fits all v-chip model for ratings on all television content. i'm not here to say that didn't would recollect out at all. look at the model when we allowed experimentation on the internets. thools exist there that don't exist for television. those are two different types of mod thals we chose. i think the latter someone some lessons for us here that we should allow and encourage more experimentation and more competition between these companies like what google and yahoo! are doing, better dashboards. i say let 1,000 flowers bloom. >> one follow-up question on that point, adam, which is does that make sense, even in the

context of experimentation does it make sense to have certain things be consistent from one end top the other. you mentioned the amazon example. consumers may understand that information is being collected to provide zpwideance about books they may -- guidance about books they may read. do you need to provide consumers with notice and choice or additional information related to the fulfillment of an order, for example, or to let consumers know that information may be used for fraud detection? one way is simplifying the information that is provided to consumers is perhaps to take some uses expected or anticipated uses off the table to reduce the amount of information that consumers are hit with. does that sort of approach make sense?

>> well, i think a couple of different questions there. the question of whether or not we should have standardized disclosure. the problem is terms and notions they have all -- getting back to something alan davidson said. things we're trying to mention. things that have developed and come on the market very rapidly we didn't expect before. i'm for holding companies promises they make about the information they collect. that's where we really need to be. if you promise to collect information in a certain way live up to your promises. but taking a different approach, mandating everybodied a here the the same thing. i think that has profound ramifications. >> i got into a car and every

car had a completely different set of controls, we would be in big trouble. we have sort of worked a combination of legislation and effort and consumer research about what actually works. when she sits down and gets new computer game she know what is different things do. we joked about people. it is these touch points that let the priesi folks saying we got to do stuff by today, tomorrow because there is a proposal. keep it going and use the tools to cajole. sometimes it is industry leaders and sometimes it is you guys. >> we're not just talking about the internet anymore. i mean television is becoming the internet. all you to do is look at what

various television cable networks and other entities are doing in interprets of canoe ventures and comcast lab experiments with collecting data and the same thing about coursing people's data through the internet is beginning to happen in what we call television. the other point is all the data we're talking about, this is peanuts compared to what is going to happen 10 years from now and it is not going to be just for advertising. increasingly the news and the information and the entertainment you get will be based upon the profiles that you have. i think the issue here confronting us not now not to make brash decisions is are we going to live in a society with those kinds of data that course under you. do you want 60 minutes to be

different for your neighbor compared to what you see based on what companies know about you. do you want discounts to be different based on what companies know about you and you don't? add up some of the firepower in terms of technology and they are going to happen because the industrial logic points that way and that's why i think we have to be worried about this. >> alan davidson, i think you'll have the last word. >> a tough responsibility. i'll go back to what the chairman said when he posed this question. i i would say actually maybe it is the worst form of government and it is one of the reasons why we have to try and get this right. there are seven websites that will ask you to put in all sorts of perm information, where you went to school and who those closest friends are.

we would say that is crazy and we should prohibit that in terms of these prohibit i practices. -- prohibitive practices. we would say that is nutty. we should never let that happen. it is a very dynamic environment. so we have to be careful. there is a giant imperative that we have to get this right. i would offer one challenge to the commission which is an area we haven't talked about which is how government gets access to information. one of the things consumers don't understand is -- the commission because it was both and law enforcement agency and a consumer protection eakt has a troll play here. thank you for having us. >> well, i want to thank all of the panelists. this has been a provocative

discussion. we could clearly go on for another hour or two. there are many, many challenges ahead. i thank everyone for their participation today. [applause] >> let me add one note. one logistics note. we have a limited amount of food available out here. there is a list with local eateries outside at the registration desk. if you do leave the building to get food, please keep in mind that it takes time to get back through security and we'll reconvene probably at 1:20. thank you.

>> today on "washington journal" a look at what's next for senate action. barbara lee talks about president obama and congressional leaders' performance on economic issues and healthcare. "washington journal" at 7:00 a.m. eastern on c-span. american icons.

three original documentaries from c-span now available on d.v.d. a unique journey through the iconic bones through the three blamplings of the american government. see the exquisite detail of the supreme court through the eyes of the justices and those rarely seen spaces over the white house, america's most famous home and explore the history, art and architecture of the capitol. one of america's most symbolic structures. a three-disk d.v.d. set. $24.95 plus shipping and handling. order online at c-span.org /store. ben bernanke says the economic recovery still has a long way to go. adding that the fed will keep interest rates a record low levels. this is about that minutes.

>> it is very nice to be here. thank you for the invitation. having faced the most serious financial crisis and the worst recession, since the great depression, our economy has made important progress during the past year. although the economic stress faced by many families and businesses remains intense the job openings -- is hard to come by. economic growth has returned and the science -- signs of recovery have become more widespread. people have many questions about the current situation and the way forward. accordingly, taking information

from the f.a.q.'s on internet websites in my remarks today i would like to address four important f.a.q.'s. they are first, where is the economy headed? second, what is the federal reserve doing to support the economy and the financial system? third, will the federal reserve's activities leads to higher inflation down the road? and fourth, what can we do to avoid a similar crisis in the future? first, understand where the economy might be headed, you should take a look at where it has been recently. a leer year ago our economy, indeed, all of the world's major economies were reeling from the effect s of a devastating financial crisis. policy makers here and abroad have undertaken a series of actions aimed at stabilizing the financial system and cushioning the effects of the crisis.

these polls interventions have succeeded at avoiding a global economic meltdown. although a global economic catechism was averted, including deep recessions in most of the world's economies, in the united states, for example, the unemployment rate which was as low as 4.4% in march, 2007. currently stands at 10%. recently we have seen some pickup in economic activity reflecting in part the weighting of some forces. the collapse of the demand in 2008 left many firms with excessive inventories of unsold good. -- goods. this phenomenon is especially northwest the motor vehicle

industry where -- in the motor vehicle industry. automakers temporarily suspended production at many plants. by the end of the year, firms have begun increasing output again. although the working data of inventories and sustainable recovery requires renewed growth in final sales. it is encouraging that we have begun to see some evidence of stronger demand for homes. in the housing sector sales of new and existing homes have moved up over the course of a year. meanwhile in inventory of unsold new homes has been shrinking. reflecting these developments, home builders have increased the rate of new construction.

consumer spending has also been rising since mid year. part of the increase is like a temperature pair surge in auto -- temporary surge in auto sales . though we have begun to see some improvement in economic activity, we still have a way to go before we can be assured that the recovery can be steaped also will the recovery be strong enough to create the large number of jobs we need to bring down the unemployment rate? economic forecast is subject to great uncertainty but my best guess at this point is that we will continue to see modest growth and sufficiently bring down the unemployment rate but

at a pace slower than we would like. a number of factors support the view that the recovery will continue next year. corporations are having relatively little difficulty raising funds in the stock markets. stock prices and other asset values are recovering from their lows. i've already mentioned what appeared to be improving conditions in housing, business investment and global economic activity. on the other hand, the economy confronts some formidable headwinds likely to keep the expanse moderate. credit remains tight for many borrowers, particularly bank-dependent borrowers, such as households and small business. the job market no longer

contracting at the pace we saw in 2008 and earlier this year we mains weak. household spending remains low. inflation is affected by a number of cross currents. commodities prices have rizzing lately likely reflecting the pickup of global economic activity. although we will continue to monitor inflation closely, it is likely to remain subdued for sometime. the discussion of where the economy is headed brings us to our second question. what has the federal reserve been doing? it has been and still is doing a