raise the cost of the destination. >> we are about out of time but are there any urgent questions? >> i think that chris i's first two points are excellent. . .

they had in mind the public interest. an auction of diamonds does not apply to an auction of cars or real estate. i think your point is sometimes lost in this debate, and it is part of the overall ecosystem. >> this is a tricky figure. the economic study that everyone is relying on is based upon the 700 mhz doctrine. the conclusion was that the direct transfer value would be about $50 billion, but there is a consumers are + -- surplus

using this 300 mhz spectrum. >> chris made some good examples that regulation affects this. i am not sure which way that cuts. c-span.org [unintelligible] we have tons of rules that affect this and violate the purposes and the doctrine. there's a question which way it cuts. and a quick thought on what ryan said, it is tricky to figure out what we do with the first amendment as we transition toward the system where you figure out the different services over the same kind of platform. and there have been for policy -- there have been policy proposals like a horizontal regulation or you regulate the

infrastructure companies and the logical layer software companies. soap comcast -- comcast would have different kinds of protection. i think that is where i would tend to reside. >> there are two sets of interest here that have to be balanced. part of the debate is that the all a provider, and people care about intermediation that matters. that means you have to balance the ticket to appear there is also a different kind of content provider with the free-speech interests. the people who will get architecture at of the network. right now we're demanding more and more from them. we should expect to see the network evolve and offer more

and more things. that may have been the standard before, but their content providers that want to speak in a different way and they cannot find it from the status quo. >> i will give you the last word. i think we are indulging their patients. let's get a hand for the panelists. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> we have more live events coming up with the afghan ambassador to the u.s., at the john hopkins school of advanced international studies. you can watch that live at 5:30 here on c-span. taking a look at the economic stimulus plan, $355 billion has been committed, at $205 billion has been paid out. for more, co to c-span.org /stimulus. you will find news conferences and congressional debates as well as links to government and

watchdog groups that are tracking the spending. the oilers c-span -- our public affairs content is available on television, radio, and on line. you can also connect with us on twitter, facebook, and youtube. sign up for scheduled alert e- mails @ c-span.org. >> the afghan ambassador to the u.s. is expected to speak at 5:30 eastern time, live coverage on c-span. this is a discussion on present of obama's recent trip to that country. on today's "washington journal," this is about 30 minutes. are talking about afghanistan with richard fontaine. he is from the center for new american security. this meeting between president obama and president karzai over the weekend, what was it all about? what came out of it?

>> the main thrust was that president obama conveyed to president karzai that they need to get a crack down on the government corruption. they believe that the lack of capacity and political will, particularly high-level corruption, is most likely the single biggest obstacle to the united states and nato allies making progress on the political side. they have not filled in with a sense of legitimacy in the government's. that was the message that president obama was trying to convey. >> what is the pledge on the corruption and what can get done actually? >> the question is whether he has the political will. during his inauguration speech last year -- guest: the question

is whether he has the political will. during his inauguration and speech he vowed to increase anti-corruption commissions, but beyond that it has been paltry in terms of actual steps. in fact, the latest news on that front, with respect to the election commission, that is where president cars that -- president karzai was supposed to come to the united states, the offer was rescinded after president karzai removed the ability for the united nations and others to be on the committee and commission. there is a real question. host: what is the mindset of president karzai to this

country? guest: if you look at a recent report from "the new york times ," it is not very good. he apparently believes that the united states is not going to be helping him and his government to govern. rather they will be viewing the war on terror as an excuse to keep american troops stationed in afghanistan. that is based on a couple of reports. it is always hard to tell what is in the mind of a foreign leader, his sense seems to have shifted in recent months. host: our guest was an advisor to president -- to senator mccain in 2008. we are looking at afghanistan. numbers are on the bottom of the

screen. there is a lot going on in afghanistan every day. here's a short piece of the president talking about the afghan people in the troops. >> as i told president karzai, the united states is a partner, but our intent is to make sure that the afghans can provide their own security. we are proud of the work they are doing and the continuous victories. thank you very much for the great work in your own country. to the afghan people, i want to say that i am honored to be a guest in your country. the afghans have suffered for decades. decades of war. we are here to help them forge a

hard-won peace while realizing the extraordinary potential of the afghan people. the sons and daughters of afghanistan. we want to build a lasting partnership. host: remind us on the status of building a national security force. how is it going? guest: is going well, but there's always a need for more well-trained security officials. it has taken a long time to do this. nato partners have slowly increased the target levels for afghan national security. so, what they are aiming for in the short run is obviously an increase, but there is a sense that the number must be doubled.

the question is how fast that can be done. the united states was hoping to get a significant amount of trainers in countries like france. on the side of the afghan national police, for the first time they have instituted mandatory literacy training. an alarmingly high number of afghan nationals cannot read at all. there is a always to go on that front. host: take us deeper inside of the country, but before that we have one headline from "the washington post." "u.s. forces have begun the initial phases of their political military offensive in this bastion of the taliban." telas more.

guest: admiral mullen -- telos -- tell us more. guest: admiral moylan recently arrived -- admiral mullen recently arrived, the president of afghanistan's brother is the head of the council there. this is extremely controversial. there are many allegations of ties to corruption. to the north and west of the province there are areas in complete taliban control. given the population in the greater area, the fact that the united states went in next door to secure those areas, it is the big place to go right now.

host: one more passage from the story. "officials have pressed local leaders and tribal elders over the past several weeks to begin holding shuras, conferences, in the city and outlying districts." john, republican line. good morning. caller: good morning. i was going to ask, i am sure there has been an increase in afghanistan as far as security needs. my description of afghanistan, it would be american during the 1930's -- america during the 1930's. do they have any intention of ever falling everyone out?

it seems like it is a big waste of time, because nothing to rocket terry, but they are extremely hard to teach. -- nothing derogatory, but they are extremely hard to teach. i don't think this is so realistic because we have been there so long. guest: it's unclear whether he's talking about pulling out of iraq or afghanistan. host: john, are you still there? i think we have lost him. >> guest: general mcchrystal has said that he does not consider june a deadline, and the secretary of defense has said that that may be a token withdrawal of american troops.

american troops will be in afghanistan for very long time. not because we are trying to teach the afghans but simply because it is when to take awhile before the afghan national army and police can secure their country on their own. with respect to iraq, but one thing worth remembering is that we have more troops in afghanistan -- iraq today than in afghanistan. we do in afghanistan. the plan is for them to draw down significantly by this summer and be out of their completely by next year. much of that will the plan on security conditions on the ground. host: mike, good morning. caller: thank you for taking my call. the previous caller was exactly right. why are we there?

host: enter your own question. -- answer your own question. caller: the military industrial complex is too fat. we will not allow. host: brief comments there. jesse, -- we will not pull out . host: brief comments there. jesse, north carolina. caller: we may withdraw a token amount of troops in iraq. we have troops in afghanistan with a partnership with pakistan. all of these countries around iran. to what extent does the gentleman think our presence in the middle east have to do with iran?

guest: first of all, the withdrawal from iraq is not a token. they are likely to keep drawing down very significantly. going down to about 50,000. next year continuing to do so. i also do not think that our presence in iraq and afghanistan, our partnership with pakistan, is all about iran. we went into afghanistan in 2001. you can debate the reasons for why we did those things, especially with respect to iraq , but i do not see that the government saw much rationale in military intervention in iran. host: our guest today, richard fontaine is the former foreign policy adviser to the mccain presidential campaign in 2008. he also served on the senate

armed services committee as a middle east staff director. this is from "the washington times." "no deal, no dialogue on both sides. this as a major militant group wrapped up the first round of peace talks in discussing what splits the ranks of the taliban insurgency." guest: before you asked what hamid karzai thought about the united states. there was the lending conference held in january of this year. it brought the leaders of the international community that were interested in supporting afghanistan. there were two issues on the table with respect to dealing with the taliban. the first was reintegration, trying to get both sides to stop

fighting. the bigger and more controversial move was reconciliation, essentially political talks, some kind of power-sharing agreement with the taliban. obviously not just for strategic regions -- reasons, but human- rights reasons, it is very problematic for the united states. we were very cautious about things like that. host: joseph, republican line. long island. good morning. welcome to the program. caller: my question -- why does the u.s. think that we can win in afghanistan when russia was there as a major superpower for 10 years and they left with their tails between their legs?

host: a question asked for years now. guest: exactly. there are significant differences in what the soviet union tried to do and what we are trying to do their. first of all, the united states was actively supporting the resistance to the soviets. there is no major external force supporting insurgents today. certainly no nation state that is giving weapons to the taliban and other insurgents. in addition, soviets are trying to impose -- were trying to impose an atheistic ideology on afghanistan. i would argue that we are not trying to do anything of the sort. i would argue that we are attempting to support the afghan government that was chosen by

the people. those are big significant differences. host: what do most people in afghanistan think of the taliban? guest: if you look at the polls, the people do not want them coming back in the power. which is one of the things we have going for us. the problem is that when you look at the thing that people want most, it is security. the thing that security forces have not been able to provide. this position where the taliban is present to support them for survival reasons. taliban is filling in for the government in some ways, dispensing justice. the afghan government has not been able to provide -- those of the two main things.

host: horton, north carolina. independent line. good morning. caller: i do not understand why we are still there. we are supposed to be training them people. what happens is we send our people over for six months of basic training, they go over there and they fight. why does it take so long to train men to do that? host: you touched on that before. guest: on the american side? host: the training of the forces. guest: in many cases you are starting from the ground up. you cannot manufacture security forces overnight. something we learned in iraq. we tried to go from zero to hundreds of thousands, but the problem was that they would go a

wall, it would collapse in battle. it just did not work. it was only after we were able to put them through robust training that they stayed in place. host: if that training is successful at some point, how do you maintain a force like that in such a relatively poor country? what is the long-term plan? guest: it will require extra assistance for a long time to come. the idea was that they would not be able to pay for it long term. the international community has mosley said that it is better for them to contribute money to the security forces. i do not think that the afghans will be able to pay for their

security force any time in the next few years. host: democratic line, good morning. go ahead. caller: how are you doing? host: fine, what is your question or comment? caller: history shows that the united states is a constantly expanding empire. of go caller, before you keep going, turn down the sound -- host: collar, before you keep going, turn down the sound on your television. caller: why does the united states need principal strategic allies in the middle east? is it for economic reasons? to enhance our political position? both, perhaps? guest: with respect to afghanistan, obviously we went in there after september 11 because of what happened on

september 11. there were al qaeda training camps there in afghanistan. our original aim was to eliminate afghanistan as a sanctuary for international terrorists. since then it has become to ensure that it does not return to that. i also think that the united states has interests that go beyond that. in many ways, pakistan was the big prize. they are increasingly unstable around the country. the western part of pakistan is being used as a sanctuary for insurgents going across the border. but that does reverse itself in terms of insurgents going across the border. very problematic for us.

the perception that another superpower could be defeated in afghanistan would be a huge boost to their international movement in al qaeda. even after their high-profile failures, there has been an increase in recruiting around the world. hard to imagine what would happen if the united states was defeated in afghanistan. host: we have a twitter message. "do you think a withdrawal in 2011 will do anything? it takes generations to game hearts and minds." guest: i do think that our goal is not to turn afghanistan into a jeffersonian democracy that is prosperous and everything else

our modest goals are related to our national strategic interests. i do not think that 2011 is a realistic deadline. host: speaking of 2011, "canada is firm on pulling out of afghanistan in 2011." this is from "the baltimore sun." "they reasserted that only civilians would continue the mission. -- the mission." what do you think? guest: this resolution was passed by the canadian parliament, which will be a blow to the coalition forces. they have been fighting very hard there, but as a result they have taken an unprecedented number of casualties.

something that canadians are just not accustomed to absorbent. they have made a huge contribution over the years. there is an upper limit to which it can be politically sustained in canada. host: caller, thank you for waiting. caller: thank you for taking my call. good morning, gentlemen. you answered my question while we were waiting. and [laughter] host: think -- while we were waiting. [laughter] host: think of another one. caller: as far as the future, economically i think what the country has going for it -- first, iraq. iraq has enormous oil reserves. like you said earlier, afghanistan did not have the money to pay for security. i do not see that as a problem

in iraq as long as things stay stable and do not get out of control politically. afghanistan, i do not see anything for them economically. >> "washington journal" starts every morning at 78 he's -- 7:00 a.m. eastern here on c-span. we're going live to a press conference from the afghan ambassador to the u.s. first, some introductory remarks for your watching live coverage on c-span. >> obviously nobody knows what afghanistan's fate and the next while will be. we have heard various versions from various corners. but one thing is certain -- that

the operations of the last decade have convinced many thoughtful people around the world that afghanistan can never be neglected again. one way or another, people of good will around the world are going to do what they can and use the resources that they had at hand to foster economic, social, and cultural development in that country. that is certainly one conclusion that is beyond dispute. a second one has only become obvious as time has passed, and that nothing serious and afghanistan in terms of these developments will occur unless afghans themselves are front and

center. it is not going to be done from the outside or by the outside. it might be done in partnership with the outside, but it will have to involve, centrally, the development of afghan capacity in each of these areas -- economic, social, and cultural. a third point that is not clear, and was not clear earlier -- it was not clear in the 1990's, is that who is and should be interested in afghanistan? we certainly were not after 1989, after the soviet forces left in 1988. one senior official said when asked in the 1990's what to do about afghanistan, this official whose gender i will not

identify or name said, "build a fence around it and forget about it." that was not smart. now people far afield as korea and japan, certainly china, india, southeast asia, all the middle eastern countries, and european countries, north american countries, and even countries in south america understand that afghanistan is not a remote place at the end of transportation, but actually the central place of the eurasian land mass, and therefore of interest and importance to anyone living on the eurasian land mass and any economy in the eurasian landmass. there for the third conclusion that i think that we can say with confidence is that the

interested parties now are global, and there are many of them. and whenever we hear this week about the afghans riddled by corruption, not worthy partners, blah, blah, blah -- nothing will be as important as these three trees, economic, social, and cultural development will continue, it will be done not two but with afghans and with afghans in centrals, and third, that this will be done with the support and active encouragement of people in many countries, not just the united states, not just nato countries, but globally. it is on that background that we are here today to announce the formation of a very interesting

and important new initiative, and to do this, we are honored to have a ambassador say -- ambassador said jawad, the afghan ambassador to the united states. ambassador to what -- jawad was born in afghanistan, he then came to the united states, he has further degrees here, including an mba. he also has studied at the school of law and political science after that can kabul. he went to a german university and munster. he is a well-educated diplomat and a very good writer, of very, very responsible, tenacious, and

i must say, in addition to all of that, of very good natured and kind representative of his country. we're very lucky to have him here. i am going to turn first to ambassador jawad, but for some guests who are here that will enrich our discussion. i want to welcome the ambassador from tajikistan, and then i want to introduce howard to further gas to our members of the board of trustees of the institution we will be speaking about three first -- speaking about. first, the senior advisor to the special inspector general for afghanistan reconstruction, a very important post in the

department of defense. prior to that, he was senior health program advisor for the pentagon and spent many years in iraq. he is by profession and training a specialist in health care management. i guess they ought to be asking him to help here than in afghanistan, but that is another matter. we're very glad that he is here to add further comments on this new initiative. beyond that, we of the vice- president of investment at the royal bank of canada, wealth management division. by virtue of the fact that his father was a diplomat, he was born here around washington, then moved back to kabul, and

stayed there during the coup, during the soviet invasion, and then he moved here and came to the united states. he is a trustee of the university of afghanistan and very active in afghan and american affairs. finally, i want to introduce the inspector general, head of the office of the special inspector general for afghanistan reconstruction, the general field. this man is at the center of all that we are talking about. he is from south carolina, i believe, of originally, but he is a career marine officer tried to retire and failed. he has spent years in iraq, he was chief of staff of the iraqi

reconstruction and management office, he is assisted the u.s. ambassador and director of iimo, coordinating the execution of a u.s.-appropriated funds for the reconstruction of iraq. a career marine, he has been decorated with the distinguished service medal. welcome to all of you, and ambassador jawad, we're very pleased to turn the podium over to you. >> thank you very much for the kind introduction. i would like to take this opportunity to thank you for this opportunity for a forum to talk to you about the foundation for afghanistan.

i am glad that you could join me on that. i will discuss how are additional -- our original idea and concept of the foundation for afghanistan, a nonprofit, nonpartisan, non-government organizations. i would also like to briefly discuss primary mission that we have developed in some of the discussions. the focus of this forum is to provide input from you on the initial idea of the development to improve the concept that we have brought forth. ladies and gentlemen, despite our accomplishments in afghanistan, the search of human capital, there is still a major

roadblock in rebuilding afghanistan. i believe restoring afghanistan's human and social capital through education, exchanges, and skill development would facilitate sustainable growth in afghanistan. historical in my country, war, violence, inefficient educational systems have led to a shortage of qualified afghan professionals and civil servants, business leaders, and educators. however, after eight years -- seven years of the establishment of the new government, we have a new generation of afghans today, a new generations of afghans who are committed and interested to contribute to the social, economic, and political development of our country. they are eager to learn more, to be connected with the rest of the world.

in afghanistan itself, it is a country that was to be self- sufficient, it wants to be strong and self-reliant. we are capable of public and private institutions. we can achieve this objective for proactive and equal partnership with our friends and partners share in the u.s. and all over the world. and that partnership could be only based on cooperation and mutual understanding. so strengthening this kind of partnership between our people in peace, they are the fundamental issues for our foundation. it is key also to increase in afghanistan's development and tourism and democracy to develop stability in the region and security in the world. we are fortunate that president

obama's new strategy and also his trip to afghanistan provided a further opportunity to strengthen those capacities and afghan responsibility, connected to each other. there cannot be full responsibility unless we build afghan capacity. and it the capacity is built but not given the responsibility, then it is a waste of resources and a waste of the country. i can get -- afghanistan's future is contingent on this, and to do our part -- and as afghans, i'm talking more about the foundation of afghanistan -- to improve efficiency of the existing programs. we have a number of programs that are in place, and to find practical solutions -- there could solutions that have not

been implemented, such as afghans first. it is a good intention of giving more responsibility to afghans in afghanistan in the areas of security. some contras had been up to $10 billion, but we do not have access to all of these contracts. one reason is the very strict requirements that make it almost impossible for afghans to qualify on the paper even if they have the capacity on the field. if you ask for contract and afghans provide five-year audited financial statements, and there's no auditing standard in afghanistan, subcontracting company building will have to have money to qualify for the building. these are features that we would like to improve the capacity by

increasing civilian attractions, by cultural exchanges. i am sure that this attractive to the afghan people and the people of the united states because we will save costs. and as the most efficient thing in today's economy. how we can get the full value of every dollar that you sent to us. we appreciate it very much, we and would -- and we have to make sure that we get the best value, there will be no waste or corruption. that is one of the objectives of the foundation, to improve efficiency, enhance transparency and professionalism in afghanistan. the foundation also intends to implement print -- specific projects that channel new

resources, informational, cultural, and other exchange programs. we will focus on scholarship for teachers and professors and research and translation of academic experts such projects will include -- improve the capacity of the government, the civil society, and individuals. the foundation aim is to act as a bridge forward for demands and opportunities by setting up a mechanism. the objective is how can we create a synergy within the existing programs, projects, and resources that exist in afghanistan? we're fortunate that there are a lot of projects going on, but they are operating mostly in silos by our international

partners. to help achieve this objective, the foundation will consult on committed afghans to could be trained and empowered to assume the leadership roles in education, social, and economic development of the country. and once again, training afghans about building capacity in a sustainable way, and preventing the high cost of bringing and international consultants who usually command to support other projects, they come in with their laptops and they leave with their laptops. the foundation will also facilitate the development of qualified afghans and we have specific ideas on how to implement it. and the foundation is also hopeful to work and get more assistance to enhance and

expand the student exchange programs, to bring more qualified afghans here for a four-year education. and we've thought of the mechanism and how to make sure that they will go back, part of the agenda of the foundation. and to prepare students in afghanistan for proficiency in english. we will be working with the existing institutions of afghanistan. we have general field on the ground in afghanistan. it is a partner will -- a great partner to have the english training courses back in afghanistan. there is a lot of demand for that. language skills are very much in demand commercially. translating some of the texts

are some of the objectives of the foundation, did get the small manuals were some cultural texts on all, economics, and business into the hands of the afghan people. and by enhancing student exchange programs, we will enhance their understanding of afghanistan and between the united states and afghanistan. there's no substitute for people who come in this country and see the values that united states stand for. you have to give the people a chance to come here and see -- and vice versa, to provide people to get an exposure to the rich life and culture of afghanistan. and just to give you a brief snapshot, the school enrollment in afghanistan has increased by

700% in the last seven years, about 35% of the children are going back to school. but public education needs a lot more improvement. this is the number and quantity that has increased. the universities, the numbers have increased to 76,000 from 4000. the university entrance exam is one central exam, and 87,000 students participated, and for two universities, we now have 17 universities. and in addition to that, we have today in afghanistan capable afghan businesswomen. we have a number of writers, film makers, artists, musicians

-- we have almost all over the country poetry reading classes, part of the culture of afghanistan. we have chambers of commerce and many afghan cities. our aim is to support, connect, and nurtured these institutions, both internally and externally. and that the notion would like to create opportunities for meaningful -- and the foundation would like to create opportunities for meaningful dialogue, a group to group, people to people, in collaboration with the private and public sectors and promote afghan-led an afghan-owned sustainable development in afghanistan. unless we build this capacity, all of the demand by our government of an afghan-led

development and security process, or the request by the international community for the security, it will not lead to much unless the capacity is there. we know that we still need to train a lot more people, but we still have good pools of qualified applicants today to draw from. in addition to that, we have a tremendous amount of goodwill for the country. the ambassador here from central asia, a lot of good news -- a lot of good will from india and the middle east, many other countries. our aim is not to limit ourselves to u.s. activities, but bring the existing talents and connect them and help these willing afghans to play a role

in building civil society in afghanistan. we already have an office in washington, the foundation has on office in washington, and part of the members of the board are going to kabul to develop the crucial concept of the foundation with afghans in order to refine the concept that we have developed. but as i mentioned, one purpose of that forum is to hear from your experience, how can we do it better, and what are the areas that we should focus on more. there many friends that have helped us, and i would just briefly thank all of them, and we're very grateful for their great advice that the law firm provided to us, a group of paternities -- of attorneys --

we could not have done this without their legal support and advice. thank you very much for your interest. [applause] >> hamp thank you very much. -- thank you very much. let me turn very quickly here, and then the floor will be open. there is a microphone. behind you. >> i'm the senior advisor right now that the special inspector general. i went to afghanistan originally in 2003, and i was senior adviser for health, education, and women's issues. we were there when the government was first elected, and then elected, of course. from that time, my interest has grown and i have been involved

ever since then, first with the state department and then the defense department, and now with the inspector general office. the reason i accepted the job to work with a special inspector general so that i could see the opportunity to take a look at waste, fraud, and abuse that was going on in that country and see how we could more effectively get that money used, as the ambassador was saying, and redirected to organizations and institutions and to people who could better use that money. so the role i played right now, i have an opportunity to travel the whole country, meet with businessmen in the private sector, the government sector, contractors, u.s. contractors, and it has given me a chance to see that more and more as the ambassador has said, the afghan people are now standing up and now demanding more involvement. they are an entrepreneur real people as many people in this room know, i capable people,

very quick to learn. the problem is literacy, the high level of illiteracy in the country. over 6 million children coming down the pike, if you know that in the next 10 years it will be a huge pool of resources to draw from. i am very grateful and very positive about afghanistan. and so i joined the foundation, so proud that they invited me. i will help out in any way i can. >> thank you very much. [applause] >> i'm originally from afghanistan, although i was born in washington, d.c. i currently work for a bank in canada as the vice-president and financial consultant, and the ambassador was grateful enough

to invite me to invite me and to the foundation. i think the foundation will take the lead on trying to empower the afghan people, and i am there to help in any way that i can. thank you again. >> just a quick note. [applause] the foundation will have of board of trustees, as required by law, and the trustees will be multinational. i have to say directly that i have been asked to be one of them and proud to be part of it. the board of trustees, there will certainly be an office here, and although there will be a serious presence and kabul -- in kabul itself, the management will be afghan an american, and it will seek to raise money around the world, not for specific projects that the

foundation will carry out necessarily, but for projects that will come to the foundation from entreprenuers and cultural entrepreneurs and people in every field in afghanistan itself, some of them working in their homes, some working with foreign or western partners, and the foundation would use the returns on its endowment, which will be formed very quickly and successfully, and other money to support those activities. now the floor is open. please introduce yourself and of course, be concise. yes, ambassador. >> [unintelligible] from my country, we would like

to be more involved in the construction after the experience of the four, and there helped build civilian capacity for the groups in your country. and we would like to do more, and it will be mutual, [unintelligible] i think it will be mutual for both of us because we can grow up together with your people because we see and understand the same things for them in the future. and my country and my president

wants to build bridges to the afghan people. >> thank you. [applause] by the way, i think we will seek active support of the foundation from other countries that are immediate neighbors, including others in central asia. which ambassador jawad enumerated. the floor is open. .

it laid out 8 different things we did wrong. i have never been there. how does that strike you? is it plain wrong? is it emphasized wrong? >> these are politically motivated articles. if you read the articles, you will see the majority of the afghans and the u.s. institutions considered him to be a stability there. when it comes up by officials who are nameless, without providing evidence, except for

political motivation, there is nothing that we can do. in canada far, there is a strong presence of the military, both the military and the intelligence. if there was evidence of wrongdoing, they would have brought it forward. for seven years these allegations have been circulating. they play an important role. >> can you say something about the second part of the question? corruption in general? >> it is a serious challenge that we face. that is why we have a seat in the past the assistance -- seeked in the past the assistance of generals. we are aware of the corruption and are building institutions.

we just enhanced the mandate of the high office of fighting corruption. it is going to be a while to overcome the challenge. a lot of money is flowing into afghanistan from outside from legitimate sources. unless we build the necessary institutions, we will not be able by a moving one individual to fight this. it is a serious challenge. it is serious that the afghan government be strong in fighting this. corruption takes place by the police force. it affects the daily life of the afghans.

we are working on it. we will be dealing with it by building the necessary institutions, by profit-taking -- prosecuting high ranking officials and improving the police force and others. >> i wonder if i could call on general fields to reintroduce the inspector general for afghanistan reconstruction and the pentagon. sir? >> thank you, sir. thank you, ambassador, for your speech. congratulations on the progress. we applaud all of the element of the intent for which this foundation has been put in place. if i may have about two minutes to give a little bit of background on what it is that i do.

-- in support of ambassador jawad and afghanistan as we carry out our strategic interests. the united states has invested quite a bit of money in afghanistan over the course of the past eight years. we first began to be significantly invested in afghanistan away back in 2002. that investment multiplied in many dimensions since then. right now, for this fiscal year, a figure on reconstruction alone in afghanistan is about $51 billion. this is in addition to billions of dollars that we spend in support of the military operations.

when i say $51 billion, that is exclusively the reconstruction -- of which $26 billion has gone to the security sector, standing up the afghanistan national army and the afghanistan national police. there is about $15 billion in development across the board. then there are crosscutting issues such as the narcotics issue in afghanistan that we also addressed. all of that is rolled up into this $51 million. my job is to, in line with the comments made by the ambassador in reference to corruption, as i reported directly to the congress of the united states, to ensure that the $51 billion

that the united states has invested is being used for the purposes for which is made available by the american taxpayer so that we can help ambassador jawad and others to carry out what the field needs to be done. -- to advance afghanistan and the people . i have thus far been privileged to work with ambassador jawad, president karzai, leaders of the afghanistan, and with our own government of the united states, and the other contributing nations. this is a partnership that we are in support of. we are going to continue our mission and do the best that we can to ensure that every taxpayer dollar from the standpoint of the americans and

every dollar that is being put forth collectively by the international community is being used for the benefit of the people of afghanistan. thank you. >> thank you very much. [applause] someone over there? >> i just arrived from afghanistan two days ago. it is a great privilege being here with such distinguished people. i have many depreciations. i have a question. he emphasized the issue --if you look to the scholarship programs that the united states

provides for the afghans, each year we have 30 people maximum. they get a chance to come and steady in the state. for the last seven or eight years, nothing has a changed since then. apart from that, you mentioned -- we talked about the "new york times" article. on the other hand, there are regulations within the united states and no u.s. government money can be spent on education. they cannot benefit from the americans. there is a lot to talk about it. nothing changed.

, to be affected that -- how much will be affected? there are problems like interferences. where can these two things meet together? thank you. >> thank you very much. i agree with you. there is a need to enhance the number of of the fulbright scholarships for afghans. afghans will tremendously benefit if we increase the number. our intention is to progress long term, for your scholarships. -- four-year scholarships. the number of the afghan student is significant.

there is room to either bring more afghans through the program or other programs. what the foundation and 10 -- intend to do is bring more in. we have a mechanism to make sure of this. if they do not want to go back, they should pay for the amount of tuition they have received by the foundation or by any other institution. unfortunately, the issue a security constraints on americans visiting of guinness -- afghans, there are large number of them in the country. they go to see what is happening.

they are reporting that we get from the media, and i have talked with my friends at the congress. they get a briefing. they fly today from provinces and the challenges they face. i would really like the congress to go and sit down with the students. i would like them to sit down with the chamber of commerce. they can hear from a different type of problem. they can see the real afghanistan. if you sit down at the chamber of commerce, there will be complaining about dumping of products. all you hear is security and how

many people are killed. the objective is to broaden the spectrum and for people to be able to see the rule afghanistan that is out there. it will need some time. it'll take some changes on the procedures to allow americans to have more exposure to the afghan society. >> thank you. yes, sir? >> in your wonderful speech, you mentioned that the goal of afghanistan is building democracy and civil society. if you read articles in newspapers and analysis from the united states and other countries, they expressed some doubt about these goals being

achievable. what do you think about this? how realistic is it to build this kind of complicated democratic society? >> thank you. very good question. i do not expect the international community to come to afghanistan to build democracy in afghanistan. that is the part of the mission. the mission is to defeat terror and tieyranny. by its nature, if you want to prevent the return of the terror, you have to build a prolific society in afghanistan. that is what the afghan people demand and deserve.

democracy may seem to be a fancy word now, but if an ordinary citizen in afghanistan or any country wanted to go to bed with the police and had a chance for his wife to give birth without dying, this is what every human being demands and deserves. it could even be suggested that i can do not demand this sense of human security and a sense of having some basic services available to them by the government instead of hearing the government. therefore, -- fearing the government. therefore, we have no option but to allow the people of afghanistan to express their views and ideas in their own way. >> thank you. over on the left. >> my name is doug jackson.

thank you for taking the time to share your thoughts this evening. you mentioned the need for dialogue. along those lines, is lineskarzai coming to -- is president karzai coming in may and what can we expect? >> yes, he is coming to washington in may. it is scheduled for may 12 or around that date. it'll be a crucial visit. there will be new military operations taking place in afghanistan. we have a number of important conferences such as a couple conference -- a ckabul conference. that trip will be crucial. we look forward to that trip by

our president. >> yes? >> from pakistan? originally predict. >> thank you for your excellent presentation. let me state that i have a large number of younger then and when and -- men and women. we are very much in touch. the brief me about the political and other situations in afghanistan. what we were curious about was the processes of the liberalization. my students come from all

groups in afghanistan. despite their different backgrounds, they come together. we are very close. during one of our conversations, one said that the very term of afghanistan is now [inaudible] the gentlemen who argued said that the identity -- despite all of these things, which are the

most important ingredients in the nation building? what else? thank you. >> thank you very much. we are not building a nation in afghanistan. the afghan nation is 2000 years old. the afghan nation has been around for many years. a lot of our neighboring countries are younger than i am. the fact is that despite the fact that afghans live as refugees in neighboring countries, in the sense of nationhood becomes much stronger. i can tell you my personal experience. i know you are talking about one student. when we were drafting the new conditions of afghanistan, many ideas were debated.

people from the countryside in afghanistan were very much against it. they saw it as a way of possibly splitting the country. they were so adamant to make sure that we have a strong and unified government. the since the nation -- sense of nation is strong in afghanistan. we do not have a strong army like pakistan. -- to keep the country together. if the state of nationhood was weak, afghanistan would have been disintegrated way before the taliban came to the power. the ability to deliver services is limited. on the countryside, there is a lot of talk of an powering the local communities.

on the countryside, those who hold the power are holding the power from legitimate sources. guns, violence, oppositions with neighboring countries. there is a tendency in afghanistan to really stick together. to my surprise, to look into the central government, there were some disillusionment that the government was not there all the time. in the mind of the afghan people, they would like to have a strong sense of system. we have to change that gradually to empower the committees to do some in the development work. -- communities to do some of the development work. >> it is striking that no one proposed to suecede during the civil war fighting. it was a bloody civil war following the invasion.

a large portion of the population was killed. there was no secession. the first minute they could come 5 million people chose voluntarily to go back home. there is obviously a strong sense sense of nation. i do not believe they are proposing to leave again. whatever we read on the problems, there are obviously pretty they are obviously committed to something. -- problems, and they are obviously committed to something. >> thank you. we have nine hours of broadcast in that area. thank you very much. thank you for sharing or thoughts. would you elaborate in a broader sense of the message of president obama and his surprise visit to kabul? we are hearing from the people

of afghanistan that they are not comfortable with the military engagement of the united states. what to they would like now -- what they would like now is to be engaged. what are you hearing on this side from the united states and the international community? ultimately, this would decide the future of afghanistan. >> thank you very much. the president had a 6 hour trip to afghanistan. he spent half of that with the afghan government and cabinet. we had a meeting with the president of afghanistan and selected high ranking members of the afghan government. they had an expensive dinner that included many cabinet members. the president asked about the progress in the area. they gave him a report about all these issues, including

governance. we are grateful for president obama to take time to go to afghanistan despite his busy schedule to visit the troops. also, to exchange views about the development in afghanistan. the military engagement, the objective, is to increase the responsibility and capability of the afghan security forces. we think this is the most sustainable solution. for the price of one -- there is no shortage of courage in afghanistan. there is a shortage of skills and resources. trainers are coming to afghans already. in the area of development,

security without development is not sustainable. we would like to invest in building the capacity of the afghan government to sustain itself. we are working with neighboring countries to develop afghanistan mining resources and others to generate large amounts of revenue for the government to be able to sustain the fiscal responsibility of the development in afghanistan. thank you. >> yes, please. >> i am from afghanistan. i have been raised in kansas. thank the ambassador for being here this evening and everyone who made this evening possible. a year-and-a-half ago, and moved to virginia. i have been very thirsty for any

afghan projects here. unfortunately, i have not found too many. there are to poetry clubs -- two poetry clubs that afghans have made that i am a part of. do you have any focus on the afghans that are here, uniting them and giving them projects to do here? >> thank you. yes, one thing that we are benefiting from is afghan center serving the embassy. -- that are serving the embassy. we do work with a number of afghan organizations such as sports and cultural events. we know that the potential for these afghans to do more is enormous.

some of them have formed their own groups, smaller groups, involved in business development and other areas. as i mentioned, and the services of the foundation is to really bring -- one of the purposes of the foundation is to really bring all these people together and bring a synergy and enhance these so the afghans to have a place to go. >> yes, please. in the front. >> i am an independent consultant. i have two questions with regard to the implications and goals of the foundation. the first is with regard to the taliban. there is a lot in the news about reconciliation. there is also a bu lot about wih

whom. where is the television in the future of the afghan government? when president obama announced the afghanistan surge in the withdrawal beginning in 2011, i see a lot of the news about concern among afghans about the u.s. leading. this is treating a lot of concern about fear they cannot depend on us. what are the implications of that? >> i suppose you could extend that to the whole region. >> certainly, there are after -- the afghan people demand peace. people are fed up. if you can imagine living in kabul and going about your normal life without worrying about a suicide bomber for a roadside bomb -- or a roadside bomb.

it has been going on for too long. people do want an end to violence. more work needs to be done to develop a national consensus on what is the price, to what extent. you have a conference coming up in may where it to be the primary focus on building a stronger national consensus and drawing lines on the limits of the concession that needs to be made. it should be in the frame work of afghanistan. i agree with you. i have been in touch with women's groups and others.

they are concerned, especially women's groups. they are worried, because so much has been achieved there. the people do not want it to have a u-turn to what it was before. >> in the far back. >> hello, i wanted to thank ambassador jawad for making himself available today. my question relates to a specific industry in afghanistan, which i think has the potential to be transformative. i ask you to comment brawly on what i view to be a revolution in communication and i want you to be the second order of fact for do -- of effects on different elements. >> would this fall within the

purview of the foundation for afghanistan? >> i look forward to learning more about the foundation. >> the first license we issued for communication went for half a million dollars. the first one the license 14 $40 billion. -- for $40 billion. some are almost worth almost $1 billion. there is a tremendous appreciation of value. they are using more telephone and mobile phones for this.

they are pulling a number and diving. it gives me a picture of a new afghanistan bor. it is old and trusted. >> you are not worried who he is calling. >> no, but the fact that he is using it. there is tremendous progress. what we tried to do and what we have established as a backbone of the internet and communication in afghanistan by laying fiber optics. there are playing down to make the internet more accessible and affordable. >> yes, please. >> hello, everyone.

i think i am one of the rare afghans here who has grown up there. this is my third day in the united states. i will definitely go back home. my question is mainly focused on the issue of reconciliation, which is now the burning question back home and even here. you kindly described the official standing of the government of afghanistan on whothe identity of taliban with whom you are going to reconcile or negotiate. could you kindly give a very clear andefinition of how your government defines taliban?

secondly, you also mentioned some very important concerns of afghan citizens, particularly about the constitution of afghanistan. up until now, what i can understand is that the constitution of afghanistan would remain unchanged under any situation between reconciliation talks. what would it mean if the taliban does not accept this? thank you very much. >> thank you. both of our speakers from afghanistan have just arrived. welcome. >> i am so proud to see young, cable afghans on this job. nothing makes you more proud of

me see your own afghans. i have spoken at many universities. the afghan students in kabul challenge me about my outreach program. i love it. this is the new afghanistan. there is the proficiency of english language. that is a very good question. it will be hard to know what to do with it. i think we are dealing with three types of taliban. first is the taliban with the capital "t." those are the members that have been affiliated with al qaeda and terrorist networks in the region for a long time.

smucker, 5%, probably. 10% maximum. with this group, what we should do is try to split them from al qaeda and from the intelligence agencies in the region that are supporting it. or we can eliminate it. there is no middle ground. the engagement should be two natured. you split them and bring them into the fold or fight them. if they do not split, it goes against everything they afghanistan for. you have another 30% of the taliban that are basically a paycheck taliban, melissa. they do. -- militia. they do a lot of fighting because they get paid or because

they have been antagonized by our own government. they have complained about a government or police of the chief staff. the government does not deliver the services in the area the way they should. or they have been antagonized by military operations. we lost these people. the engagement we need to do is both political and financial. this is a hard thing to do with limited resources. sometimes seasonal unemployment in the winter is close to 80% of the countryside. there is nothing to do.

we have to give them jobs. if you give them a job and restore their home and village and vineyards and orchards and fields, they have no reason to fight. that is the parts that is the reintegration. there is a lot of focus politically on the 10%. the others focus on the nine -- the '90s are. that is why it reconciliation is -- the '90s are. that is why the reconciliation is twofold. they came together somehow.

>> thank you. we have time for a couple more questions. >> i am from the embassy of pakistan. -- khazkistan. >> i have -- i have a couple of questions. i do appreciate and and think the world embraced this. the government pays very much attention on education. there is the importance of educating around 1000 students. it is around 50 million u.s.

dollars. it is good. it is very good. i think education is one of the best ways to reconstruct and revive the economy and bring the nation more stable. my question is here. what are the efforts of the acting - >> thank you very much. we appreciate your questions

from he is a very good friend of mine. we are very grateful. pakistan recently increased the number of the scholarships from 1000 to 2000. it is important for the stability of the region. we need to have more afghans at pakistani universities for these two nations to come together. these are very crucial. we will live in peace and prosperity. we will all pay a price for it. we are spending 6% of our

revenue on education. that is the -- 60% of our revenue on education. that is the highest. that is much larger than is spent on defense or anything else. >> i just arrived here from the embassy. welcome. you are very active on the first week here. >> i just completed two years of contract work. one of the challenges is that there are no certified accounting programs in afghanistan. you see the position to assist in locating funding for establishing accreditation. >> i know that it is costing afghan businesses. they cannot get it. we have worked with accounting

firms even in florida to seek assistance. that is an area that is very crucial. unless we developed that, they are way too expensive for actions to be able to pay. he established an accounting academy to build this capacity. >> ladies and gentlemen, i want to ask you to join me in thanking ambassador jawad forgiving as this report on establishing a foundation for afghanistan -- for giving us this report on establishing a foundation for afghanistan. also, particularly, the board of

trustees and general field. if i may offer a quick comment. general fields made a point about the amount of expenditure there. it is a very substantial sum. there is a presumption that i sense in the country the we have never done anything on this scale. this is somehow leading a strike. it is too much. -- belieleeding us dry. it is too much. if you take 2001 through 2010, in no year did it otherwise equal the amount that we were spending non-military expenditure. it was a long time. i was not speaking about taiwan. i am not speaking about japan.

i am not speaking about germany. i wonder if we are not deluding ourselves, having convinced ourselves that this is some reckless and unprecedented expenditure that our culture has changed. something that we considered a normal expenditure if you want to do the job right. the what is done on the quick and cheap. -- we want it done on the quick and cheap. i want to suggest that the money that this foundation for afghanistan is going to command, no matter how energetic the trustees are, it is going to have limited resources. you might reasonably ask, after hearing the ambassador go on, can an entity which is only dealing in millions and hundreds

of millions -- can it had a real impact on the ground? i want to say the green revolution in india in the 1950's and 1960's, before the foundation had a lot of people there and was spending a lot of money, in relation to the scale of india it was a drop in the bucket what they were doing. in the long run, the foundation brought about the green revolution, transforming life. why? they were strategic. they did not just read the money around. -- sprouted the money around. it does not take vast amount of

money. it is clever people who are looking deeper and broader. let me add one further issue. running through this entire conversation and everything you hear in washington this week or in the national press this month is one big word of corruption. nothing will work there. they do not get it. you are throwing money down a well. we have heard citations of very recent statements of high officials if you have a pretty

officials. if you have a few hundred dollars a month, -- high officials. if you had a few hundred dollars a month, forget about the officials that have much less. you happen to have a wife and three kids. you have to eat. meanwhile, it turns out, and this is the entire international community, focused entirely on government organizations outside the government who did not focus at all on building effective local institutions o.

it is an emphasis in haiti, working outside organs the government. -- on not working outside or against the government. it seems to me that we helped build this corruption by our neglected government institutions. we should not be the ones leading the complaint. we need a longer view. that is my final point. he is talking way beyond strategy. i did not hear about any exit strategy with regard to the foundation for a cannon -- with in regard to the foundation for afghanistan. this is like breathing pure

oxygen. this is exciting. this creates hope. hope to create positive realities. they do not want a foundation for afghanistan that has an exit strategy. they want a foundation for afghanistan that will be supported worldwide that will be there 10 years from now and 100 years from now. i want to join all of you in wishing this entire enterprise enormous success. >> thank you very much. one final remark. i apologize for the time. i have tremendous respect for the work they are doing in afghanistan. they are listening to the afghans. we have issues. we have to work together. it is a good example of the excellent work they are developing. on the issue of correakorea, its

state building. the difference of the approach that relate exactly to the ideals of the foundation is that the way you do it in correa -- korea, is that he the united states and a lot of money on building the leadership first. in korea, bill the corner office and then the army. -- you first build the corner office and then you build the army. if you trained, there is not enough incentive. they need to make these functional otherwise the money will be wasted. on the salary, if you are an

ethical person, you will not be corrupt. if the offer $70 to a police officer, you expect to find al qaeda criminals. who's going to show up? he is going to be using that uniform to make money. he could make $500. it recently increased to $240. they make $5 per hour. we have to pay better in order to attract better people. otherwise, they have other options. he is looking forward to working with the afghan people. they should be treated as such.

the investment to make in korea is important to the stability of the region. the afghan people have the same potential in the long run. if you look at korea and the lack of literacy and sources, it is worse than what afghanistan was. thank you. >> thank you, ambassador jawad. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> president obama announced a plan today to open offshore areas to oil and national gas drilling. his plan is on the eastern gulf of mexico will cover 167 million areas of -- acres of ocean. it will protect national resources. you can see his remarks in a little over an hour from now here on c-span. tomorrow on "washington journal"

we will take your calls about president obama's drilling announcement. postal and regulatory commission chair ruth goldway discusses the modernization of the u.s. postal service. "washington journal" every morning starting at 7:00 a.m. eastern time here on c-span. president obama's new drilling proposal was the main topic at today's white house briefing. bill burton says the plan would -- was not influenced by the desire to pass a bill regulating greenhouse gas emissions. this is about 25 minutes.

>> hey, guys. >> [inaudible] it was an expensive decision on otter drilling. >> we need to take a comprehensive approach. there are people on the bright that supports some aspects of that. there are some people on the left that supports some aspects of that. he did not go into what the political coalition would be. he went into this thinking, what is the best policy for our country? it is something he has talked about for a very long time.

the present was encouraged to see senator mcconnell's spokesperson said this was an issue he had spoken specifically with president obama about. it does look like their support on both sides of the aisle. they will hopefully get something done. quite obviously, they are not happy with this. how much can you afford? he has to do with the fallout. how does that play out? >> we often have disagreements. the president will continue to talk to folks. it is some port in because we

need to decrease our dependence on foreign oil and move forward to create some of the most important jobs that we can create in the 21st century. his view is that the country that comes out on top is going to be a leader in the 21st century. he is not playing for second place. >> the drilling announced today, there is no implication -- they seem to be running into obstacles? >> it is a part of the crime legislation. the present is working with congress to move forward. he is coming through on a promise he made to the american people that he would have a comprehensive energy plan that would create a big investment in renewable technology as well as

finding ways to promote efficiency. all of these things are connected. >> yesterday, robert stepped in to the timetable of getting regulatory reforms onto the president's desk by september. what is the timetable you are thinking of for climate change legislation? >> i do not have specific date. this is something the president want to make forward on -- a move forward on as soon as possible. there are some ways we can come together to make congress not an issue. he will continue to work with them. >> does he believe this to be done for the midterm elections? >> his goal is to do this as fast as he possibly can. >> what changed? he said this would be insignificant. he said it would not do much in

terms of long-term or short- term. what is different? >> what he said is that there is no silver bullet in decreasing our dependence on foreign oil. a lot of people treated offshore drilling as a panic yet to solve our energy related problems. it just had to be one part of a comprehensive strategy to dealing with that. that is why over the course of his presidency he has talked about increasing production of domestic oil. he has talked about finding ways to get nuclear energy moving in this country. along with the increased production, he talked about ways to make vehicles more efficient. there were more fuel efficiency standards. that was something that is very hard to get an agreement on.

he has done things to make the federal fleet more fuel efficient, using hybrid vehicles, plug in cars, make sure we are doing everything we can in order to decrease our dependence on foreign oil. nothing has changed. . . >> this was just one part of that. that is what he said in the campaign.

>> why does this not go further in terms of drilling off alaska, where it is believed there are a lot of big sources? >> what the president thinks we ought to do is use the best science available and the safest method we can't in order to find oil and gas and then go and retrieve it and use it domestically. what this proposal represents is what he and the team of experts around him think is the best way to go about that and the most responsible and safeway. >> what is going on behind the scenes, in terms of the president's selling to the american people, beyond what we're seeing this week, selling the short-term and long-term benefits of this log? >> as the president said, when we were going through this process to get health care passed into law he was going to spend time going out, talking to the american people specifically about the short-term and long- term benefits they were going to

get out of it. that is what you see. tomorrow, the president will be in maine and, talking about benefits small businesses get in the short term and the long term. you'll see the president travel and talk about it. you'll see members of the administration talking about it. we're going to continue to make sure the american people know what is in this bill for them and when it comes into effect. >> i want to revisit the health- care issue from yesterday. part of the writedowns for big companies like at&t, caterpillar -- i am unclear. is it the white house position that these writedowns are purely political, that they could have been done in a more gradual way? or is it the position that hands are tied by county rules and they had to take these write- downs immediately? >> i am not going to make a statement about the motivations of people. what 30-year projections are saying about the impact of

health-care reform on their business -- it is the white house view that all of the benefits from health care reform will have a much greater positive impact on those businesses than the loss of a double subsidy will. >> you seem to be stopping at a break down over 30 years. >> i am not saying that. i am just pointing it out. >> secondly, i sent you a high priority e-mail yesterday. i am sure you saw it. i was questioning the reading habits of mr. gibbs. has mr. gibbs actually read all the reports he explained yesterday to claim there will be a bending of the cost curve in health care? >> i assume he has. he is a fast reader and has been very interested in the subject. the good news for you is that i am just doing this part time and you will have your chance to ask him directly. >> does the president believes

that his proposal today will make it easier to raise the cap and trade bill and get it debated in the senate? >> the president's view is that what he did today is an important view of moving it forward. >> it is politics. >> i understand that. i know that here in washington -- i have not been here long. i know everything is viewed through a lens of who does this help, who does it hurt, who is up or down. the president thinks this is the best policy and the working with members of the senate on both sides this is policy that -- there are things that people of both political persuasions can agree to and we can move forward on. >> most of them want an investment. >> i would not go that far. having talked with those who work with here in the white wing -- here in the west wing, i know there is a belief that what we have proposed today does not just follow through on what the president promised on the campaign trail for the sake of

following through on it. it also would put our country on a new track toward more domestic production of energy, toward more renewable energy use, and toward creating the jobs of the future. >> will it set deadlines for other regulations? >> i do not have a deadline for you today. i know the president wants to move on this as fast as possible. >> given that you guys have not resorted to politics with this, is it possible there was a strategic blunder by announcing new grants for nuclear reactors without giving any concessions from republicans? there are no presidents -- there are no republicans standing up there with the president. he has given this away without any guarantees you a republican support. >> i will start by saying that senator mcconnell spoke for us in a statement that was encouraging. this was an issue he had brought ups is a booklet with the president. we believe we will be able to

work with republicans on it. like i said, none of this should have been a surprise to anybody. wheat and talking about these elements for a long time. -- we have been talking about these elements for a long time. this is a comprehensive energy strategy. in terms of the politics, we think there are good things in this package that appeal to people of all political persuasions. in the short term, we're going to be able to move forward and pass this. >> i just read he mentioned this was a small step. all the statements have kind of a lukewarm response. will the president get involved? did he learn something from the health care debates that he plans to use in this debate? >> i do not think there was anybody who anticipated the president would not rule out an energy plan and.

if you saw what happened over the course of the health-care debate, over there were saying this would be the waterloo -- stop this at all costs and all the agenda of the president -- i think even lukewarm statements are a step in the right direction. >> to what extent is the administration joining the chorus of those who chant "drill, baby, drill"? >> i would say the comprehensive approach is more drill where it is responsible. invest in clean energy and create jobs for the future. i know that does not fit on a t- shirt, but that is what president obama thinks is the right direction. >> is it the plan to expand oil and gas leases throughout the atlantic ocean? i read a figure of 160 million

acres of ocean that would be available for new drilling. >> i do not know the specifics on acreage. i think some of your colleagues are going through some of those particular >> looking at this friday, the jobs report is coming out. the analysts so far seem to success -- seemed to suggest this will show job creation for the second time since the recession started. will the white house stop the jobs plans or are you going to try to lay back on what things take hold and see where it is going? >> unless the jobs report says we have created 8.5 million jobs in the past month, the president is going to create this jobs report, the same way he has treated the rest of them. we have a lot more work to do. there are analysts across the

spectrum who have different views of what the jobs report is going to say. there are different factors that will play into this specific report. last month, there was the huge snowstorm. this month, there were reverse effect. the census bureau has hired. there are different factors we will see in this report. the president is committed to bringing the american people back to work and keep the economy on track. the report that comes out on friday is one set of data. it is not necessarily going to mean the president is going to change course when it comes to doing everything he can to move through the ideas he has put forth on helping small businesses, helping big businesses, helping everybody he can to create an environment where people can create jobs. >> you are leaving the door open for another job creation package if needed? >> keep in mind that some of the things the president has talked about, even recently in

december, have not come to a vote. some of the jobs ideas are still out there, including some of the things to do with energy. they want to make homes more efficient and give incentives for people to retrofit their houses and that sort of thing. >> a minor housekeeping question. will the first family's tax returns be released either friday or over the weekend? >> i do not know the timing. they are generally released sooner rather than later. i do not have an answer. question? >> thank you very much. you are making very crisp answers. does the president believes that the holy father has been fairly treated by "the new york times" and "the washington post"? >> i will see what i can find

out. >> why does the president believes it is fair to bar all private school children from the easter egg roll, including scholarships students and sitwell friends? >> i am not familiar with easter egg roll policy. >> you must be aware. >> i am not aware what they said. i am not fully briefed on easter egg roll policy. i appreciate the question, but you should direct it to the east wing, where they know a little more about it. >> is there a prospect for a deadline for congressional approval for settlements? is there information about whether the president supports an extension that understands black farmers were looking for an extension? does the president support an extension of the deadline after 15 years? >> i checked in and they told me

they are working with congress with some urgency to get this done as fast as possible. i do not have specific timing for you. we are working to make progress to make sure that we -- >> you mean they could possibly use the extension -- today's the deadline. >> not knowing the particulars of the specific settlement, i am letting you know that the legislative team is working to get this done. >> since they have been waiting 15 years, the black farmers want to know if they can meet with the president, a special anniversary -- especially after he announced a budget and put out a paper suggesting he supports it. the want to know if they can sit down and talk to the president to push this administration to make it happen. they have waited 15 years. >> i do not know if there is a meeting in the works. i can check on it. >> is this administration open

to meeting with them? >> i have not spoken with anybody on that. >> you said a couple times over today that the present policy is to drill where it is responsible. so far, i have only heard about virginia. can you give us an idea of other places where the administration believes it is responsible to drill? >> other areas talked about in the report are in the northern parts of alaska, down in the gulf region -- areas like that. >> are there plans for drilling off the coast of california? >> that is not part of it. >> out of consideration? >> i cannot speak for the rest of this administration. it is not a part of the president's plan. >> to what extent was this discussed with democratic leaders on the hill before it was rolled out today? >> we speak with democratic leaders on the kill every day.

>> have you taken the temperature of democrats on the hill? >> we talk to democratic leaders every day. it was no secret our energy policy was coming out. folks got a heads up it was happening. the president has a close relationship with speaker policy and senator reid. >> on the west coast of florida, when you talk about the gulf of mexico -- if the ban were lifted, he would like to see more exploration. would he like congress to lift the ban? >> every place has specific regulations that have to deal with in order to move leases, put in the brakes. there is an exploratory phase they have to go through. what is your specific question about the gulf? >> in the eastern gulf, which

remains under commercial moratorium -- if it were to be lifted, do you think there could be more drilling close to the coast of florida? >> i do not want to get into water that is too deep for me. i would encourage you -- >> for years, some of the arguments that opponents of drilling used -- the president said when he was a candidate it does not come up with a single gallon of gas in the short term. it takes a long time to develop. he said into a dozen eight he would not do it. -- he said in 2008 he would not do it. >> this is not a silver bullet to the energy question. but it is one part. and this is something he said over the course of the campaign. people who voted for him, people

who covered him, people who watched this election, new if you pull the lever for barack obama what you were going to get was a president who was part of a comprehensive energy strategy, who was going to support some drilling where it made sense to promote efficiency. he was going to invest in renewable, but he was going to take a comprehensive view and not assume drilling was the answer. >> the complaint against it was that there are a lot of lease is sitting out there, untouched. how many leases and what kind of exploration are private companies not doing? >> i regret that i do not have the specific numbers for you. they are sitting upstairs on my desk. i will make sure i get you those numbers and everyone else who is interested. >> in the run-up to copenhagen, the administration receive criticism from groups in the

environmental community. what you think this says about the president's attitude toward environmentalists? >> i was saying this earlier. i do not see it in that political lens. the president has done something today that he had promised he was going to do. we had telegraphed from the campaign through the state of the union of this year, and to all the different things we said about energy. i would say maybe we can have a conversation about what this means for standing up to whomever, but this is what the president said he was going to do. a thing for the most part people ought not feel surprised about it. >> if you look at this map, it appears to be carefully crafted. you have the north shore of alaska. u.s. drilling off the coast of virginia. -- you have a drilling off the

coast of virginia. what did you discuss with the senators there? what was their backing? >> on the process for figuring out the places where it made the most sense to explore drilling, i would direct you to the department of the interior. >> the president's stance on iran -- president sarkozy -- a deal have more understanding of what he thinks he can get on that time frame? what is happening in terms of the discussions with the chinese? >> for starters, the president expressed a sense of urgency as it relates to working to apply pressure to iran. there is intense conversation happening at the united nations right now. there were able to make real progress. the president feels we have more support from the international community for sanctions and we have ever had.

he feels very confident that this spring we will be able to move forward with an agreement. >> can he get a sanctions resolution that does not include everything he initially wanted to happen? >> the united states is not the only country who is dealing with this issue. we have to work with some of our foreign partners to apply as much pressure as we can. you brought up the chinese. the chinese know it is not in their interest to have a nuclear arms race in the middle east. we are confident we will be able to work with them to move forward on meaningful pressure on iran. i would say that the president takes the long view. he wants to apply as much pressure as we can. he is confident we will be able to do that. >> gas prices have been on the rise over the past few months. i have seen $4 a gallon here in washington. to what extent does the white

house believe that the proposal announced today will bring down the cost of gasoline across the country? >> i do not know about the immediate impact. there are some places you can drill a lot sooner than other places. the length of time it takes for oil to get out of the ground and into the supply is going to take a little while. i am not a speculator, so i do not know what is going to happen on the price of a barrel of oil today. over the long term, this is going to save the american people money. it is going to decrease our dependence on foreign oil. we will know our energy future is secure. >> you said you do not know about the immediate impact. you think the prices of gasoline across the country will come down as a result of the announcement today?

courts a think as a result of the proposal, our country will have more energy security and less dependence on foreign oil. in terms of the ups and downs of the markets, i am not going to guess. >> the cad tools of the white house in making this decision -- perhaps this could come down to gasoline promoters. >> as we get into the summer, gas prices go up. at a time when the economy is not doing very well, that can have a pinch on families who are unemployed, families who are underemployed, or families who are feeling pressure from all sorts of different aspects from the economy -- rising tuition costs, rising utility costs. the president does want to do things that make energy more affordable for the american people. i would say that this comprehensive approach is the best way to do that. in the long term, as it relates to energy and is a relates to

our economy, thank you. >> former federal reserve chairman paul volcker said financial firms must face the threat of closure for any new regulations to be meaningful. he heads the president's economic recovery advisory board. he made his remarks at the peterson institute for international economics. this part of the event is 35 minutes. >> do you see any value in limiting the size of financial institutions in either the united states or in other countries as some analysts have proposed? >> the treasury has proposed -- sometimes this is considered part of the olker rule because

it was announced at the same time. i am not sure i am happy about that. they made a proposal i think is sensible. it is not a proposal that is so aggressive you're going to make financial institutions smaller. it does say a few big financial institutions which might become a lot bigger are going to run into a restraint of a proportion of the total market in the united states. it does seem to me that a handful of institutions that would approach to an%, or whatever limit will be set -- an institution that has access to 10% of the entire u.s. market is big enough to take care of itself. we do not have to worry about it somehow -- about prejudices against size and prejudice american banks against other banks. i used to trot up to the

congress and testify on regulatory matters 30 years ago. i would always get the question. look how big the japanese banks are. isn't that a terrible thing? i did not know how to answer that question. i said i would rather be good than big. this is quite a change, when you consider what japan did with their enormous banks which got even bigger. i do not think it is implicit that we can get a solution by saying we're going to break up the big ones and make them so small they are not systemically important. that seems unrealistic. >> a question here. >> thanks. mr. volcker, i think the upside of the suggestions you have made are clear -- some form of

stability and a step back into a safer time. i am curious how you think about what could be the potential losses or the downside in terms of something related to liquidity or credit availability and how you reconcile your thoughts with the bottom line -- if there were lots of financial institutions not involved in each one of those, whether it be proper trading, hedge funds, private equity -- that failed miserably on poor underwriting and excessive leverage, how you balance that with the upside of your rules. >> on the first point, the state it again. i am getting old. >> the downside of limiting some of these activities. i frankly do not think there is a downside in terms of limiting activities by commercial banks. i would refer you to the

attorneys analysis. liquidity is one thing he looks at quickly. he arrives at the argument that more liquidity is not valid. some liquidity is necessary for functioning markets, but there reaches a point where it does not make any difference whether you are making a stock trade in nine nanoseconds or 10 at nanoseconds in the over-the- counter market. there can be such a thing as too much liquidity because it encourages risk-taking with the idea you can always get out tomorrow, an hour from now, or two days from now. maybe we encouraged too much confidence in the always strong liquidity of the market and the increasing liquidity. i obviously have some sympathy for what he says. he says some liquidity is good but at some point let us stop it.

thousands of institutions already do trading in hedge funds and private equity. there is no shortage of people willing to do that stuff. the other part of your question -- >> there were lots of [unintelligible] >> there is no question that proprietary trading, although it contributed to the crisis in commercial banks, but particularly outside of commercial banks, did contribute. but a lot of things contributed. proprietary trading, particularly proprietary trading in commercial banks, was there but not central. do not forget that a few years ago one rogue trading -- one rogue trader imperil the whole institution. he was not even part of the

trading operation. one rogue trader crossed -- cost society $6 billion. that suggests the risks involved in this industry. what i am doing is looking ahead. i want to make the distinction between what banks can do and what others can do. i assure you that if all those other institutions can get banking licenses it will be fair game for commercial banks to do all that stuff in greater volume. and at greater risk. that is what i want to remove. >> pricing of derivatives -- as you know, i used to head the chicago mercantile exchange. i may be showing my biases here. derivatives traders on the exchanges, as either futures contracts or options contracts,

obviously have protections. they are cleared every 24 hours, market to market. a lot of people in this legislation would like to have exceptions from that so they can do a lot of customized products that will not be cleared anywhere, presumably. the preference is that they are not transparent. we have to be careful in handling that. >> it is very important. i entirely agree with you. that is where the pressure comes from. some of that stuff can be highly profitable. there is a strong interest in keeping as much out of the trading operation, as much out of the clearing house, as possible. we have to fight against that. let me also say there are more ways into a market.

i think we need to review the strength of the clearing houses and the strength of the market to make sure the next crisis, the market does not breakdown and the clearing houses do not break down. that is part of the needed reform. >> a question over here, right at the center. >> i am formally of the sec and world bank. assuming for the moment the proprietary trading is severely limited, if not excluded from commercial banks, as well as proprietary derivative trading, and that it is confined to non- banks -- since virtually all the proprietary trading, and certainly all derivatives, are

highly leveraged, what is to prevent that non-bank, as it must, from borrowing and leveraging and therefore putting the risk right back to the commercial banks, who will be at risk on the landing rather than proprietary trading? if you cannot control the lending by commercial banks to prevent that risk, why can't you control it also in those who do proprietary trading? >> you anticipate my answer to your last thoughts. i would expect a normal regulatory approaches. they would be alert to the fact that banks loaned to other institutions. the big ones have special programs with brokerages. through the brokerage, a supervisor can monitor the

practices of the broker and make sure you are not am periling the bank by being overly liberal in lending to big traders outside. if the traders are big enough, there would be regulatory authority brought directly -- leverage controls over at least a handful of the big ones. that is harder to do if you are in the same organization. there are many ways of getting around it. there is incentive to play games. i am not going to cure every evil in the world, but i do not see any point in inviting the conflicts of interests and the risks that are involved. when we talk about this and you look at central american banks, what you are looking about today is tiny. the number institutions are less than the fingers -- the number

of institutions are less than the fingers of my hand. there are only two that do high- volume trade. you're not talking about a sweeping change to the existing situation. we are looking at 10 years from now. we're not looking at every operation with the commercial banking license. we are looking at commercial banks doing big volume proprietary trading. if there is no limit on it, the temptation is great. it rewards -- the rewards are so great. the rewards would not be so great if you take account of a crisis, but they certainly are tempting. >> i am here at the peterson institute and american university. i am sympathetic to your volker rule, but i want to ask you about the international dimension. in order for the volker rule to be effective, in light of the fact that so many of these

institutions are global financial institutions, whether you need other organizations in other countries to adopt the rule in order for it to bite. if so, what is the prospect that you see for europe and other jurisdictions to adopt it? >> it is certainly true that the effectiveness and sustainability of this approach would be greatly enhanced by coordination with other regulatory authorities. the critical one is the british. you have the two biggest financial markets in concert on this issue. you would have a big head start. institutions are going to run down to the cayman islands to do this business, and we will stop them if they do. if you get the british, you are a long way ahead. if you get the rest of europe, you get the european union to do

something very similar, then we are practically homa. at least at this point, as far as i know, japanese banks are not doing this. i do not think korean banks or thai banks -- they will eventually do it, but now there are no big threats. the effort has to be the u.k. and europe. i hope the president will set up a contribution to international consistency not just in this area but others. there is a meeting coming up in june. maybe there will be a commonality of approach agreed to. i do not think that is hopeless. the governor of the bank of england supports it. a number of politicians in the uk support it. we will see.

>> it is something you have not addressed in the volker rule, but i wanted to raise an issue. the system is designed to be built on transparency. in other words, accountants, redirating agencies. but the recent laymen -- lehman report tells us we are down to 2.5 credit rating agencies, four forirms from the big eight. the gatekeepers are so few, and shrinking every day. they are in the prisoner's dilemma. the regulators cannot afford any longer to penalize them. any proposals that are now in congress -- the credit rating

agencies are frankly not dealing with the real issue, a small number of credit rating agencies who will find virtue in acting together wrongly as opposed to acting individually bravely. that is the real problem. >> i think your point about credit rating agencies -- i agree with you that is a problem. if there were an easy answer, i would not have a clue. actually, i have sympathy for the idea we should be more liberal in permitting more credit rating agencies to appear, including a direct competitor with moody's, standard and poor's, and fitch. you could get more specialized credit rating agencies go. that would have a product that could actually sell rather than charging the issuer. i think this would be an interesting development in that market. i hope we go in that direction. i think it is sort of consistent

with the law. it is sort of consistent with the new legal proposals. in general, if you think i have a magic plan to eliminate financial crises, my objective is much more limited -- to eliminate them for the rest of my life. [laughter] >> i am morris goldstein, peterson. when i see the volker rule described in the newspapers, it has the elements to describe -- the ban on proprietary trading for commercial banks and the size 1, vis-a-vis the u.s. markets. you are enthusiastic about the first one. the second part, you think is reasonable.

i think you are wrong. i think the size part is more important. i am in favor of the first part as well, but i think the size part is crucial. you can imagine non-been financial institutions that get in trouble. if they are very large and interconnected i submit there would be pressure for the government to step in and save them. we do not have any evidence that economies of scale of these institutions exist beyond $100 billion of assets. now that we have the crisis, if this is the opportunity, why don't we envisage reducing them to something i would say -- better than the size of the market, gdp. give them 10 years to come down. why do we need financial institutions that have more than $2 trillion balance sheets? i do not see it. i am disappointed to hear you say you think that is unrealistic.

i would like to think it is realistic. i think that really is the key to doing something on too big to fail. higher capital liquidity counts. wind down authority counts. but the one that would really deliver is some kind of size limits. >> let me say i may be disappointed in myself. i guess my imagination is limited somehow. i think we would be doing reasonably well to prevent them from getting more concentrated. that is just a practical judgment. there is a slight moral hazard. it is not going to hurt my feelings. i do not know whether something can be done. i doubt it. if you can hold it in place now,

with the relative size -- how can you prevent, and this may be close to your point, three secondary banks getting together and making another one within the size limits that are suggested by the treasury? if you can store up some support for what you're saying, you're probably not going to be in the vanguard, but i will be interested in seeing what you can do. >> you mentioned in passing excess liquidity and international imbalances. let me ask a question that relates them. you're one of the few people who have addressed both the macro issues and the more precise regulatory issues. how much role the u.s. signed in the creation -- how much role do you assigned to the international imbalances -- to global flows of capital, the

fact that it generated lots of liquidity here, downward pressure on interest rates. therefore, some of the incentives to over borrow and to underprice risk -- there is a debate about that. how much weight do you put on that element? >> i put substantial weight on it. i think it is a contributing factor that facilitated the excess is in the american economy, which then encourage lending practices -- sub from mortgages and some of this other stuff -- some prime mortgages and some of this other stuff that led to the collapse. >> as one of the last academic defenders of glass stiegel -- of glass-steagall, i have support for the volker rule and what it

seeks to accomplish. much of the discussion of too big to fail has overemphasized one particular problem at the expense of recognizing a wider array of problems. this is what i want to pressure you on. you left the fed by october 19, 1987. allen was in charge. but your old friend jerry cordorigan was at the new york fed. the story is that on the 20th, jerry got on the phone and told the major u.s. new york clearing banks, "keep your broker dealers open. we do not want to force a massive sell-off in the stock market because the banks are withdrawing credit from these particular actors." that was not a matter of

rescuing large firms. it was a matter of rescuing the financial system. we had at that time many failures of investment banking firms in the '70s and into the 80s. there are sometimes systemic crises where it is the task of the authorities to step in with public money and public commitment to stop the crisis before its bid is completely out of control. it seems to me that on the discussion of too big to fail there has been kind of a loss of this notion that when the crisis become systemic that is -- then, we need to have public money at risk, and we should not lose sight of that. second point -- this time, big institutions were involved intimately in the development of the crisis, but that has not always been the case. in the savings-and-loan debacle, we had hundreds of institutions

that were doing odd things that got us into difficulty. in this instance, we had indy mac. it was not too big to fail, but it cost the fdic $8 billion of public money. at least my impression is that the so-called notion of corrective action and the rest of it that we have been sold as we have solved the problem for smaller banks and financial institutions -- that is not entirely credible. we need to maintain the focus that the next crisis may not look exactly like the last one. it is not only big institutions that can get us into trouble. >> i basically agree with what you are saying, so long as you continue to agree with me. i will agree with you. [laughter] i think the responses i would give -- there is not enough attention given. it is buried in this bill.

whether you had the kind of situation you seem to be describing, the agencies and the proper safeguards could declare an emergency where they would use good old-fashioned money to provide assistance to the market generally that would be necessary or might be necessary in the conditions you are describing. i think that is an important element. the fdic did during the crisis extend a guarantees to virtually all banks. if i remember right, a very sweeping measure. i suppose it is not inconceivable that something like that would be necessary again, which is now focused on bailing out the large institutions.

they benefited as well. i might say investment banks benefited as well, which is not something i particularly want to encourage. i think that the resolution authority is really for the big institutions. i do not think there is doubt about that. but it should act in a way that reduces the chance of spreading panic through the markets, so that the smaller institutions could be affected. there is no fail-safe measure for all this stuff. i do think, in the back of your mind or the back of the legislation someplace, that something like -- and happy as that may be -- unhappy as that may be, it is still necessary. >> you are earlier passed by rather quickly in your answer on international coordination, on

the issue of taking that beyond europe. particularly, you did not say much about china. at the same time, you mentioned earlier that 30 years ago japanese banks were big and held up as a paradigm that did not turn out to be quite right. you also said that the volcker rule is looking forward rather than backward. even though chinese banks right now have not really gone into some of the practices that got us into trouble, if you look forward and you look at the enormous increase in size in chinese banks, isn't this actually an area that should get a lot of focus? how, in your view, to chinese regulators look at the bulker rule? >> the chinese banks may be on their way to getting in trouble, but i do not think it is because a private -- of proprietary

trading. the economy is expanding very rapidly. if you have the united states, the u.k., and europe, it becomes -- i hope we are not so weak, relatively, that we cannot declare that this is international law. if chinese banks did not cooperate and they did a proprietary trading in a big way, we could say they could not operate in our markets. they are not going to get by with that very easily. you could say the same to the japanese banks. that would take getting the cooperation of the europe, the u.k. and the united states, at the very least. without that, we have a big problem. >> i am from the iif. my question is about the outside

risk. it is different and a bit broader. i would like to ask it at the end of your excellent presentation. assuming that the proposal you explained in your remarks is implemented and the proposal you alluded to but did not explain in your remarks, including capital requirement liquidity , capital boppers, and so on -- all implemented. what do you think the cumulative impact of those would be on the economy? the net community -- the net cumulative impact on the economy in your proposal -- if all the proposals are implemented, will be the net impact on economic growth? my proposal would have no adverse impact on economic growth. i do not see there is anything there that produces any. the banks are not doing it now

in any substantial way, even the ones that do it. the very big ones -- it is not a substantial part of their organization. there are people in the market ready to take proprietary risks. there was an announcement in the paper this morning that jpmorgan is buying through their equity fund a stake in -- what is the name of? "american idol." i don't think the united states is going to suffer if they cannot buy "american idol." that's what bothers me. the kind of thing you are discussing -- you could have capital requirements so high and liquidity requirements so tough and lending restrictions so vague that you would affect

growth, no question. you're talking about the whole banking system. you could tie them up with some and regulations would affect growth. i did not discuss it, but i assumed we would try to avoid that. it is a terrible thing. how high can you make capital requirements and still have a viable commercial banking system? if you make them too high, they may do more foolish speculative things to try to recover their losses. i think they're at in a delicate area. they are very sophisticated. i wish them well. i think it will take time to get a consensus. the history -- when we first made those up, that old crude version, the political pressure was to go very easy on lenders. everyone wanted easy mortgages. even the germans wanted us to

have a very casual reform against mortgages. you see the results of that kind of political pressure in terms of getting capital requirements. >> you had not shown your age until you trashed the social about you of american idol. [laughter] >> in jessica. i wanted to take us back to inflation and ask you a question about moderate inflation, which has picked up a little talk in the last few months. i do not want at all to caricature olivier blog chaanc's careful theoretical paper.

the one institution -- so many institutions have lost credibility around the world. the one success we have had in the last 25 years is in getting a handle on controlling inflation. as you point out, people do not remember things that happened before they were born. they can conflate thousands of years of history. it seems there is a certain abandon now about being able to talk about moderate inflation as a response to problems. of course, even if the most careful economist does it, it is music to the ears of some politicians who do not want to see fiscal crisis. i would like to ask you to speak to this notion of moderate inflation >> you know the answer to the question. >> but i would like you to speak

on the record about moderate inflation. maybe embroider your remarks with some of the things that henry wallace used to talk to us about so meaningfully in terms of inflation. it is not just a monetary concept that goes from 2% to 4%, but how corrosive people's expectations, but from -- people's expectations, and who it rewards. >> the director of research in the imf issued a paper a few weeks ago saying the way out of all this crisis is to have 4% inflation, which startled me. when i was in europe a week or so after that, i had a short interview. they ask what i thought of that proposal. the only word i could think of was nonsense. in the press conference, they

get a nice big headline -- bulker says it is nonsense. --volcker says it is nonsense. this is not being a little more relaxed. 4% is quite something. i do not know what i can say. once we lose sight of the ultimate desirability, the capacity of price stability, i think we have lost a lot and will never sort our way through these crises. i am so unreconstructed that it does not make me nervous that we have 0 price inflation at the moment. i applaud that. it happens in the middle of a big recession -- zero price inflation happens all the time. it comes out close to that all the time. it is ok with me. it is what it should be in

people's minds. it is more than a monetary phenomenon. if oil were not, how would you deal with that situation as a practical matter in the context of the euro. it is a very tough question. >> the administration he served in 1971 applied wage and price controls when inflation hit a roaring 3.4%. remember that. >> i thought it was 4%. it was only 3.4%? [laughter] >> you began with provocative remarks about the tremendous growth of the financial sector. i think it is tied to the growth of compensation. that is pretty widely known. we've seen that compensation has come back strongly. do you have any proposals that you think would address this in

some way to get the scale of the financial sector back into better proportion with respect to the economy -- get us on a more sustainable path? i do not have any recommendations for strict laws saying you cannot make this much money or cannot have that big a bonus or whatever. it is a pretty deep cultural thing. this kind of behavior, when i was a younger man, would be unbelievable. but people think they are entitled to $10 million a year. but they do. it is in their mind. if i made $20 million last year, i must be worth it because somebody was willing to pay me. that works in a narrow sense, but i think it does lose perspective in terms of the kind of functions that are useful for economic growth and stability.