american energy that keeps $400 billion here at home. i would rather it go to south dakota and saudi arabia. i'm very comfortable saying to the american people, let's develop our own energy. if you develop american energy, government revenue goes up dramatically because the government gets royalties. to give you an example of how much potential revenues you've got, we own 69% of alaska. alaska is twice the size of texas. if we own 69% of alaska, that is 1.5 texas's. you can say, look, we keep will give you half of texas. pick the 25,000 square miles you would like to keep as parks, wilderness areas, terrific. that means we get to develop 250,000 square miles, an area

the size of texas. can you imagine the net value? you get more people no longer afford and lower costs because they are no longer on medicaid and food stamps and welfare and unemployment. and you get more energy production and you get more revenue out of federal lands. all of those increased revenue flow with no tax increases. i spent years on this project. i chaired the medicare reject -- medicare tax reform of 1996. i have been involved in health transformation. it involves new thinking on the lincoln tradition. on social security, it is simple. every young american should have the right to choose whether or not they want a personal social security and counted the chilean model. it is a very simple model. i am against making things compulsory if you can avoid it. you go to them and you say,

would you rather have -- and you show them the quotes of obama in august saying, i may not be able to pay your shores of security check. do you remember that? do you want to spend 60% or 7% of the life working knowing that politicians may not give you your own money? or would you like your own account that you can control? would you like to have a system that has no estate build up or a a a system that has your money? would you like to have a system where there is a working age where there is no required working age. and by the way, over a million people over the age of 75 still work. this is a model for an industrial era society that is gone. if you get the kind of economic growth that these two great,

social security is fine -- that these two create, social security is fine for the next three years. they get two and half to three times as much money as they're going to get out of the current system. and medicare, very simple. we start with something that we publish a book on called stop paying the crooks. you would have thought that title was clear enough that even in washington it would have led to serious conversation. it did not have any impact. the senate bill transformation published in three years ago. i was very confident it would break through. no impact. here are the numbers, just as we understand what we are talking about. if you have an american express card, they use massive expert systems to track fraud.

so does visa and mastercard. how many of you have ever had a call to make sure you did the charge? and i am not making this up, just for the benefit of people in washington. [laughter] it is literally true. american express pays .03 of 1% to crooks. as a taxpayer, you are paying three and 33 times to crops. -- 333 times that to the crooks. is between $70 billion and $120 billion per year.

but it requires thinking to do it differently. it requires new approaches. i have talked to all three major cards and all three are ready to go to the the congress and explain it. the head of i.t. -- ibm did go to the president and explain it. it did not work. this is why lincoln talked about new thinking. you have a paper based bureaucracy trying to keep up with crooks who have a and ipad. it is impossible. second, you give people a choice. why did you just passed tom price's law that says if you are successful and you would like to contract out, you are allowed to contract out. if you want to pay more to the doctor or hospital, you can pay more. every liberal will tell you that is impossible.

medicare today is more restrictive than the british national health care service. why not allow people who are successful to have a choice? you could institute next year paul ryan's model of support, but make it voluntary. and then you say to the insurance industry and others, to you want to compete for the customers? fine. if you want to stay in the old system, fine, but we will give you more and more opportunities to have better choices. we do not compel people to go to wal-mart. you'll hear some folks say, oh, senior citizens get too confused. you cannot allow them to have this many choices. the idea of walking through and saying to my mother when i take her to wal-mart, there are 250,000 items at wal-mart. maybe you do not want to go to all of the aisles.

[laughter] she would think i was crazy. but the right to choose is different than being forced. there are ways to modernize social security and medicare that will save money in the system and allow people to get better interactions. you want to balance the federal budget and i want to recognize mike george. take it out. -- take a bow. [applause] he is an example of why america is a unique country. his first client was going in 1981. he did pretty darn well. he made enough money. then he decided to take his own lot -- his own money voluntarily to organize and his promises that if you modernize the federal government, you will save billions. in order to apply modern

management to the federal the 130nt, you end of thend year-old regulatory system and you can move every day with continuous improvement, which is part of getting to a quality system. this is a big, not a small idea. of i am the only speaker of the house in your lifetime to balance the federal budget. we paid off $405 billion in debt. i am here as testimony to my own candidate saying to you -- [laughter] i know we can do this. and we should pass a balanced budget amendment so future generations are reminded not to say yes to every interest group that shows up. sixth, we need to control the border by january 1, 2014. this is not hard. anybody who thinks this is part -- i have written two novels about world war ii. i used to teach about it.

from december of 1941, the victory f. japan to 1945 is five years. in 3 -- is years. it recently took longer to build a terminal at the atlanta airport. you can do that if you are really rich and nobody threatened to. but if you have real competitors and you have real problems, it is useful to apply common sense. i have said, for example, there are 23,000 department of and security personnel in the washington area. if necessary to achieve this goal, i would be willing to move half of them to texas, new mexico, and arizona so that they can serve on the border. that would double the people available. but this idea that you cannot control reporter is nonsense. every country in history that

wants to, does it. it is a matter of willpower. we want to pass and bill in 2014 to control the border. and you go do it. that does not solve all the problems. is the beginning of a process. we need to deal with the issue of appropriate immigration. we need to modernize the current visa system. it is actually more expensive to get a legal visa and it is to sneak into the country. that strikes me as backcourts. -- backwards. we need a serious national conversation about national security. we are in vastly greater danger than anybody wants to talk about. and part of that danger is the rise of modern weapons. part of that is terrorist groups who hate us. part of that is the rise of china. part of that is international crime on a scale that we are not prepared to deal with.

and which manifests itself, for example, in mexico. this conversation is tragic and dangerous that our leads are exhausted, our news media as timid, and as a result we are not having a discussion about national security. in some ways, it manifest itself in things like admiral mullen, the chairman of the joint chiefs of staff, who has just now said -- he has come to the conclusion that pakistan is not our allies. that is a very bold thing to say in washington. it is a very obvious thing to say if you are anywhere else in the world. if bin laden was living for five years in a building on lyell from there -- a mile from their defense university, using that was physically possible without the pakistani government knowing it? of course not. and this proposal that we keep 3000 troops in iraq is, i think, very frightening.

3000 troops is too small to defend itself. it should be thought of as a target. this administration is making political decisions that risks the lives of young men and women in uniform and is profoundly wrong. my dad served 27 years in the army. i know what military life is like. it is wrong to put american debt risk for political reasons and leaving only 3000 troops. we ought to either leave enough to defend themselves or get them all out. you leave a small group in a dangerous neighborhood and somebody is going to try to kill them. is a very dangerous thing to do. i wish we could have two or three debates only on national security. i will be making a speech that outlines the war later on. imagine a projected cost between now and 2015 of $20 trillion.

-- between out and 2050 of $20 trillion. in washington, this would be a radical and even weird idea. that is what alzheimer's is projected to do. and after that, parkinson's, autism, mental health. brain science will be the most rapidly accelerating knowledge. in the world in the next 25 years. experts say if you could send to postpone it, not cure it, but simply postpone it for five years because it is largely a disease of aging, you save somewhere around half, $10 trillion. if i could save $6 trillion to $10 trillion, would i do? -- what would i do?

this is not an irrational conversation. in washington is weird. i cochaired for three years department -- and autism working group. -- and alzheimer's working group. it is the most feared disease for people over 55. at a financial level, it is 1.5 federal debts. i want to propose very dramatic -- this will be a speech in the near future and i would like to give it at the university of iowa on the scale of change that we need to fundamentally rethink how we explore brain science across the board. how do we help these diseases? the net payback will be several times the national debt in the next generation. and to have an industry helping

the entire planet deal with these problems will create at an incalculable number of new jobs. the ninth one is the other one. there is no judicial supremacy. this is an artifact of the warren court in 1958. in the federalist papers, alexander hamilton says, the judiciary is the weakest of the three branches and will inevitably lose in a fight with the two elected branches, the legislative and executive. in the judicial reform act of 1802, thomas jefferson, the secretary of state was james madison -- so you have to assume that the two of them knew something about the constitution. they abolished 18 out of 35 federal judges. they say, go away, you do not have a job anymore. some of them tried to file a lawsuit claiming it was unconstitutional. and the judges said, are you

crazy? if we agree to hear the lawsuit, they will abolish our offices. is a huge fight. people forget that in the declaration of independence -- look at it some time and look at the number of citations of british judges. the second most popular complaint of the american people have turner taxation without representation was imperial british judges acting as dictators. when you have a judge who in san antonio on june 1 issued a ruling that not only could students not pray at a high school graduation, but they could not use the word prayer, they could not use the word god, they could not use the word benediction, they could not ask the audience to stand, and he would arrest the superintendent if any student broke his order, that judge is about as anti- american as you can get. this is a country that was founded by a document that says, we are endowed by our creator.

this is not about theology. this is about and and then the effort -- an unending efforts to fundamentally change america. we're going to have a very big fight over the proper role of the judicial branch, because the idea that appointed lifetime lawyers get to dictate the future of america is crazy. jefferson was asked about it at one point and he said it would be an oligarchy. lincoln in his first inaugural, speaking of the dread scott decision, which would have eliminated slump -- slavery in the whole country, said if nine people can dictate to the exclusion of the other branches, we are not a free country. we need to enforce the 10th amendment. washington is too big. washington is too powerful. we are citizens, not subjects.

washington is supposed to serve us. the only way to fundamentally change is to go step-by-step and take everything back home. in order to shrink the bureaucrats, you have to grow citizens. this is a fairly decisive first step. we will flush it all out -- flash it all out between now and some kemba 27 of next year. -- september 27 of next year. the only way you're going to save this country is for the american people to save it. no single president, no set of politicians, no magic. just hard work, common sense, and a willingness to put the country first. i would like to, if i can, take questions.

and josh, by the way, is learning some school credit today. [laughter] he is an example of what this is all about. my daughter, jackie, is here with her two children, my grandchildren, maggie and robert. politics is all about their lives one day if we do our jobs. >> you said that you are not for state impose religion, but from what you said it sounds like you support religion imposing its ideas on the rest of us. i am very concerned that a branch of christianity has gotten some of its tenants into our laws, like stem cell research, linking foreign aid to reproductive issues and so forth. i was pleased to see -- i did not think you have a lot of

social issues in your contract. if you are president, would you work hard to make christian social issues the law of the land? >> the two that you just cited are not necessarily christian issues. i think orthodox jews have as a profoundly believe in those issues providing a lot of other people do as well. i am very much for adults stem cell research and i'm very much for stem cell research that comes from, for example, any device other than killing an embryo. but i'm opposed to getting in process of killing children in order to have research materials. if you look at what is happening with stem cell research, we have less and less demand that you have a thing except regular stem cells because we're learning how to use them. for some people i think that is an ideological fight, not a scientific side. i would not use the american tax

dollars to pay for abortion. i do not think the people of the year and states should be paying for abortions. i am very much in favor of adoption. i was adopted. my father was adopted. i think we should make it very much easier and more desirable to be adopted. i did not desire to impose a particular branch of christianity. my argument about religion is different. we said in our founding document we are in doubt by our creator with certain inalienable rights. should we teach children that are not? sure they learn what the founding fathers meant or not? abraham lincoln said in his inaugural address and he reverences god 14 times and has two quotes from the bible. can you explain lincoln without understanding that he read the bible every afternoon, or is it just bad history because we now have this politically correct model that says we cannot tell

you anything about religious beliefs anymore? the idea about taking school prayer out in 1963 made the country better, i do not see any evidence that the children that do not spend a moment recognizing that they are subservient to god -- now the average guy in any way they want to. -- now they approach got and anyway they want to. i always tell my friends who do not believe it in this stuff, how do you believe we came to be? we could have been rhinoceroses, but we got lucky this week? obviously, i assume that is better to be human than a rhinoceros. [laughter] nobody wants to see the headline, "gingrich shows anti- rhinoceros hostility."

[laughter] >> i cannot see how $14 trillion going to $16 chilean national debt is going to be overcome. do you have any idea? >> you put simply what i'm trying to describe up here. for a while i carried a poster that says to plus two equals four. and i actually got that from a movie. there were signs that people put in their windows in poland. the reason i carried it around for a while was to say to people -- lincoln says at one point, if you cannot get your opponent to agree that 2 +2 =4, you have other problems.

we're currently on a trajectory to go money to the chinese and get our oil from offshore. how do you get to a balanced budget? we did this as a conscious act of wilke in 1985. we said -- 1995. redounded in four straight years. how do you do that? pretty straightforward. spend less than you take in. everything else is details. you are increasing where you are taking in and i would do it by generating revenue without a tax increase. or you do it without -- by cutting spending and i would do it with little pain. if you get to where you are taking in more than you are spending, you have what is called a surplus. this is not theoretically hard.

we did it in your lifetime. nobody in washington wants to think about it. can we do it? of course we can do it. but we currently have a machine whose entire existence is based on spending enormous amounts of money. in order to change, you are now going to have to defeat the machine. this is why sacramento is such a mess. it does not matter who wins the election in california. the machine own suit sacramento. californians can i get a grip on their government. if you look at what i've done over my career, this is a very, very bold proposal. it is saying, for example, the whole idea of balancing the federal budget, we are saying to end the civil service system as it currently exists.

do not make it impossible to fire someone who is incompetent. there is a series of very bold proposals here. if you are prepared to go through the level of change i'm describing, will get to a balanced budget and pay down the debt. if we will pay off the chinese and create our own energy so we do not sit -- need to send any money to brazil and we will be a much wealthier countries with greater national security. but it is real change. it is not just more of the current model of washington bureaucracy. >> i'm a former marine and combat veteran and you said that 3000 people left in iraq would be a target. i agree with that. if the other way is to have nine or more, which where would you want to go? >> with the current president, i would go for nine. >> thank you -- i would go for none.

>> thank you. >> i think the right now, the iranians are on offense in iraq end we are on defense. it is going to get worse, not better. the same problem with the embassy. the embassy is way too big, way to indefensible, way too expensive. it was designed for a different world. and the world that obama wants, it makes no sense to half the current american embassy in iraq. it is much too big. it is over $1 billion. what are we doing? we have to rethink the entire region. general john abizaid, who i think is the only four-star general who speaks fluent arabic, said to a couple of weeks ago, we have a bigger strategic deficit than our fiscal deficit. i think people should take that really seriously. we are grossly underestimating how dangerous the world is and

we have no strategy to match those dangers. it is a very serious problem for us. >> first, speaker, thank you for coming. i have been following you and some of the other candidates for the last couple of years or so. you seem to outline a lot of specific ideas. can you explain your thoughts on why you are not being better received across the country in some of the polls? >> i'm glad you asked it now instead of a month ago because the polls have gotten better. [laughter] my family, we all went through a lot of conversations about whether or not to run. we started with the assumption that if i did run, i would get

attacked prefer to sleep. certainly, june and july met that standard -- attacked pretty ferociously. certainly, june and july met that standard. and some of it is my fault. what i'm trying to do is very different. it is something i did with reagan in 1980 and something i did in 1994, that is, it's positive, ideal oriented campaign that reaches out to hold new groups of people. for example, people interested in brain science, modern management, a new coalition in tradition -- in addition to the traditional republican coalition. and i made a mistake in early spring of bringing some very fine consultants. this is not about them personally. they're all smart people -- and anybody who watches money ball will know i'm talking about. they're all smart people doing .ne thing i no i'm not going to run attack ads. i cannot compete with the sum of

money. -- with some of the candidates on monday. i can attract an enormous amount of volunteers and network them together, and in the process build a new way of thinking about governing america. i lost about four months being involved in that. the other thing -- i want to say this just right. remember, we just talked with a former combat marine. this is a country in which the media is more comfortable spending two or three weeks on a congressman's truly bizarre tweets then it is on serious analysis. bring science could be the largest single breakthrough -- brain science could be the largest single breakthrough in

saving medicare and medicaid. if you look at the front page story about the contract and you look inside, opposite it is its story on dementia. and i think every fifth person on medicare has dealt with a person in their life with extreme dementia. trying to get the news media to understand what i'm talking about makes you feel stupid. fundamentally rethink the entire garment system. -- government system. rebalancing the constitution and the tree branches of government. if we can get the media to slow down, get away from gotcha questions, actually have some open debate -- i will make it clear, if i am the republican nominee, i will challenge the president to seven lincoln- douglas style debates of three hours each with no timekeeper no moderator. we are in enough trouble that we

deserve to have a serious, adult conversation between the two competitors for the president of the united states and not have mickey mouse situations where reporters -- and if you look at some of the articles that have come out about how they have planned some of these debates, the level of cynicism on the part of some of the people asking the questions is disheartening. and it is unworthy of the united states of america. if you have a serious candidate who wants to talk about serious issues, your first challenge is to get the elite media to decide that they will give up the cynicism and spend at least as much time on this as they do this stuff that currently passes for news. [applause] let me thank the principal port for having us here. i can take one more, ok. did you notice how obedient i

was? we can take one more. [laughter] >> you mentioned deregulating and making it easier and less costly for companies to do business, but how do you go about regulating enough to hold people accountable and keep them from cheating the system and the greatness without making it so hard and so costly to do business? >> i think that is a very powerful question. i think part of it is that you need more transparency and less -- fewer bureaucrats. and you need more ability to respond if they lie to you. i am not for a society in which there are no rules because i think people will on occasion be greedy and lie and cheat and steal. let's be clear. there are profound reasons --

supposedly, theodore roosevelt was reading about in sinclair's "the jungle -- reading upton sinclair's "the general." -- "the jungle." and he was reading the part about the gentleman who fell back into the machinery. and he supposedly bad day the but the food and drug administration. -- that today developed the food and drug administration. i was a kid in world war ii and you could not always drink the water. i am for those requirements necessary as a base line. i am against turning massive power over to bureaucrats who

inevitably politicize and are inevitably ignorant. they are a thousand miles away. you have to have laws that hold people accountable. you have to have laws that provide for transparency. we now live in an age where, frankly, with the internet and everything, you have enormous amounts of information flow have relatively low cost. that is why this gives you a way to have a real safety and efficiency and productivity. it would -- we ought to be able to have all three. i will say this again. i'm not going to ask anybody to be for us. but if you want to be whitney,

then -- if you want to be with me, then something between 2005300 executive orders will be filed -- between 250 and 300 executive orders will be filed the first day. and we can and arch of an anchor and children will once again live in the safest and most prosperous country in the free world. that is what we owe them. thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> is this the heart and soul of your campaign? >> yes. this is a direction that we should go. >> what should we read into it if your poll numbers don't go up? >> that it didn't work. "do you feel that the details and specifics will separate you from the other candidates? >> we are in the kind of trouble as a country that puts a premium on having solutions rather than slogans and this

will be a unique election in which people are really worried and they want to know what would you do and how would you do it and why should you believe it. and the only candidate who has balanced the budget. >> are you worried that you are a foreign off some of the voters in this 30-second world? >> know. if you don't want to read all of the 23 pages, tell me which you want to read about. i think that citizens must be willing to learn and i'm prepared to have a conversation on the grounds of in the end, people care. people are worried about the future of this country. not in a shallow way but in a deep concern. i hope to provide them the information to reform them of the options for saving america.

>> the dramatic fluctuations shake the foundation of your view on social security? >> any look at social security over 50 or a hundred years, i don't ever tell anyone to go in and out of the market on a one week basis. as a general at system, you can come out better than you do with the kind of return you get out of social security. >> why give people a choice with a dual system? doesn't that make it more complicated to administer? >> not that much. the flat tax is easy to it minister. steve forbes learned campaigning out here a very painful lesson which is that you cannot impose a flat tax because it comes translated into he will take away your home mortgage or

whatever your particular thing is. the only way to give people an opportunity is to have it as an option, not as a replacement because it is too hard to get people to take the risk. you might only have a small amount of people making the choice. giving them the right to choose is very important. >> there is a small core hurts of troops in iraq, would you pull them out of other countries? >> when you are next to iran and you have the level of overt hostility that a number of leaders have expressed in iraq, you have to think about it long and hard. i would say the same thing. you want to be large enough to defend yourself or you want to get out. you don't want to become small enough to be vulnerable.

you have to do that on a country by country basis. the deeper question is what is our grand strategy to from that ramallah is saying this as he leaves. this is very sobering what he has said about his view of pakistan. this will affect your whole thinking about the scale. >> how are the numbers looking? >> i will not answer you. you should really go home and think about why you would even ask that. >[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> tomorrow, texas gov. rick perry holds a town hall in new hampshire. live coverage starts at 6:00 p.m. eastern here on c-span. watch more video of the candidate, see what political

reporters are saying and track the latest campaign contributions with c-span website for campaign 2012. this helps you to understand the campaign. also links to media partners in the early primary and caucus states. >> former bb and t chairman spoke about the financial crisis. this is hosted by the harvard law school to party. this is an hour and 40 minutes. >> good afternoon. i'm the coach president of the harvard law school to party. on behalf of my fellow co- president, i am proud to introduce today's speaker to my fellow students and members of the community at large.

hings we constantly discuss and debate in law school is the virtue of free markets. and the ability of each person to engage in rational trade with this fellow citizens to generate a value. most of our professors seem to adhere to three axioms regarding economics. business will prey on consumers to the extent that they're able to. participants in the free market are ignorant of their best interest is and need to be guided by public servants. this self interest this of businessmen means that they are never going to help their fellow man unless the government forces them to. story contradict each of these axioms. he began his story -- his service in 1971 and managed a wide variety of responsibilities. he became president of bb&t in 1997.

during his tenure, bb&t grew from $4.5 billion to $152 billion in assets. his success was inseparable from that of its customers. that success derived from multiple -- multitude of successful partners with businesses large and small. he is a graduate of the university of north carolina at chapel hill. he received his master's degree in management from duke and diversity -- duke university. he has received six honorary doctorate degrees. he has been inducted in the north carolina business holophane. he received lifetime achievement award from the american banker. he was recognized by the harvard

business review as one of the top 100 most successful sec -- world in the last decade. he has piled academic achievement on top of his business success. in addition to all of this work for bb&t, he has given generously to his fellow man. the bb&t has spelled the programs at over 60 universities across the country to encourage the moral and at the could -- morals of capitalism. this background makes him uniquely qualified to discuss the most serious economic crisis to hit the united states since the great depression. one of the largest challenges to

free-market capitalism and our nation's history. ladies and gentlemen, i am very proud to introduce mr. john allison. [applause] >> good afternoon. it is a pleasure to be here. i always enjoy talking to bright young people will be the future leaders in our society. my focus of this conversation will be on the great recession and the ensuing failed economic recovery and the financial crisis that created that phenomenon. i wish i had a more fun topic to talk about. it is an important subject to talk about because of the broader implications and the decisions that will impact the quality of all our lives. i have five basic things. financial crisis was primarily caused by government policy. we do not live in a free market

and the united states. we live in a mixed economy. the mixture of various a lot. the least regulated industry is technology. the most regulated industry is financial services. it is not surprising that the most regulated aspects is where we have the biggest problems. government policy created a bubble. that bubble burst, destroying the trillions of dollars of wealth. a number of financial institutions made some very serious mistakes. those companies should have been allowed to fail. however, their mistakes were secondary in the context of government policy. almost everything we have done since the crisis started will reduce the quality of life and our standard of living forever. we've made a lot of serious errors in terms of improving our long-term productivity.

finally, there were a number of economic problems, the real cause of the financial crisis and the real killer or philosophical. what happened -- and a real cure is philosophical. we built too many houses, we build houses in the wrong places. we should have been investing in technology and manufacturing capacity. in education, agriculture. we should have saved more and we should have spent a lot less. we should have borrowed a lot less. this miss investment was destructive for a couple of reasons. housing is consumption. we consume housing. it is not like a manufacturing plant. once a house is built, it does not create any new job. we made a huge mis investment

and consumption instead of production. we told a lot of people how to do the wrong things. for 15 years, we have this housing boom. we drove a lot of jobs overseas because construction rates rose. this is not just the destruction of wealth, it is the destruction of productivity, the destruction of people's ability to produce and create. how did we make a mistake of that magnitude? three primary culprits. the federal reserve, the fdic, and government housing policy -- freddie mac and fannie mae. the fundamental cause of the financial crisis was errors made by the federal reserve. something that people that study economics and no is that in

1913, the monetary system in the united states was nationalized. we do not have a private monetary system. the government owns the monetary system. you cannot go out and print your own money. if you are having problems in the monetary system, by definition, they are government costs. -- caused. the federal reserve was created in three to reduce volatility. unfortunately, what the federal reserve is the reduced volatility in the short term. in a free market, we are not omniscient. free markets are always -- that corrective process is very productive. it allows us to reallocate resources. when you take out the downside of the correction process, all you do is push problems out to into the future. it is analogous if you do not

discipline your children. by trying to moderate the correction in the economy, they made them much worse. in addition, the very existence of the federal reserve allows the federal government to leverage dramatically. since the federal reserve was created, the leverage by governments in the united states has grown exponentially. why is that? california can borrow a lot of money because they can tax people. they will run into a limit some day. on the other hand, the federal government can borrow a whole lot more money. when you can print money, it is a huge temptation to borrow. we have had a dramatic increase in leverage since the creation of the federal reserve. we had some very specific errors made by the leaders of the federal reserve. alan greenspan wanted to be the

maestro. he wanted to be the hero. in the early 2000's, he created- interest rates. what that means is that inflation was higher than the interest rates. inflation was running 3% and you could borrow money at 2%. ben bernanke, the current head of the there are reserve, when he took over the federal reserve, he converted interest rates. short-term interest rates are higher than long-term. that is not unnatural phenomenon. only the federal reserve can do that. if you invest long, you want a higher return because it is riskier. banks make money by borrowing short. if you convert the yield curve and create negative short-term rates, the margins go negative.

that is why -- we are buying watermelons for $10 and selling them for $8. the banking business is a funny business. you can get higher interest rates by taking more risks. if you look at most of the bad loans that were made, they were made during the periods of inverted interest rates. at the same time, the federal reserve, economists and ben bernanke were setting, this would not create a recession. not only did he give us incentive to create risks, he said, everything is going fine. in a fundamental sense, it is not mathematically possible. the secondary factor was the fdic. that sounds like a good thing. however, it destroys market.

bb&t took over a failed bank in atlanta. a lot of banks failed in atlanta. it is a very typical story. 10 guys in the hotel business raised little capital. leverage that capital dramatically. they lend that to their cronies in the motel business. those counties go broke and that community bank fails. large financial institutions that fail, countrywide, washington mutual, all financed high-risk lending operations using fdic insurance. without fdic insurance, the depositor would care about the strength of financial institution. they finance those operations. the proximate cause of the

financial crisis is government housing policy. this goes back along time. the government is trying to raise the homeownership rate. homeownership is a good thing. homeownership is a good thing in one context for however, there is no evidence that owning a home changes human behavior. the evidence is the opposite. giving somebody a home does not change behavior. it is consumption versus investment. we did it with the tax laws, community reinvestment act. the big event was a decision made by bill clinton in 1999. he set a goal for freddie mac and fannie mae to have at least

half their loan portfolio in what is called affordable housing. a number of economists said, that is risky. the legitimate affordable housing market is not that big. they will have to take a lot of risks. freddie mac and fannie mae,. government sponsored enterprises, even before they got in financial trouble, they were leveraged 1000 to 1. no private company would be able to leverage at that level. when they failed, they owed $5.50 trillion.

now you owe it as taxpayers -- congratulations. they absolutely dominated the subprime mortgage market and day the -- they had a huge dominant market share and everybody else was competing. they kept lowering their standards. politics played a giant roll out with freddie mac and fannie mae. i can tell you that from the personal experience. we were running the numbers and it was mathematically certain there were going to fail. anybody can hear said they were going to fail. we met with congress on numerous occasions and they were absolutely not willing to kill us. ar us.

dodd-frank -- ready-made and fannie mac were huge political contributors. they were the biggest single contributor to the democratic party. they simply evaded. if you look at the financial crisis, there are a lot of nuances. the federal reserve planted too much money to avoid a correction that led to a bigger correction. that correction got focused and the real-estate market because of freddie mac -- freddie mac and fannie mae. it was a destructive bundle -- bubble because we over consumed. we over consent and that is why we are having such a hard time restoring our production capacity. let's talk about some other aspects. one of the more destructive

products that was outside of bernie madoff and -- any day and freddie mac. -- fannie mae and freddie mac. each month you owed more on your house. it was bad because you could qualify at $500 so you could buy a much bigger house. these products work very popular in places like california, nevada, southern florida. house prices had been rising very rapidly. the theory was go by a big house and refinance in five years. they were not subprime targets. they were targeting mostly young people in the expectations that their income would go up. it turned out to be a very destructive product. people had massive losses in

their mortgages. guess to the big players were. washington mutual, countrywide, all large financial institutions that financed those loan portfolios with fdic insurance. they could not have raised the capital and the private marketplace. in addition, they got into a vicious cycle with higher rates that they paid on specific deposits. it became a vicious cycle using fdic insurance. bb&t chose not to offer a bad product. we chose not to offer it over ethics, not economics. however, we knew that these were bad products. we did not know the disaster was gone to happen in real estate, but we knew that home prices

could not appreciate in a year. we were setting up a lot of young people for economic disaster. one of our fundamental commitment is to help our clients achieve financial success. never do anything that you know will be bad for your client. easy to make a profit in the short term, but it will always come to haunt you in the long term. if you do the right thing for your client, they will be more successful. we decided not to offer the product over ethics. i want to come back to that in a few minutes. one of the interesting questions is how did the federal government and up dominating house financing in the united states? it is a very unusual phenomenon. it is not a natural phenomenon. our housing finance markets is far more specialized than europe. our housing market is far more

socialize than the european housing market. if you go to a bank with a 95% probability, they will sell it to freddie mac and fannie mae. they have about a 95% market share in the united states. we have a government dominated financing market in the united states. how did it happen? there are lessons to think about. it really started back in the 1950's. it is interesting what happened. when i got my first mortgage in 1975, i went down to a local savings and loan. you had to put 20% down. at those times, interest rates

were 8%. the success rate were incredibly good. very few loan losses. they knew they were going to hold the risk for 30 years. into the market. they understood the local real- estate market. the savings and loan industry was systematically destroyed by a government policy. lyndon johnson was to create a great society and wants to have a war in vietnam, said he did not want to tax people. the federal reserve lots that to happen. -- the federal reserve left that to happen. there is a long lead time, but in 1970, that turns into a roaring inflation. by the end of the 1970's, our financial system is under severe stress. the total reserve steps in, drive the prime rate to 21%.

they have been doing it for 70 years and suddenly they're paying 16% interest. not a good formula. the few that may get to that crisis, they get some help from the regulators. the fslic cost the taxpayer $300 billion. they had to go work for the fdic. none of them ever got fired. the regulators of the savings- and-loan industry encouraged to hedge their home mortgage portfolio. here is the dilemma. you cannot have lunch a home mortgage. when interest rates started to fall, they prepaid their

mortgage. the regulators decided that you could not make money in home mortgages. they forced the savings and loans to get into the commercial real-estate lending business. shopping centers, office buildings, commercial property. they helped create a commercial real-estate bubble that burst in the early 1990's. only a handful made it through that cycle into that vacuum is where fannie mae and freddie mac took over the business in the u.s.. bb&t, we could head are risks because we were making loans to businesses. we could not compete with the federal government. they are leveraged 1000 to one, they have lowest -- the government guarantees your debts and you have an advantage. right?

they did not do subprime mortgages. they drove all of the private participants out of the marketplace. by the way, i have no empathy for golden west. they could not compete against the federal government in the traditional home mortgage business. the option was to go out of business or be creative if they had not dominated the home mortgage business, it probably would never been invented or would have been a much smaller portion of the market. it was invented in the u.s. in reaction to compete against the dominant government competitor. after they take over the prime market, bill clinton and the

government in general but lot of pressure on ready-made and danny mac on the fannie mae and freddie mac. traditional banks, we did not to subprime mortgages. they had to find people to help them. they went to people like countrywide, washington mutual. they set up these programs so these companies would generate subprime mortgages. they kept lowering the standards because they had to meet a portfolio or congress would not guarantee their debts. they got more broker relationships with more brokers. to go back to the old savings and loans, in the broker model, you make a loan and use salad. you really do not care about the rest. -- the risk.

it leads to a lot of default. an individual says, i made $75,000 last year and want to buy a house. he rarely made $65,000. -- he really made $65,000. some of that volume went into fannie mae and freddie mac. a fair amount of that went into the international market where these things were securitized. the security instrument is what made people buy them, standard and poor's and moody's are interesting entities. they're the only people that are allowed to write financial as to ms. that are held by public

pension. that means they have an oligarchy. they're supposed to know what they are doing. they have a special certification. they did an awful job. that is where so much toxic mortgages were bought by hedge funds, pension plans. people say the investment bankers were greedy. that cause the financial crisis. i will guarantee that investment bankers were greedy. i have been in this business for 40 years and wall street has been consistently greedy. but they were no more greedy in this for years. they were exactly as greedy as they were. it is the nature of the beast.

they did make some very irrational decisions that had some severe consequences, but they are not any more or any less greedy than they always were. let me tell you call that unfolded in the capital markets and what happened. a lot of people that want to blame it on grade from that statute. -- greed throw that out you. the idea is pretty simple. it is a credit default obligation. it is a way to diversify risk. it started out -- a bank makes a loan to general electric. it is a $5 million loan. even though they're a good company, they want to diversify their risk.

they are looking at the same opportunity with their mortgage bonds. they have a mortgage bond portfolio. the people that would like to buy a-rated bonds, and the way we can do that is to create trudges -- tranches. they went about selling these bonds in the marketplace, making a lot of money. ben bernanke in first the yield curve. i am sitting over at merrill lynch and i need some assets in my own portfolio. the only assets that i can make a positive spread and is a c- rated mortgage.

i do not think it is that the height of a risk. i will hold it and sell the a's and b's. when the meltdown started, merrill lynch loses 100 cents on the dollar. a year before they went, they were making a fortune. they go broke very rapidly. another interesting thing in the capital markets is something called a credit default swap. that sounds very esoteric. that is where aig was a big player. it is also a simple idea, it is an insurance policy. i have a portfolio of be-rated

mortgages. for some reason, i'm going to hold that portfolio, but if i can get them rated a, the sec will let me have a lot less capital. all i have to do is to go over to aig, and they issue me an insurance policy guaranteeing me that bonds will default. i paid them a premium. the insurance premium -- aig does this on a huge scale. they screw up a badly. the risk is greater. one of the interesting questions, why did we saved aig? aig is the large insurance company, but the subsidiaries --

there was something called a counter party. this is another explanation. the county party risk -- if you are the secretary of treasury and you spent your whole life at goldman sachs. you can honestly believed that if aig fails, it will take out goldman sachs. that is simply not true. bb&t had a lot of derivatives and we hedged all for derivatives risks. we were doing business with bear stearns for 80 years. we did business with lehman brothers and we lost not a penny. only a few people, like goldman sachs, were really out the risks. that whole systems risk argument

is an interesting argument. a couple of other thoughts about the crisis. there is an interesting myth is the the banking industry was deregulated during the bush era. absolutely not true. we're not deregulated, we were missed regulated. -- misregulated. regulations increased exponentially. there was a huge focus on two things. the patriot act. sarbanes obsolete -- oxley. we are behind one back from the early 1990's. the patriot act was bare spots to keep -- catch terrorists.

do you know what the probability of us catching a terrorist is close to zero. if there are that dumb, they will get caught anyway. if we caught a terrorists, -- the only significant conviction of the patriot act is eliot spitzer. he was convicted of soliciting prostitution. in some ways, that is humorous and in some ways, that is poetic justice. in other ways, it should scare you. what is the terrorist risk of the governor of new york? why should that be used? what information is being gathered under the patriot act? i will tell you that your privacy is being invaded on to

the patriot act. there is a huge focus on the mathematical modeling. all the mathematical models failed. we were told numerous times that if we just had mathematical models, we would be in great shape. they can be very useful tools, but they have something called detail. -- call the tails. if something is one% probable, gives it enough time. if you build your house in a

flood plain, you will have a flood. nobody can mathematically modeled human behavior under stress. all these models collapse. one of the biggest myths right now is that banks are being encouraged to make loans. the banking regulators have dramatically tightened lending standards. this happened in 1980, 1990. the regulators always overreact after the fact. if you are a government regulator, you are a lifetime bureaucrats, you are not at risk, the only way you can get in trouble is if your bank is in trouble. it is a self protecting mechanism. i guarantee you that bb&t is

putting people at a business that should not be at a business because of the banking standards. it is a tough regulatory environment. let's talk a little bit about what we did economically and we should have done. one of the most important things that we should have done is let markets correct. that is a very healthy process. when you prevent markets from correcting, you push problems into the future. let me give you a couple of examples. keeping businesses in business that should not be in business is a good thing. citigroup has failed three times. they will get a bigger and they will kill again in 15 years. -- fail again in 15 years.

main culprits the of creating problems in the automobile and the street. they invented the one under% seven-year car loan. what that meant is that a lot of people over a lot of money on their part that it was worth. worth. than it was so bb&t has been in the automobile business for 50 years. a more interesting story is chrysler. chrysler failed in the early 1980's, bailed out by the government. they failed again. what if chrysler had been allowed to fail in the 1980's? their plans -- their resources

would have been redistributed. where would they have gone back some of their resources with a gun to ford and general motors. -- there are resources would have gone to ford and general motors. what they learned is the government is going to bail us out. if chrysler had been allowed to fail, they would have learned a different lesson. a lot of the resources may have gone to a private u.s. company. that company may have been a non-union company. people talk about the genius of the japanese automobile industry. the only genius is they operate in the non-union plants. we would have a much healthier automobile business if chrysler had been allowed to fail.

we of not allowed people to foreclose on houses that kept the housing market from the bombing. it has driven house prices lower than it would again. why's that? they are not gone to buy a new homes if they know the price is going to go down that quick. there is a huge inventory of foreclosed houses. the inability of the real-estate market is a drag on the economy. most economists will have to admit the stimulus program did not work. it is not surprising. do you believe that spending money that you do not have on things that do not need to be done is gone to raise your standard of living?

that is based on a theory who was a famous economist. in his book, he argues that under adverse circumstances, you should pay people to dig holes and the ground and then pay people to fill them back up. if you want to stimulate activity, cut taxes, but make them permanent tax cut so people can plan ahead. a lot of those job creators -- if you want to create jobs, you have to great set incentives for people that create jobs. be a that a massive increase in regulation. we have -- they change the law pretty radically and we have that a tightening of regulation in the u.s..

introducing a new regulation, new rules, ambiguity is very destructive. i teach leadership at a business school. one of the things that you teach people in any adverse circumstance, the worst thing you can do. when people are concerned and they do not know what is going on, they become more concerned. they assume the worst. whether you think obama health care program or the dodd-frank financial bill are good bills, they have terrible timing because they have created a huge amount of uncertainty. a lot of small businesses are not hiring people because they cannot figure out what their health care costs are going to be in the future. the economic discussion is very interesting. it is far more important is the philosophical issue. this is not an economic crisis. this is a philosophical crisis. the real cause of the financial

crisis is a combination of altruism and pragmatism. where did affordable housing come from? everybody has a right to a house provided by you? everybody has a right to free medical care? my right to free medical care is my right to imprison a doctor to provide me that medical care. that is exactly the opposite of the american concept of rights. you produce what you create. you do not have the right to what anybody else produces. in business, businesses may pay lip service to all tourism, you can not be successful in a competitive market. the philosophical position -- what we teach in brentwood business schools is pragmatism. pragmatism's -- pragmatists do what works. a lot of things work in the

short term that are very destructive and the long term. there is also a deeper problem. if you are a pragmatist, you can not be rational. if you are a pragmatist, you cannot have integrity. if their goal is do what it works, there are no principles to act consistently. it is the free lunch mentality. nobody proposed a serious solution for social security and medicare. if they had, they would not have been elected. the free lunch mentality leads to a lack of personal responsibility. the lack of personal responsibility is the death of democracy. the founding fathers talked about the tyranny of a majority. they also realize that when 51%

of the people figured out they could get a free lunch from 49%, the party is over. just like the cause is philosophical, so was the cure. life, liberty, and the pursuit of happiness. each individual's right to their own life. each individual's right to pursue their personal happiness. ifh individual's right -- they produce a lot comment they will get a lot. if you think about that, it demands personal responsibility. there is no free lunch. it also demands and rewards self discipline. liberty is very important. that is an old idea.

before jefferson, everybody existed for somebody else is good. nobody existed for their own good. jefferson says each one of us has the right to your own life. success in that pursuit of happiness, we have that right. that idea change the world. when people have the right to their old life, they're nicer to other people. the united states was the first country created on the idea that people should act in their own self-interest. not taking advantage of other people, but not south sacrificing. we help our clients be successful and they help us make a profit. my favorite book -- it is very

relevant today. she wrote the book in 1957. current predictions are coming true. -- current predictions are coming true. the bad guys are writing the book. where do we go? we are struggling. we've never had a recovery this week and we have hardly had any recovery at all. i do not think we are in for a second dip unless europe collapses. they are 20 years ahead of us which is an interesting lesson economically. we're more likely to have stagflation. it looks like higher inflation, particularly in commodity prices.

not good times by any means, but not horrible times. what really scares me is long term. everybody in this room ought to be worried about long-term. if we continue with our altruism, free lunch mentality, the united states has in place mathematically certain an economic disaster. if you look at the unfunded liabilities under social security, medicare, public pension plans, they are in excess of $100 trillion. it is a stunning number. we are running $1.30 trillion annual operating deficit right now. we have a dysfunctional foreign policy. we have a big problem with the retirement of the baby boomer generation. a lot of us old people want to keep being fed. if you look at japan, it is all

explained by demographics. they have too many old people. we have a failed k-12 education system. we were running the numbers for fannie mae and freddie mac. it is mathematically certain that we will go broke. if we do not change direction. countries do not file bankruptcy. countries print a bunch of money and they use -- it is a cycle. it is exactly what has happened in this phenomenon, more government interference. argentina, 1940, higher standard of living than the united states. we are the next argentina if we don't change direction. we can change direction. it is not too late.

we do have to change direction relatively soon. we have to do something in the next five years. here is the dilemma. we cannot do something without pain. i use the analogy. it is a form of terminal cancer. will not treating ed, we die. it is not treatable without any pain. do we have the courage to deal with the pain? that is the fundamental issue. we have terminal cancer from an economic perspective. i like to talk to young people because we are setting you up for the bad times. i happen to be in the optimistic group.

the reason i am optimistic -- i think the two-party -- tea party symbolic of the american sense of life. we are independent people. we are very productive people. we can fix this problem. we have never gone through this, but the 1970's were really bad and we turned it around. we bought some time. what makes be encouraged is the american sense of life. it is a very intangible thing and we need to provide the intellectual ammunition. one reason i tried to talk to groups like this, the people in here are leaders. you have an impact on other people.

if you look at the problems we have had, we have had ethical problems. we have had failures and leadership in business, government. we have individuals that have acted in a very on ethical fashion. we need to reenergize that ethical commitment. purpose, reason, and self- esteem. as human beings, we are purpose directed entities. for organizations to be successful, the people and those organizations must step and the purpose of the organization. on the individual level, they describe their work as some kind of burden.

if your work is just a burden, at your missing a lot of what life is about. this is it, this is not practice. if you want to the passion and energy, you have to have a sense of purpose in your work. i would argue that purpose is the cop -- the context is the same for everybody in this room i believe that everybody in this room wants to make the world a better place to live. i think that is the characteristic of the vast majority of human beings. there are a lot of ways to make the world a better place. businesses make the world a better place to live. the primary difference between the quality of life in the united states and africa is that we had better businesses.

businesses produce something before it can be given away. good attorneys, the doctors, good teachers make the world a better place to live. you need to believe that your aunt worked is making the world a better place to live. -- that your work is making the world a better place to live. you need to make the world a better place to live doing something that you want to let -- doing something that you want to do. we had a fundamental right to your own life. if you try to make the world a better place doing something that you do not want to do, you will not do it very well.

everything that is alive has a method to stay alive. we have the capacity to think. it is our only means of survival. no shortcuts, no free lunches. that is the way it is. i talk to employees about thinking. i do not know what role iq plays in the thinking process. there are a lot of bright people that do a lot of destructive things. you can make a choice. you can choose to be as disciplined thinker, commit yourself to be a lifelong learner. in that context, commit yourself to that a very active mind. people that are lifelong learners have the capacity to become masters of what they do.

that is what we need in a global look economy. people that have that commitment are affected at learning from a life experiences. we learn from our life experiences. it looked at people -- everybody in here can associate with learning from your mistakes. on the other hand, a lot of times we do not learn from our mistakes. we do them over and over again. we do not always learn from our mistakes. why don't we learn from our mistakes? we have to have the courage to admit that the psychological cause of the mistake. on fortunate, a lot of times, we invade.

it is the ultimate psychological senate. -- sin. you refuse to examine it. you literally do not hear it. when you evade, you are detached from reality and bad things happen. one of the fail is the leader of that business. things are going along fine. something happens in their business. it is more interesting, more dramatic. the higher acre could geniuses. they run their affordable housing.

they said they would make less money. they juggle the citigroup around. i would argue must that i have seen it was made by highly intelligent people. the second thing is that life is a constant education. i would go to the banks and have lunches. i never had a boring life. they were always asking me questions. we were always paying attention. you could see why they were successful. they were not in focus. a lot of people live their life out of focus. you cannot live your life. my observation for success is not that correlated. what i find in terms of

success, they are much more likely to be successful. the most evil don't stay in focus. when you are clear but your focus, you raise your self- esteem. higher levels of organization, people that go to harvard law school -- if they fail, it is because they have some subconscious low self-esteem issue that results in self- destructive behavior. you see that fairly often. self-esteem is the foundation for happiness. happiness is the end of the game. i do not mean having a good time on friday night. that is the ended the game.

they think money is the end of the game. money is a good thing. happiness is the end of the game. self-esteem is the foundation. self-esteem is a complex subject. it is fundamental self confidence and ability to live in reality. you earn self-esteem by how you live your life. nobody can give you self-esteem. the cannot give your children self-esteem. self-esteem has to be earned. live your life with integrity. forever by the in room, most will come from your work. it is very productive and hard- working. most will come from your work. this is what makes it work.

it is real important that you do your job well. if you do not do your work the you you can possibly do it will lower a year self-esteem. the flip is also true. do the work the best you can and you will raise your self-esteem. that is more important. you get more money. you get a promotion. that concept has huge subjects. take an entry-level construction. he has a tough, hard life. he gets there it. they raise their children. they have a successful life.

the interesting thing is you get something very precious. he is to be proud of themselves. take the same bricklayer and give him more out there. he may be better off materially. he gives off his pride and self- esteem. a lot of people are focused on security. the united states is not the land of this. they did not come to the united states to become secure. it is a land of opportunity to fail and try again. most importantly, this is the

american sense of light. this is what is so precious. thank you very much. [applause] i would be glad to take questions. you think you're supposed to go up there. there is a brave soul. >> you mentioned atlas shrugged it caught the country is pushed to the point of desperation before anything happened. so is the democratic side your people have you both for the changes. how do you view us making these changes without being pushed to that extreme? >> that is a really good and tough question. i am in the optimistic category.

he had the advantage of seeing the power of individual freedom. aristotle never made the connection. i think her ideas can actually change her mind. i think people can finally put it all together. they have an intellectual mind

to do it. we have 65 or more for capitalism. we have thousands of students that go. we have thousands tell us now i get it. now i get what we cannot have a free lunch. i am hoping they will be leaders. a lot of people are committed to getting a free lunch. they do not want to do anything about social security and medicare. we have got to tell people the

right ideas. the whole purpose of this is the bill of rights. this is how we drifted to where we are. they are going back and looking at the incredible men in history. they come together at one time with the right ideas. they could do what they did. it was amazing. their goal was to limit the role of government. they got a pair -- they got it.

compare the declaration dependents urging the declaration of independence compared to today -- compared the declaration of independence to today. as things get worse, maybe this time people will be there. >> i have a question about the structural about the method of the government. it seems that part of the problem with long-term issues like social security and medicare and make some focus on the next election. but do you think there is a structural problem or a way to overcome that on the next election? >> i think the structure could be improved.

this is what they wanted. also communication. they're making the terms longer. limiting it would structurally help. i think unfortunately we elected people we deserved. we elected people we deserved. we have to change their ideas. there is a belief system that is being taught to our teachers that teach our students that has changed. life and the pursuit of happiness are not taught any more. everybody should get the same. all of those eyes are destructive ideas.

>> thank you. how would you go about thinking about trying to predict if and when a catastrophic effect and the collapse of the dollar will happen. what preparations would you take in preparation of that? some things that come to my mind are the total number of dollars that have been printed, outstanding obligations, and looking at how humans have reacted in previous situations in history where there has been a massive printing of a currency. what are your thoughts on all of that? >> that is a very critical question. i am more worried about it than i think a lot of our politicians are pureed the united states has the reserve currency.

people would extend dollars the matter what. if we did not have the reserve currency, we would already be in economic disaster. we're so in debt, no telling where our interest rates would be. the fact that we have the reserve currency is a huge benefit. at some point, at the rest of the world has confidence in dollar. this is just paper pictures of george washington. this is not functioning properly. a lot of people who are buying gold -- i am not recommending people buy gold -- when criticizing the rise in the price, it is confusing. if corn is going up, and there could be speculation. goldas people believing that paper currencies are getting

ready to go. if they are all based on the government. they all made these commitments. .t is not just greece it is everybody by germany and maybe france. france's marginal. it will be interesting to see. they were speculating that paper currencies are not holding up. i tend to think it will not happen in immediate future. i tended to think we've got 10 years in which will be go directly with determine it. i think the dog will collapse. when it collapses, there will be a lot of warning. when it happens, everybody will

be stunned. i think we've probably got 10 years. every kid going in the wrong direction, we might have less. i do not think this is likely to happen. i think we were direct, will not have to fix all of the problems. we would jump on any proposal. this was not a radical of a proposal.

the number of conservatives jumped on it. bernanke needs to wake up and realize it could happen. he is very naive. he has never been in business. we hope it will work out. then one day it is over. the company is best. that is how we will go as a reserve currency. i do not think it will happen in next 10 years. >> a sense of pride and self- esteem seemed to depend on in comes. -- in comes a driving inflation. there are figures saying they are not.

i am wondering what you see as the cause of that, if you think it is true. some people say it is globalization. some people say it is technology. some people say it is policy. what do you say are the causes? >> is another series of important questions. there is another debate. it is not self evident to me. it is below the poverty line. what happened since 1999, they have gone up exponentially. misstating what is happening. i'd think the income negatives

are all from this. shouldn't have risen as fast as it should have, no. i think it will go down. there is a debate over what has already happened. i think globalization has paid a factor. globalization has raise our standard of living. we are buying goods in china that are cheaper and better.

the labor raises our standard of living. if you have workers that are not trained to be competitive, that will be there. technology has raised their standard of living. in the quality of life. cell phones are a lot better. my grandmother had a nine party phone in her house. technology has raise our standard of living. we have to be problems. we have a field education system. -- we have two big problems. we have a failed education system. without a high-school degree you have no prayer. a lot of people that graduate from high school cannot read and write. we cannot hire high school

graduates that cannot speak english. it is now globalization. they're starting to work harder for a lot less. we are competing. the smart people are always valuable. they are competing against people that are willing to work a lot harder for a lot less. i tell you. i for years tried to fix a public-school spirit i would argue republics school. i would argue it is run for the

benefit of the bureaucrats. we have to privatize the education. we have to create incentives. businesses paid incentives. they cannot stop innovation. the attack on microsoft was not initiated on the justice department and microsoft competitors. they get more money. we have to create an incentive for innovation. if you think about a market economy, what makes it work is a bunch of experiments. there are millions of experiments going on. most are failed.

there are 10,000 failed bugles -- googles. he said the 999 that failed or the last ones that worked. when you take up the learning process when businesses cannot fail, you destroy creativity and innovation. if you look at our technology has advanced and how little in education, the time has come. i do not know exactly what the answer is. there is a solution for low income kids. walmart is a classic example of a model that worked. it created a lot of jobs. we have a failed education

system. it is not the highly educated partner. every employee will tell you they're trying to hire this. a lot of them came out of construction industry. they do not want to except the compensation. there 50 years old in dublin to do it. -- do not want to do it. or they are minority teenagers that the school systems fail. it costs about $10 an hour. a lot of small businesses cannot afford to pay and skilled workers $10 an hour. -- unskilled workers $10 an hour. the fundamental one is a loss

apply a in man. -- is a law that applies to man. it is a price that clears the market. some of the supply will not be used. if you went into the grocery store and look as $100 a gallon, you probably would not buy it. if you raise the minimum wage, people go unemployed. if you raise the minimum wage, 40% are in face a bolt recession. he had to get entry-level jobs. small business cannot pay $10 an hour.

this is policy. minimum wage is a policy issue. even with inflation, it is a lot less than minimum wage. i do what prison guards do now. i learned i do not want to do that job. these are very valuable things. people have to get a job to get started. all these other policy things i just decided. it is a combination of a failed education system and failed policies. technology will probably help raise our standard of living. not necessarily create more jobs. >> there's a lot about regulation.

what is the way forward? >> if i were in charge, i would say every regulatory agency had to regulate and the next six months and reduce it. i went to work in in 1970, we still have the regulations. at least 3/4 was on necessary in united states. if they have staff, it will create work. then the staff has exploded. as trying to remember this number. we have added 65,000 regulations.

reading the names of regulations, there is a wall that happen in the library of congress. it is full of books. we have a massive over regulatory structure. in six months, in business we have to do it. we have to go back to ground zero. would you really do this if you're going from 0? which is at dawn. we never go back and visit anything. here.

the role of government is free lance. we should not be involved in this. it is a terrible economic and human mistake. we needed a policeman to punish the bad guys and put them in jail. what the porpoise -- purpose of the court system is more contracts. the contract lot israel. i am not an expert. it takes a lot of time. we could argue we do not need any regulations. i think they're really about enforcing contracts. there is room for regulatory structures that are in contrast.

theoretically they do not have to be called regulation. making sure the contract is in forest will always get into the court system. by 75% will be more than making their read up. -- is more than we can get rid of. anarchy is failed. i know some libertarians that are anarchists. there is an important role for government in protection of individual rights. it could commit fraud. we need good laws. we need in effective court system. there should not be this redistribution of wealth and deciding which energy is better than what. that is not what the government should be doing.

>> thank you. i come from brazil. we are achieving quite success and economic development. government taxes reach people. they say they're getting $100 per month. the of putting more people into the market and getting an extra 1% a year. did they say something about digging a hole?

countries like china and brazil are following this lesson. we make a lot of public works. given that some are not necessary, we have a very good fiscal situation now. even today there meeting in washington to decide how much money they are relaying to the union. >> i think brazil will have severe economic problems not far in the future. you state the history is a mecca less than the united states.

i think brazil will not dwell long term. i do not know what you're talking about in china. china has basically two different economies. they have a privatized economy with tougher regulation. industries are having huge economic problems thing subsidize by very successful private economies. it is much less regulated. the united states is much heavier. we have a welfare system, too. a lot of these things are bigger. we're coming out of a bigger economy. dollars are much higher.

the thing that is smart was finally creating currency. it is one of the united states problems. we have been creating money like crazy. that stabilizes the economic system. you have to look at the potential. brazil has phenomenon national resources. it is doing better. should it do better? yes. the brazilian structure is not any more difficult. i know a lot of companies that operate in in brazil.

they get more subsidies from the brazilian government. i do not know that the government is more anti business. it is hard to make those kind of issues. the chinese i think all had big problems. they have demographic problems. the way they spurred huge growth of in japan was by not having babies. babies are expensive. japan created an economic boom. they chose on their own not to have babies. then they are creating an economic bust because we do not have enough young people. china has government making decisions to have one baby per family. the of drastically reduced the

number of babies. that has a short-term impact on the quality of life. these are expensive. they set up a lot of resources. the chinese, the reason they are saving so much is that they're not having babies. they want their money back. they are going to expect us to pay them back. their savings rate is phenomenal. they do not have any babies. children cannot take care of you. they do not have the children to take care of this. this is why our debt will become a problem. we are their savings.

their civilization of the currency picture all the stuff is harder to fill through. >> we have this since 1995. there's money that goes directly against this.

>> is much bigger than what brazil has. it is way above the poverty line. >> the income here is there. >> you do not distribute money to the people at the level we're disturbed eating it at. it is a different -- distributing it at. >> i have not been very long time.

>> if you bought insurance, you went. the united states health care is objectively the best in the world. that is a fact. one of our problems is we invested way too much as a percentage of our gross national product in the medical care. we spend more than any of their country in the world. whether how productive that it is rather argumentative. we have the best medical system. the united states says of the medical research in things like pharmaceuticals and those kind of things. any hospital has to treat

anybody that comes in. that is just the way it is. here is the answer is -- interesting thing. ed canada was socializin medicine, you'll get treatment for cancer be making the six months later and you will die. you get treated. they come to united states. the cost is delaying the treatment. the united states has 10 times the technology in scene. we treat people very fast. we treat more people at in united states. whether that is good or bad, that is a different question. and maybe one of our economic problems. >> thank you so much. >> we are out of time.

i think we can all appreciate this great speech. thank you so much for coming. [applause] thank you all for coming. we afford to seen at are few -- seeing you at our future events. [captioning performed by national captioning institute] [captions copyright national

>> midafternoon everyone. i think we are about to begin. -ms. peter cherukuri. i will be a moderator for what i know will be a very exciting conversation. it is a topic that is near and dear to everyone on the panel. hopefully that is why you are in front of me. i want to welcome you. this is the second annual a.m.p. summit. for those that may not know, it is an acronym for something that i think is important to understand the interconnections between activism, advocacy, media, and policy. while we are going to be focused on in this session is how the news -- what is the future of the news industry and how has it changed. my name is peter cherukuri. i am the general manager of the aol political division. i have been there for a couple of years.

i originally was with the huffington post. prior to that, i was the publisher of roll call. my background is in the political trade industry in washington. i am going to let everyone on the panel introduce themselves. >> i am jim barnett to. a strategic adviser to our digital publication and strategy group. at 43, i went back to graduate school and thinnest a master's degree and a nonprofit management. i study about non-profit models for journalism. i was a washington correspondent for the oregonian. >> i am jeff selingo, vice president and editor of the chronicle for education. i started as a reporter and moved up to the editor. now i am in charge of strategy on the digital side and the press side for our publications. >> steve buttry. i am the director of

communications and social media for the journal register company. i have been active in teaching journalists how to use twitter and other social media for a couple of years now. >> i am eyder peralta. i am able augur for -- i am a blogger for npr. i am also on their social media team. we manage the facebook page and social media presence. >> for the structure of our organization, the organization for this conversation, i want to throw out a framework for the program. that framework is, when i look at media companies and we talk about it, each individually at various times as a group, when

you look at the media landscape and are trying to evaluate what the news organization is doing, there are three factors that i think our way of looking at the organization. to evaluate how content is being generated, how it is being distributed, and how it is being monetized. our conversation will focus on those areas. we are going to have each of the panelists talked throughout their organization meets those two or three trends that have changed in those categories. for example, the content generation side -- when we look at the last five years, we look at our newsrooms hierarchies have changed. how is that hierarchy, where was it before and where is it today, what does that mean in terms of how we gather content? we consider the role of the byline. that is what i would like to talk about. >> the thing i would throw out is the rise of the nonprofit

model in journalism. people do not know what non- profit journalism organizations are, but there are many flavors. everything from your taxes the tribune to the aarp. nonprofits new and old are jumping into the business and are doing a news or something that looks a lot like news. one of the things we have to think about is how we can have news with dan and advocacy organization. there are ways to do that and we can discuss that today. >> at the chronicle, it is interesting. in the last five years, we have gone from a centralized model of creation, only created by people from our newsroom and staff, to a model that is much more decentralized. we still have a staff of 70 reporters and editors in washington, but we now have many more freelance correspondents around the country. we are also using a lot more contributors for our blogs and

other advocacy areas. that is something that is definitely different in the last five years. the other difference is we are partnering with other organizations like we have not done before. for example, we partnered with the huffington post and provide content to their college peripheral. we partnered with the new york times where we generally run stories, where our reporters are working on stories that are run in the chronicle and the times. in that is something that i do not think, five years ago, we would have even considered. as news sources have exploded, in a given the higher education that has expanded around the world and we have not expanded with it, we needed to find new ways to generate content. >> we saw a great example of how the community is generating content at the lunch presentation. a picture of the easy chair in the single -- in the sinkhole

which was a good example that the tools of publishing are an ever but its hands. with their cell phones now. the community is generating content. the content has different degrees of reliability. and that was a actual picture. it made me think of another picture involving chairs that some of you may have seen that was treated a lot and making a lot of the rounds after the recent earthquake. a picture of a couple of plastic lawn chairs that had tipped over. that picture, i do not know what earthquake it began with, but is circulates every time there is a mild earthquake. somebody in california probably has fun with it or something. a lot of the work of -- journalists still need to produce content that the community is not creating, but a

new function of the journalist is the creator -- the curator. you are gathering content from the public and finding the best way to present it and also to bet it -- the vet it. to say, "this one is a sinkhole and this one is just someone having fun." they're finally, said the community is creating is a big function of the journalists now. a function that andy carvin has really pioneered. we are still trying to figure out what is the future of that

aerifying in real time -- that verifying in real time. >> for us, that shift was easier than for most. in some ways, the public radio system has always had the public creating content you see it very simply in a college shows. it is a very similar audit relationship with the public. -- symbiotic relationship with the public. going from that to gathering information on the arab spring through twitter takes a bit of a mentally for everyone, but it is a natural transition. what has been happening in our organization is that people have become believers that the masses

can provide high-quality information that we do not have access to, period. when things started happening in libya, we realized there was no one there. we had no one there. very few news organizations had anyone there. what we were getting was the raw stuff coming out on twitter. we are still very much learning how to vet that and how to present that. my colleague, andy carvin, has been doing it on twitter. on my blog, we have been taking some of that and crafting it for the broader audience. the point is, we are still learning on that part of it.

>> i think it is important for all of us to appreciate the distinctions of each of the panelists in terms of the platforms and the audiences they talk to. there is a great thing we are hearing right now. the theme is there is a broadening of the -- of a definition as what we consider input in the creation of content. it is not just from original content, but taking input of the social space. there is an importance of the newsroom supply chain making decisions and vetting about what is real content. the idea of the broadening of what -- of what we might consider input into that equation is interesting. another good point i want to talk about is how an advocacy organization can act as a news

organization. when you look at aarp, at its core, -- no judgment on that at all. in terms of how to help them think through, it is how you become a news organization? >> one of the things that an organization has to decide right away is, do you want to support journalists and all that entails? one of my favorite example is from 100 years ago. the founder of the christian science church was being attacked by the journalists of the day. she decided that free independent journalism would support the mission of her church, hence we have the christian science monitor. that is pretty well established. an organization like the church can support journalists.

it continues to this day. the question is, how do you organize it within your organization. how do you fund it? is the case for philanthropy attached to a mission about journalism or independence? that is something you have got to think about and think about how you are going to do that. then you have to roll with the punches. if journalism is taking place that the organization does not like, you have got to go with that. you have to accept that as part of what you are doing. if you're not willing to do that, you might want to rethink the idea of having a journalist enterprise. >> if you could say a couple of words on how technology has allowed or accelerated the ability for an advocacy organization to act as a news organization. >> absolutely. we are seeing that at the red cross. it is not a journalism organization, but it functions like one. that some of the first people on the ground when there is

earthquakes and that sort of thing. so i think that technology is accelerating the need to be transparent. when people to a source of information, they are willing to take it from the aarp or the american red cross, but they want to know where you are coming from. the one to know in a shorthand way what is behind this and how it is structured. over time, you can have a model the works for you have more than one voice coming from the same organization. >> related to that, when we think about non-profit journalism, there is one kind we are thinking of. as a type of a journalistic enterprise to support its cause. another one that is huge is trying to support foundation support the traditional aspects of journalism. if you want to talk about that,

let's think about what is the role of foundation supported journalism and how does traditional news outlets taken that kind of content? >> and with the decline and collapse of traditional business models, we are in a time when we are going to see a lot of different models. in it is not going to be here is the model of the future. it is going to be here is the models of the future. there will be multiple models, including the public broadcasting which is a combination of government and donation, member support. clearly, it is popular in the newspapers he, the traditional media that i come from, even though my work now is pretty

much all digital. to sing the praises of the newspapers and all the watchdog journalism that we did, the fact of the matter is, a lot of the journalism we did was pretty much routine at commodity coverage of in stocks that was happening in the community that could be done somewhere else. i think the pro public and texas tribune non-profit model, there are several out there that i think are very encouraging, they are trying to say we are not going to do everything like a daily newspaper, they're going to focus on one the hugely important public service kind of journalism and hope that they can find philanthropy that will support that. so far, i think they are doing a good job. >> the idea of the public service and supporting public-

service journalism. i think it is crucial thinking about the changes that have happened in the news industry. there has been such a day -- when we think of how we approach a story, the bureau's in washington that are no longer here, they were not vocalizing it. there were not telling the story differently. but then, i love your opinion of you think that foundation supported journalism is continuing the to modernization of that kind of process or are they bring something new to bear in terms of how we approach the story? >> the fact that all these public service type foundation funded things are starting from scratch, they are starting small without the baggage of saying, we have got to cover sports, city hall, everything. they can say, we are going to

cover this slice and cover it very well. they are choosing slices that are not commodities. there were some good data journalists doing things in texas. i am not aware of a texas news organization that made the data analysis and data presentation as central parts of its mission as the texas tribune. where the data can be available, and certainly our lunch speaker showed how the government itself to make it available, if you are in a place where the government is not doing that, you are in new territory. at this point, it is not a modest sized -- commoditized. you have to adapt and adjust. that is part of entrepreneur ship. you have got to adapt and adjust.

>> those newspapers are still fairly general, though. what you're seeing in some areas, especially in education, is that many newspapers have given up on covering k-12 education. you're starting to see some foundation-supported efforts in that realm as well. you are starting to see the heckinger institute producing content. it is not known who is supporting those efforts. for the foundation, we know it is the gates foundation and some of their foundations that have agendas. you start to wonder about what types of stories are not being covered by these non-profit organizations because of the agendas of their foundations that are supporting them. you might say that news of a breeze might -- used to get advertising.

we had student loan companies and banks, but they supported the whole enterprise. they supported the coverage of everything. in this case, the gates foundation has a specific agenda on education. you have to wonder about the story choices that those organizations are making or, in most cases, not making. >> talking about the agenda- driven concern and then turning to eyder about npr and some of the challenges they have had in the past year about putting a spotlight with funding being an issue and whether or not there was agenda-driven news. >> now was all over the news. the idea in traditional

newsrooms is that there is a far wall in -- a firewall. i think that is what we are getting to. in the traditional newsroom, journalists, as soon as you get hired, you sign that the code of ethics and you are supposed to abide by that. obviously, that does not happen all the time. i think a lot of people brought up some issues about the project we just launched, the state impact. we are trying to put two reporters in each state. to report on state politics. and people were wondering where that money came from. it came from george soros, so it got attack on that. there is a well defined firewall in the newsroom.

you tell the public you have got to trust us on this. that is what news organizations have done all along. in my experience,that firewall is certainly there. >> it is important to know that may be the most successful for profit, new journalism organization of the past 15-20 years is fox news. despite its fair and balanced slogan, it has a pretty transparent agenda. a transparent agenda the was launched in response to an alleged agenda with varying levels of tree behind the allegations of the liberal media. going back to the firewall issue, most of the organizations in the liberal media are organizations of journalists who might tend to be liberal working for companies that are big

corporations and quite conservative. those firewalls -- if the liberal media really is liberal, there is evidence that the firewall is working even if journalists have their own agendas. >> also, i think so many people forget the nonprofit models are falling very quickly. what we are seeing very quickly, pro publico was a started out with funding. now you are seeing more nonprofits with grass-roots efforts. look at the texas tribune. they are starting to develop commercial revenue streams. they are getting a variety of revenue sources to read your seeing a variety of new structures in place. i think about investigative news networks.

they are the umbrella organization for 60 non-profit news networks across the country. they're working hard to develop in revenue that each of these members could not do at their own. it is a number of things. there is also a case for philanthropy. if your goal is to be journalistic, then the people who give you money have got to sign on that. in the market makes a big difference. if the aarp is successful in producing a credible news of what topics of interest to the retired and aging population, they are going to find in a sweet spot in is going to keep them sustaining. if they are pretty much a pr arm of aarp, that will not be successful. >> i think that is important. transparency. who is giving us money and i

think we underestimate the intelligence of the public, which is what you are getting. the public will know if this is good, if this is trustworthy. if this is something you are not getting from someplace else. i think the news organizations should allow the public to make that decision, by giving them all the information they need to make that decision. >> we are going to move to the next topic. we have looked at the first 10 minutes here with content generation. we will talk a little bit about distribution. to make sure that the audience knows, jeff is coming from the chronicle for education, at an extremely successful media company that is not on everyone's radar. at the heart, it is a trade policy. helping people do its job.

they are running higher institutions and helping the people in terms of navigating those institutions, their careers, and the different nuances of the industry. in terms of thinking about content distribution, i know that as an editor, it is probably challenging. you hit a wall and you only right for the university president. you thought your cardin was important for the entire world to see. talk a little bit about distribution from the perspective of, as a former editor and now as a strategist, how you have the need of focusing on your core audience being a trade publication, as well as being mission-driven to a higher idea. market that need to hire

audiences. >> we have had a pay wall since before people knew that term. we have always had that. at the beginning, you could not get through it at all. everything was behind that wall. now, about 40% of our content on any given day is free. unlike the new york times, we do not do the meter system. we decide on a content by content basis of what should be in front of that pay wall and what should be behind it. we want to reach the broader audience of opinion makers, so we put that stuff out there. we put breaking news where it is a commodity. a couple of years ago at virginia tech, when the shooter? -- when the shooting happened, it was ridiculous to put it behind that pay well because we

wanted our stuff out there. anything we feel, whether it is our direct competitors, we put that in front of the pay wall. we also tease a lot. if you want to know how much your president makes, how much -- we put it in front of the pay wall. if you want to go deep into it, we put it behind the pay wall. it is interesting, all these organizations moving the pay wall. they need these as revenue from readers. the new york times made a mistake by treating all of their content the same. they said there was a meter and at some point, you would run out during the month. whether you read a sports story

that is everywhere today or a big investigation of obama. news organizations that treat their content that is really specialized, put that behind the wall and everything else in front of the wall, those are the models that will succeed in the future. >> when you are thinking about the pay wall, you are thinking about one platform. the web as a platform. what i thought you were getting to is that commoditization of content is occurring and beyond the distribution channel, i want you to talk about a little bit more about this. talk about ipads and apps in terms of how you think about trade content and distribution of your content through those platforms. >> that is where our future and many other people's futures are. we launched our app in march, and within a month, we had

15,000 users download it. it was free to readers and. we are in slightly different situations because we have readers who are unwilling to pay for information that they need to do their jobs. >> you want them to pay for access on those sort of pop forms as well? -- for those platforms as well? >> yes. once we start giving away content for free, readers are grown to expect that. it is really hard -- the new york times seems to have succeeded with it. the baltimore sun has a bizarre plan, i am not sure how it will work. once you let it out of the bottle, it is difficult to bring it back. we cannot find -- we found some advertisers interested in the app in, but there are not a ton. until we have a revenue stream that will support that, at the end of the day, someone has to

pay for all these reporters. whether that is a foundation, advertisers, readers, somebody has to pay for it. when you take readers out of the question of paying for information, that puts some pressure on you to get revenue from other sources. >> this is a great segue. eyder, this is your sweet spot in terms of looking at social media in terms of lengthening the life cycle of a news story. giving it more legs. talk about that and how npr has evolved into something much more than radio content and using these different platforms to extend the life cycle of a story. >> and we are in a completely other position, which is we are aware of who our listeners are. npr evolved from a radio company to a media company.

that is not necessarily where people are getting all their information. we have got to be on facebook, we've got to be on the ipad, the iphone. in a few years ago, our content -- we put out a api, which is a fire hose that you can hook onto it and take our content. put it out there. our philosophy has been, take it. it is there. this is our public service. it is informing you. obviously, people pay for the content. listeners pay for it through their member stations. we make those pitches. we are online and we are everywhere because that is where people are.

i like to tell the story of how the facebook page was born. that has about 2 million fans, which is pretty hefty for a news organization. when it first started, people at npr were having discussions, what is that thing? is it marketing? what do we do with it? a few months later, legal says there is somebody who has npr on facebook, what do we do? just e-mail whoever made it and see what they want. they e-mail the kid and he said he was a college kid who had made it for us because he loved us. [laughter] it had all the language that is needed to have, it had everything.

he told us we could have it. here are the keys, i made you an admin. we sent him a mug. [laughter] he is still an admin. what that does for content is incredible. everyone is trying to get their story on the facebook page because of the amount of traffic it drives. it is incredible. it extends the life. for radio into the web. to give you an idea of how big the facebook distribution is, it is second only to will -- to

google, as far as referring traffic. >> the referral is great, but also about sharing it and how you value sharing. >> that is obviously -- we have seen that increase a huge amount. at some point, we do expect people, or the social part of it to take over google, as far as referrals. you can see it on an everyday basis, we post only about 8 stories per day on facebook. we made a decision, from the very beginning, that it was going to be an editorial product. it would have an editor and each

store would be hand-pick. somebody would be getting the feel of what this is and how it works and what people want on it. we treated the same as we would our home page. the same as we would our show. each one has a very different feel. morning edition is different from all things considered. you were going to get the news, of course, but on the facebook page, you might also get cute pandas. >> i do not know any other new site that does that. [laughter] >> i want to put a spotlight on your background, steve. i think that pays -- plays a big discussion in terms of local

content and what you have seen for the last few years. in this market, you try to build an audience that is local in a very neat way. it is their challenges to it? what have you learned from that? what you see in the future? >> i think hyperlocal is a buzz word. i would say local at different levels is where it -- we are very early in the evolution, he evolution is survival of the fittest and that means things die along the way. the evolution of local into the digital marketplace, just talked about the pay wall. that is a narrow market segment

delivering a high value, specialize content that the consumers who generally do not pay for. they are expensing it or putting it on their taxes. the wall street journal also has a successful pay wall. it is hard to picture a local organization relying as heavily on donor support as public radio with statewide organizations that have been able to do it. we need to look for what the successful model for that is going to be, in terms of distribution, connecting it with revenue streams. the newspaper's never made our money, never supported our content, by charging for it.

if you paid for a newspaper, you are paying for paper, ink, gasoline, and maybe some of the wages associated with production and distribution. you are not starting to pay for the content. the content is all supported by advertising. advertising does not work the same way online in terms of volume and rates. we need to figure out what the local model is going to be. in generally speaking, when established businesses are faced with a new business opportunity, a new technology, they tend to cram their existing model into that. our existing model was display advertising. it was display advertising and classified advertising. classified advertising, we have lost a lot to different competitors.

craigslist is the one that is cited most often, but is not the only one. and the banner ads. in the only more people saying you cannot make money online are traditional and journalism organization. you do not say amazon saying, who has ever made money online? what we need to do is find out what are things beyond advertising that have value and that local marketplace and can he the local media organizations, whether it is a metro organization like tbd or a local blogger, what are the ways they can connect with local businesses and help businesses connect with customers? we are still working on that. i think we will see a lot of development on that over the few years.

>> the one thing i want to talk about is something we are doing at aol. it is called patch. i do not know how many of you are familiar with patch. it is a big bet for the company. we are doing things that all the hyperlocal strategies we have tried. we see a lot of local newspapers going away. but the content is still needed. communities still need to stick to one another. it helps the connective tissue of a community. we are hoping that our model, that thing is over 850 patches across neighborhoods, there is a lot of cost there, but we hope the networks, local content, will have the modernization

strategy that is tied to -- monetization strategy that is tied to advertising. but it is a risk. >> it will be interesting to see how that plays in with the metro play of washington, which is filling some of the space that tbd was going after. with the local attaches all around, he -- local patches all around, can you build a natural platform that sinks well with the -- syncs well with the patch with the audience and the business their way that will build a healthy business.

people ask me what i think of patch. it is under a microscope now and taking a lot of hits. no startup that succeeds succeeds by doing exactly what they did when they started up. they are not yet on that path to success, but if they make the right adjustments in the next year or two or three, depending on how long it takes and how committed they are, i think somebody is going to succeed in the local space in. if patch makes the right adjustments, they have a lot of resources to see it through. >> before we open the to end day, i want to take a couple of minutes for each of you to chime in on the third leg of this model for our conversation. monetize asian -- monetization.

we talked about content generation and distribution judges. the third is, how do we get paid for that. there is a desire for monetization. maybe there is not such an emphasis on it for you. but how does it work there. >> we of services we sell. a lot of people join aarp for the products, services, and discounts. the number one reason they come back is for our magazine, which is fantastic. they love our content. the lesson there is, we do not have bay pay wall, because we got the extent we could get it out there helps bring people and and help people open their minds to being a member. that is our model.

we want your membership and want to give you some great journalism, where you are going to get some products and services along the way. it is a bit like tehe bank. the way you get in is the discounts, but once you get and you find a reason to stay. your membership underwrites the magazine and the bulletin as well. it is not quite as direct as some of the other panelists. >> i think that too many newspaper publishers are looking for -- as many of us know, local newspapers were licenses to print money for years. they made a ton of money in classifieds, i cannot even i imagine that we used to pay for advertising.

classifieds, display advertising, in circulation. too many newspapers are looking for that one big play that is going to make them a lot of money. i am looking at a lot of smaller things that add up. repackaging content. someone might not subscribe to the chronicle for $85. they might not subscribed for $85 per year, but there polygon to play -- and going to pay $5 for that package of articles on how to get that first job. by the way, it is that model. you sell a lot of things at $5 and suddenly there is that magic bullet. we are looking at the smaller placed at packaging content, creating it wants, and delivering it on multiple platforms and in multiple ways. that is where it can help out on local level as well. i think people are willing to

pay for content on local level. i know that i and desperate. i live in d.c. and m desperate for information from my community. what is happening down the street and with schools. that is the big play. paris would be interested in paying for more information on what is happening with their public schools. that is where i think the month cessation -- monetization for these hyperlocal sites can work. >> my old boss talked about the silver bullet. he said there would not be a silver bullet, there will be shrapnel. [laughter] multiple revenue streams there are not all kinds of technology, but there is an issue with technology -- ok, the iphone,

ipad, droid, kindle fire coming out, these are great opportunities, but keep in mind that a significant amount of that money goes to apple, amazon. part of it is working out those partnerships and delivery systems. those are formats where people are more willing to pay than they have then to pay on their laptop or desktop computer. some of that will be thinking differently about the basic model. it is not just all in the technology. an example i see is the obituaries. newspapers, for a long time, used to write obituaries as news stories. there were formulaic and dull and did not give the full flavor of that person's life on this there were a newsmaker. we saw that as a revenue stream

and we started charging for it and now most of them are written by somebody at the funeral home who is not a good writer. those are not satisfying either. if you are willing to pay enough, you can put more about the person. it tends to be savvy and sentimental. is there a possibility, with all these out of work journalists, that we can develop a model of commission stories? is there an ethical problem in that? i suppose so, but journalists have been a ghost writing biographies of sports figures and entertainment figures and politicians for my whole career. we can work past those in ethical issues and is there a whole different revenue stream in there? that goes beyond obituaries. you can do like stories at retirement and anniversaries and

and things like that. it is a matter of thinking differently about lots of different revenue opportunities rather than where is that silver bullet. >> i am not a money person. i have an editorial person. black at npr music, which has made it work somehow. it crosses into radio, but it is a website. somehow, staff has grown and it has flourished into its own thing. they're doing well. >> to take away on this. commissioners obituaries. i am going to open it up to questions. before i do that, i want to thank our viewers from c-span across the country watching us right now. i want to welcome them.

questions from the audience. is there a microphone? do we have a microphone? >> we say that traditionally and socially, trying to separate them -- we cannot do it anymore. that is where traditional media becomes culturally relevant to a population. do you ever see in a data social and traditional media can truly work together in times of disaster in a way that is going to be beneficial and get in better information to people who need it faster? >> there is a mapping program based on putting together the messages from the public which is one of the first great uses

with the haiti earthquake and identify clusters of messages by text and where they were coming from. this shows great potential for that. the news media jumped on the disaster story like nothing else. except maybe a celebrity sex scandal or something. the social content is just astounding in its volume. i think tools like storify and storyful, that help was curate the themes from social media are an example of where that is coming together. any media that are not using his social media to cover disasters are not covering them well. >> i want to throw in there in terms of something that has

cemented huffington post as being part of disasters or anything that has a significant barrier to access. from the iranian elections, it was a seminal moment for covington posed in terms of using social media to carry the conversation on what was happening on the ground. we saw that in japan and haiti. the challenge, as we are rethinking the storytelling, is using the component of a twitter feed or a facebook update, to complement the long for a story that a traditional journalist might do. or a opinion leader, something we have not talked about, b the, blogging has helped facilitate a lot more people to create

content. content from a ceo to everyday citizen to extend the conversation and get it more in depth. the challenge for us, as we take all these different inputs, is hopefully we are presenting a rich textured view of what the news cycle is about using social media, blogging, traditional journalism. >> if there is a story on cnn about dogs and cats that are abandoned in that disaster, there are people who will then send 10,000 dolled booties to that location and clogged up the supply chain so that the vital stuff can i get through. it is an advance that the traditional and social media have a plan on how they would work together in crisis and they

actually did it work -- rather than worry about the competitiveness of the story, you would be speeding the velocity of the response in that emergency and a different way. whites i take a point to make, not to say that what you are suggesting cannot be done, but you say the social media who, if that was a matter of the traditional media being the new york times and cnn in get together with facebook and twitter, it is not facebook and twitter, it is the million users of facebook and twitter. is, the social media is not the platform, it is the users. to think that you were going to coordinate that, that is way beyond herding cattle. not that there is not some ideas that you could use traditional

and social media to get out the word about what you need. but that chaos of the social media is here to stay. we need to figure out how do we deal with that chaos? >> one more question. >> i work in tv news. oftentimes, there is no question that we work -- that we look for -- my question is, do you think the audience we have online and the tv viewership are two separate groups of people and if so, what would be the key to getting that population of online or tuning in to television to watch the conte that we put on television? my third part of the question is, is there one news agency or

outlet that is doing it right right now? >> npr. >> i do not know the answer to your question. i will tell you that there is some overlap. here are some numbers i wrote down. we did a survey over facebook users and 51% of them said that facebook was a major way in which they get their news. if it is important, it will come to me. 74% of them said that it is a major way in which they get their npr news. i think that that tells you a lot about -- >> what percentage of them get their news and then tune in? >> i'd think they're going to tune in if you give a video that they can post on the facebook page or put on his youtube for

those sorts of things. the average age of, whether it is television, induced, or a newspaper reader, is than theantly older average age of people on social media. people my age are starting to use social media. i do not think we are going to change those habits. what we need to do is find out the best way to reach that audience and a deal with it where they want to be. >> i do not understand why it matters. my feeling is that people reading you on facebook or twitter, it is a new audience for you. why do you need them also to -- it reminds me of newspapers trying to drive people from their web site to the paper. i just got back from atlanta and somebody was telling me that the atlanta journal constitution is

only putting some stories in print. they are not even putting some stories on the weather, to try to people -- to try to get people to buy print. what is happening is people are not seeing the stories. a lot of these organizations tried to drive people to the print paper or the television when people do not want to consume media that way. why try to heard those cattle when what you are doing is expanding your audience. >> i tracked my friends and what you hear about is the people who create ratings are trying to figure out how to track all of this stuff. if you have a news clip on youtube, does that count? how do you do that? over time, that demarcation of, this is how a news car -- this is a newscast, that will not happen a more. it will be what people want to see. once that matter is in place, it will change everything.

>> we of time for one more question. >> anything that i consume happens on twitter first. anything from npr to cnn to any news outlet, i see a first on twitter with a significant lead. it may not be the full content, but it happens there first. i do not have a television, i do not subscribe to anything. when something happens, i go to twitter first. when the earthquake happened, that is where i went. >> you can put your video content where he is going to see it on twitter and click on it. >> i want to thank everyone. the last thing i want to say, you said it perfectly, the biggest challenge we are facing is an appreciation in the news industry for the idea that it is industry for the idea that it is important