part of what tenure tax. we have enjoyed our partnership without that, you do not have thus far. the expertise of the faculty available. >> cary nelson on sunday night. thank you for coming today and adjusting your schedule. >> thank you. [applause] >> get regular updates of what is on the c-span networks with c-span now on twitter. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] we have links to help you what. it is easy to sign up. you can get the now on twitter. president obama spoke to students here in the washington, d.c., in his third back-to- school address. he praised teachers and talk about infrastructure, academic achievement, and mice to students. this is just over 20 minutes.

[applause] >> everybody did take their seats. it is often said that in washington, our next speaker need no introduction. i need to introduce myself. >> thank you. thank you very much. everybody, please have a seat. i have been madam president, that was an outstanding introduction. >> if his biographical material is we're so proud for her representing this school so well. in addition, i want to of knowledge or outstanding principal who has been here for 20 years, first as a teacher and too expensive and we are on a now as an outstanding principal. tight schedule ready. please give her an outstanding on a personal note, it might have been several years ago, round of applause. [applause] you were testifying in philadelphia. i am not sure if we were working on mccain-kennedy, something or other. maravene cynne gray is here. please give him a round of listening to your testimony at

that hearing, you getting applause. -- mayor vicent gray is here. engaged, we had to get something [applause] one of the finest secretaries of done eventually. over the years, we learned on education that we have ever had, the senate floor. arne duncan, is here. [applause] the members of the coalition, i it is great to be here and want to direct you to benjamin banneker high school, one of the best not only in washington, d.c., but one of the best in the country. renewoureconomy.org. there is an impressive group, we all send students tuning in mayors across the country. from all across america, so i these are the kind of things that i think we did not have want to welcome you all to the eight or nine years ago, which new school year although i know really helped form what we many of you have already been in school for a while. needed. the day's meeting is focused on here at banneker yet been here immigration. for a few weeks so everything is just starting to settle in just like for your peers across the

country. the fall sports season is under i very much look forward to your way, musicals, marching band is remarks. [applause] starting to shape up, and your >> i don't know if it has been a rough morning here, i spent all first big test sand projects are probably just around the corner. my time sitting on the tarmac i know you have a great deal at laguardia. we started out thinking that we going on outside of school. would have no problems whatsoever. your circle of friends may be changing. we kept looking at the map and issues that used to it stay saying, why? hall's well that ends well. confined it to the hallways are now pounding -- finding their i love the chamber of commerce. way to facebook and twitter. i used to be a member many years ago. it cost me a lot of money. some of your family is now also it wasn't a gift to support the be feeling the strain of the economy. as you know, we're going for one chamber, it is money well spent. of the toughest economic times in my lifetime. likes to see you, how was your your lifetime has not been this spanish? long. one of the smartest guys i have but as a consequence, you may have to pick up an after-school ever met, that is neither here nor there. job to help bought your family when we left the chamber, there or maybe your babysitting for

younger sibling because mom or was a beautiful porcelain dad is working next shift. eagle. trouble was, i was already the all of you have a lot on our mayor and the mayor can't take plates. you guys are growing up faster gifts. i loved it so much, i bought one and interacting with a wider world in a way that old people to take home. without that, i would not have like me frankly did not have to. spent that money. my girlfriend would have been i do not want to be just another able to have a better wardrobe. adult to talk to you like you're my kids another horse. anyways, my remarks will not run just kids because you're not just kids. too long. you are young leaders. for those of you that don't whether we fall behind or raise know, it is the beginning of had as a nation, it depends a rosh hashana. lot on you. i have to wrap up before sundown. this is the jewish year 5772. this starts with, obviously, that is when some people say being the best student that you we will see a bipartisan budget can be. agreement. this does not mean that you have to have a perfect score on every assignment. seriously, three septembers ago,

it does not mean you have to the global banking industry meltdown continues, the nation all the time,a's facing the prospect of economic collapse. the that is a great goal to have. you have to stay at it and you thankfully, congress and the bush administration acted to have to persevere. shore up the financial industry. you have to work as hard as you i always thought that hank know how to work. paulson and bernanke, tim it means you have to take some risks ever once in awhile. geithner really save this you cannot avoid the class you think may be hard because you country. were worried about getting the people say we should not have done tarp, but those people best grade if that is a subject you think you need to prepare you for your future. don't understand how close we came to a meltdown that would have damaged our economy for you have to wonder. you have to question. many years into the future. you have to explorer. every once in a while you need in the years that followed, to color outside the lines. congress passed and president that is what school is for, obama signed a stimulus package. discovering new passions, acquiring new skills and making they rescued the auto industry from bankruptcy. use of this incredible time that you have to prepare yourself to they passed financial reform legislation and they extended give yourself the skills that

the bush era tax cuts. you will need to pursue the kind i know all of us have different of careers that you want. opinions of those actions. that is why when you are still a people think that some were more student that you can explore a helpful than others. wide range of possibilities. but as we approach the end of one hour you can be an artist, 2011, two things are very clear. and the next a scientist, first, the american economy historian, a carpenter. remains in very serious trouble. this is the time you can test with more concern that we are headed into a double dip new ideas. recession, and more of the same is not going to do the trick to you can find out what makes you get us out of that. excited, the career that you whatever you think of the want to pursue. president's job plan, i say, if you promise not to tell anybody come i will let you in on a little secret. what would you do? i was not always the very best what ever you think of the students that i could be in high school. republican agenda, and they have put forward some things whether and certainly not when i was in middle school. you agree with them or not, you i did not love every class i just spend the hour ways out of took. i was not always. attention the way i should have. this.

in eight grade, i had to take a we have to grow our way out of class called ethics. ethics is about right and wrong, it. we really need an approach that but if you had asked me what favorite subject was in allows businesses to grow and expand our market overseas. eighth grade, it would have been basketball. ethics would not have made the they start businesses here and list. creating jobs for americans on i still remember that ethics every part of the economic class all these years later. i remember the way it made me ladder. think and being asked questions there ways that we can do these like, "what matters in life" or "what does it mean to treat without cost to the taxpayers. in the process that we could other people with dignity and raise revenue, and we could use respect?" either that revenue to pay for how do we figured out how to get tax cuts or pay for essential services like national defense, along? each of these questions lead to i expect all of you would say, new questions and i did not great, what are we waiting for? always know the right answers. those discussions and that the truth is, we can do all of process of discovery, those that and we can do it in a way that both parties can support if things are still with me today. we have an open and honest

conversation about immigration every day i think about those reform based on economics rather same issues as i tried to lead than anything else. this nation. right now, the two parties play i am asking the same tiype -- to their base. type of questions about how do the democrats say that we need we come together? had the amateur ever since a comprehensive emigration reforms. person is treated with dignity i agree with that. and respect? what responsibility do we have republicans say that we need to to those who are less fortunate? tighten the border. i agree with that. how'd we make sure everyone is included in this family of if we could get the two sides to america? talk with each other instead of those are all questions that past each other, i think we date back to the class a tip could see a lot more agreement back in eighth grade. than disagreement and we can here is the thing. pass a bill that will do more to i still do not know all the answers. strengthen the economy than anything discussed in washington if i just tune out because class today. sounded boring, i might have missed out on something that not we are here to talk about a middle ground that exists and only when i turn out enjoying how both parties can seize upon that but that has ended up serving in good stead for the it. rest of my life. we know our partnership for a new american economy, this a good part of your responsibility is to test things out, take risks, try new things, organization we have formed, work hard, do not be embarrassed

there is an emerging consensus if your not good at something right away. between democratic and republican leaders. you're not supposed be good at everything. that is why you are in school. it boils down to saying that we will define a presidential the idea is to keep on expanding election. your horizons and sense of it is the economy, stupid. responsibility. now is the time to do that. if the parties are locked in a those are the things that will standoff over how to create make school mark bond. jobs, immigration reform based down the road, those with the on economic needs offers a traits to help you succeed, as unique opportunity to both of well, the traits that will lead them. it does not require either party you to invent devices that will to walk away from the position make the ipad look like a stone on taxes or spending. tablet or figure out a way to they can produce legislation use the sun and the wind to give consistent with political us new energy sources that are principles and will put less polluting. maybe you'll write the next great american novel. americans back to work. to do any of those things, you today, i will talk to you about have to not only graduate from high school, and i know i am in ideas that will form the basis of that legislation. how they are not a panacea. the "amen" corner, but not only there is no doubt that they will do you have to complete high strengthen our economy and put us on track to create the jobs

school but continuing education that our country needs. after you leave. first, both democratic and this may mean for many of you a republican business leaders agree that visa distribution four-year university. should be better align with our you're president wants to be an economic needs. architect and she is interning every year, we admit more than 1 with an architectural firm and girardi has her sights set on million new permanent residents. what school she wants to go to. but 85% are of for those for some people may be a community college or seeking family reunification or refuge from harm while 15% are professional credentials or training. the fact of the matter is that given for economic reasons. more than 60% of the jobs in the the real number is probably next decade will require more something more like 7% because many bring spouses and children. than a high-school diploma. more than 60%. that is the world you are humanitarian relief is vitally walking into. important. i want all of you to set a goal they reflected the values that have long sustained our country. to continue your education after but immigrants have done more you graduate. it that means college for you than shape our culture. coming just getting into they have built our economy, and colleges not enough. we need them to help us to you also have to graduate. continue building it at this one of the biggest challenges we point in our history, allocating have right now is that too many

of our young people enroll in only 15% on economics is college but do not actually end up getting their degree. terrible public policy and is holding our economy back. as a consequence, we used to in today's global marketplace, proportion, andt part we can't afford to turn away those that the country needs to grow and to succeed. i call it national suicide. i like being number one. i think that we should expand we have to make sure your generation gets us back to the the number of green cards top of having the most college available for the best of the graduates relative to the best. population of any country on the highest skilled workers we earth. need to join the u.s. economy if we do that, you guys will permanently. have a brighter future and so they will not only help create will america. we can make sure that the thousands of jobs, it will give us knowledge of foreign markets newest invention than the latest breakthroughs happen right here that will help u.s. businesses in the united states of america. increased their exports. better jobs, more fulfilling a 1% increase in immigrants lives, greater opportunities for working in managerial and you and your kids. professional jobs leads to a 3% i did not want anyone listening here today to think that your increase in exports to their don want to punish high school. home countries. you are not done learning. you can take the example of in fact, what is happening in caterpillar, 60% of their sales

today's economy is that it is all about constantly upgrading are international. your skills and finding new ways but to design the bulldozer that of doing things. we sell in china, they have to even if colleges not for you, know how the chinese approach construction and infrastructure. even if four-year colleges not having a few chinese engineers for you, you will still have to get more education. in senior positions go a long you have to start expecting big ways to fulfilling that need and things from yourself right now. making sure that their products i know that may sound a little are saleable overseas. the idea that both democratic intimidating, and some of you and republican business leaders may be wondering how you can pay agree on is that foreign for college. students that are earning you may not know what you want advanced degrees in technical to do with your life yet, and fields from our universities that is ok. should be eligible to work here not expected have your entire permanently. picture mapped out at this point. foreign students account for we did not expect you'd have to nearly 2/3 of those that earn a make it on your own. computer science or engineering first of all, you have wonderful ph.d. from a u.s. institution. parents to love you to death and these are the individuals that what you have a lot more opportunity than they ever had. make the discoveries and which, by the way, that does not innovations that propelled businesses and create jobs for mean to give them a hard time americans. when they ask you to turn off they're already here on our

the video games, the television, soil. but when they graduate, our and do some more. i speak from experience because immigration system has no permanent pass designed for that is what i tell malia and them. after a brief grace period, they sasha. we are thinking about your have temporary visas and an future. uncertain path to a green card yet people all across this country including myself, arne, limited by a tangle of restrictive rules. and people at every level of turning these students out of government working on your the country is about the dumbest behalf. we're taking every step we can thing that we could possibly do. to ensure that you're getting an educational system were the. other countries are bending over backwards to attract these we're working to make sure that you have the most up-to-date students, and we're helping them schools with the latest tools of learning for making sure that to do it. we have become the laughingstock this country's colleges and of the world with this policy. universities are affordable and there is no such thing as too acceptable to you. we're working to get the best many engineers, scientists, or teachers in the classroom as well so they can help you prepare for college and a future technological innovators. we need all of them in this career. country. foreign students they used in advanced degrees in engineering teachers are the men and women or math, what has called to be who might be working harder than called the stem field should be just about everybody nowadays.

[applause] able to remain and work indefinitely after graduation. offer them green cards when we whether you go to a big school a finish their degrees and we can get down to the real business of small one, and attended public, convincing them to stay, because private, or charter school, your that is not a foregone conclusion either. teachers are giving up their we are in competition with the weekends, waking up at dawn, rest of the world for the best cramming their day's low and the brightest. class's and extracurricular activities. then they go home, eat dinner, the truth of the matter is, there are lots of alternatives and stay up past midnight for people in this day and age. grading your papers, correcting our grammar, and making sure you the third key idea that both the democratic and republican business leaders agree on is back that algebra formula that we should stop turning away properly. some money on to open doors that they do not do this for a fancy want to come and start businesses. office. these businesses will higher they sure do not do it for the american workers. immigrants are more than twice as likely to start a new big salary. they do it for you. company, and a recent study they do it because nothing gives them more satisfaction than shows that u.s. job creation in the last 30 years is entirely attributable to start up seeing you learn. they live for the moment when companies.

something clicks, your 1/4 of u.s. technology companies started during the dot com boom intellect, your vocabulary, they see the type of person you have a foreign-born founder. become and they are proud of you. i had something to do with that 40% of companies successful to yonder -- a wonderful young conduct a public stock offering person that will succeed. they know you are our future. had a four and founder. and including many longstanding giants of american business, your teachers are pouring everything they had been to you more than 40% were founded by when they are not alone. immigrants or the children of i also want to emphasize this. immigrants. with all the challenges we're as with foreign students, our facing right now, we just do not immigration has no real path for need you for the future, but we foreign entrepreneurs. need you now. even if they have a bright america needs young people's passion, their ideas, their business idea that has already attracted investors. energy right now. they are finding other countries i know your up to it, because i smart enough to take them and their new businesses. have seen it. nothing inspires me more than too dull the pain, u.s. capital nine young people all across the that could have seated economic country are already in making growth here at home this appears their marks. they are not waiting. overseas with them. they're making a difference now. let me tell you the story of an

entrepreneur that wanted to grow there are students like will be in the united states, the canadian named eric deep. launched a non-profits that gives loans to students. he went to silicon valley he is raising the money doing seeking opportunity and capital. what he loves by hosting dodge he found success with an online quiz program that attracted millions of users and the ball tournaments', capture the flag games. interest of u.s. investors. now he is helping other young they wanted him to start a people be able to afford the company to sell the program, but he could not get a visa tuesday schooling that they need. in the united states. or the young man jake bernstein his ability to build a company from a military family in st. that could of created u.s. jobs got him nowhere with our louis working with his sister to launch a web site devoted to immigration system. community service for young people. his investors gave up and the they have held volunteer paris, opportunity pass. put up a volunteer database, and it is no surprise what happened have helped families find with his next idea. volunteer opportunities from he and a couple of other maintaining nature trails to canadians had creative ideas for serving at local hospitals. last year, i met a young woman video games to play on smart phones. he also convinced u.s. investors

from richardson, texas, who is to get on board. but this time, his partners have 16-years old. during the summer, she decided chosen to grow their company in vancouver where they have less trouble getting visas for their employees. that she was interested in and over the border when the cancer research. she had not taken chemistry at, u.s. capitol and the jobs that could have been created in the so she taught herself chemistry united states. during the summer. this is craziness. but we can stop it by offering a then she applied but she had learned and discovered a brick visa to immigrants to back their through a process that uses light to kill cancer cells. business ventures. if it successfully creates jobs -- a breakthrough process that for american workers, they can uses light. stay and grow the business into she's been approached by doctors the future. and researchers who want to work america has some of the most with her to help her with her discovery. enterprising individuals on the point is you do not have to earth, but on to open doors -- wait to make a difference. your first obligation is to do well in school. entrepreneurs are like your first obligation is to make sure your preparing yourself for engineers. colleges and careers. you can't get enough of them. he why bring more immigrants you can also start making your mark right now. into the country when you have

a lot of times coming young so many unemployed? people may have better ideas for is the solution than s old people do come anyways. we just need those ideas in and unemployment. out in the open. of democratic and republican business leaders agree that we should expand and streamline our when i meet young people like you and when i sat and talked existing tools for attracting your president, i have no doubt talent our country. that america's best days are temporary visas help fill still ahead of us, because i know the potential that lies critical gaps in the work force, but the numbers are too within each of you. soon enough, you will be the few, and the filing process long ones leading our government. and unpredictable. the visas have been exhausted in you will be the ones making sure that the next generation gets days, and even in the midst of a what they need to succeed. national recession, the visas you'll be the ones charting the have run out for the end of the course of our own written year on which they are history. that all starts right now. authorized. it starts this year. not only in the software i want all of you for listening, industry, but in electronics, i want you to make the most of pharmaceuticals, aerospace. the year ahead. this is absurd, to deny american i want you to think of this companies access to the workers they need. time as one in which you were the government doesn't know how many skilled workers are needed

just loading up with each year. information, skills, try new let the markets work. things, practicing, and honing you can do that by eliminating the cap on visas. all those things the will need to do great things when you get another arbitrary cap which it out of school. of lemonade is the one that your country is depending on limits employment green cards by you. set your sights high. country. have a great school year. right now, iceland and gets the same quota as india. let's get to work. thank you very much, everybody kno. it makes no sense. i have nothing against iceland, gun bless you and god bless the but think about where they are united states of america. [applause] coming from. we'll get some from iceland, but just because of size, it is more ♪ ["stars and stripes likely we will get some from india. these quotas mean that they can forever"] face a wait of up to 10-years for a green card. during that time, they are prohibited from getting a ♪ promotion or taking a new job. no wonder why many return home.

that is not just for american companies, but the entire economy. they returned home to help our competitors. think about it this way. the yankees sending him on to pitch for the san francisco giants. ♪ this in case anybody is interested, is not going happen. and the yankees will go all the way and win the world series. you heard it here first, just so ♪ you know. i didn't mean to take all the fun out of it, but it is going back then. each of the steps that i have just outlined will help the economy at the american worker. if we don't take them, we will not only be undermining our economy, we are putting our nation's future at risk. ♪ look at what other countries are doing to attract the people that

we are turning away. how the government offers tax breaks in india, and startup capital to chinese citizens educated overseas and returned to start a business. china has launched the thousand talents program, a campaign to lure back, a chinese scientist with cash and well-funded laboratories. in israel, the government is spending hundreds of millions of dollars on a program to attract millions of israeli exit path -- ex-pats. ["stars and stripes forever"] in chile, the government is seeking people of any ♪ background. the founders of new technology companies their offer free office space, produced red tape, and access to mentors. many of the english-speaking competitors from canada and the u.k. have programs designed to

thatct the entrepreneur is come to create jobs. smarted visa policies alone can't guarantee that the economy will be successful. but that other is no chance there will -- they will stay competitive unless they can attract top talent from around the world. too few jobs to go around today, i said before, why should we let people overseas compete for slots that can go to u.s. workers. i want to repeat the real facts here. as the data shows, immigrants don't take away jobs. they make jobs. ♪ that is true for high skilled immigrants. for every position, u.s. technology countries increased their employment by five workers.

it is not that the u.s. work force doesn't have extraordinary ♪ ♪ individuals, cut the global economy is changing everything. people and resources are moving more freely. offices and factories can increasingly do the same work everywhere. information technology is creating an unprecedented >> coming up, and member of the opportunities. as a result, america is no federal reserve board of longer the inevitable governors gives her outlook on crossroads for enterprise and economic outlook. innovation. on the 2008 financial crisis countries now back in with opportunity, so the united with a former executive of the b states has to compete like never and t bank. remarks of new york city mayor before for talent. that is a competition we can win if we work at it. michael bloomberg on immigration. and we must win if we are going >> less than a year after the to remain the world of the creation, it faced its first strongest economy and a beacon for hope for people around the great test. world. when the cuban missile crisis exactly one month from today, brought the world to the edge of the entire country will mark the one hundred twenty fifth war. anniversary of america's >> marking the 50th anniversary

greatest monument, the statue of of the central intelligence liberty. agency established in 1961. her torch has brought light to the director advises the defense the darkest corners of the secretary in the chairman of the earth, beckoning to our shores joint chiefs on all military intelligence issues. hold those yearning to breathe learn more from the current free. director online on the c-span it is not her torch, her crown, video library, all archived. in his washington coming your or herb broken chains that have way. inspired so much. now they're regular updates on it is her location. what is on the c-span network the power of her symbolize and with c-span now on twitter. get tweets once an hour on live the reality of new york city as a gateway, a golden door to the land of opportunity that is the united states of america. events. it is easy to sign up. go to twitter.com/cspannow and the reality is our history but it also must be our future. click "follow." and today, we are saying to c-span2 and c-span3 now on those who dream of becoming americans, who dream of coming here to work and start businesses, we don't need your twitter. sweat, your skills, your ideas we will hear from a member of or your innovations. the federal reserve board but nothing could be further governors uses the job market is from the truth. recovering at a slower rate than

expected but believes that this we desperately need immigrants that want to come here to prevents the unemployment rate from rising. this is just under one hour. >> good morning. thank you for attending this event. at the head of the center for financial policy at the university of maryland. this came into being because of recent events. the main goal was more research, and vacation, and reform of policy. today's talk is part of an ongoing speaker series hosted by the center and redo a variety of things and i will make an

announcement about a major upcoming conference. today, we are privileged to have gov. sarah raskin to speak to us on a very timely topic, monetary policy and job creation. the suspect of job creation is constantly in the news. i will say it is the most pressing policy issue. i think we will hear about linking monetary policy and job creation. there will be time for questions and comments, but you need to write them on the index card, and they need to be legible. let me formally introduced our

distinguished speaker. gov. raskin took her seat as a federal board governor. prior to her appointment, she was a commissioner of financial regulation for the state of maryland. she was responsible for regulating all types of financial institutions including banks, credit unions, mortgage lenders and servicers, among others. under her leadership, the commissioners played an early role in reform of the financial crisis including reforming the foreclosure process and combating loaned discounts and elevating lending standards. prior to serving as commissioner, she has a wealth of experience. she was managing director from a

financial group and also served as counsel for the u.s. senate committee on banking. she worked for the bank of new york in the joint committee of the contras. we're very pleased and privilege that she should join us today. i'm very happy that you're from the state of maryland and visiting this school lettis part of the university of maryland. thank you very much. [applause] >> i do want to thank you the center policy of for inviting me to participate in this forum. i'm delighted to see that the

center for financial policy is already driving. back in 2008 when i was the commissioner of financial regulation for this state, two of the founders came to my office in baltimore and spoke to me about starting up the center and asked for my ideas about what such a center man accomplished. i'm so glad to see that despite the formidable challenges facing all new projects that the center is not fully engaged in addressing financial policy issues that are critically important to our country. today, i want to talk about how monetary policy can promote maximum employment in the context of price stability. i will set the stage are reviewing current labor market conditions and then talk about the tools that the federal reserve has been declined foster job creation and promote a stronger economic recovery.

i will do my best to make these points in plain english rather than jargon, but feel free to collect me -- correct me if i lapse. my children have no hesitation in doing so. it goes without saying that these remarks are to express my views only and not necessarily the opinions of my colleagues on the federal reserve board or the fomc. the global economy began flowing in late 2007 and early 2008 -- began slowing. it turned downward sharply when the financial crisis intensified resulting in the worst recession in many decades. by the end of 2009, the unemployment rate had reached a horrifying 10% corresponding to more than 15 million americans being out of work with all of the intended social

consequences including lost income and wealth, mortgage foreclosures, families strained, and health problems. officially, the recovery began in the third quarter 2009, but the pace of recovery has been modest. we have learned from recent comprehensive revisions of economic data that the recession was deeper and the recovery weaker than had previously been thought. indeed, the most recent reading on real gdp in the united states, the one for the second quarter of this year, still has not returned to the level it had obtained before the crisis and the increases in economic activity have been at a rate is deficient to achieve any sustained reduction in the unemployment rate. the latest employment report issued by the bureau of labor statistics was bleak.

private-sector employers added only 17,000 non-farm jobs in august, far fewer than the week average of 110,000 recorded over the previous three months. the unemployment rate was 9.1%, representing about 14 million americans out of work in august. nonetheless, as many families now, these headline numbers do not fully capture the weakness in labor market conditions. an additional 8.8 million workers were classified as part- time for economic reasons in august because their hours had been cut back or they were unable to find a full-time job. 2.5 million americans were classified as marginally attached to the labour force because even though they wanted to get a job, they had not searched for one in the past

four weeks. almost half of that group had given up searching for employment altogether because they do not believe any jobs are available for them. it is not just those that are currently classified as unemployed to are excluded from march. the underemployed, marginally attached and the discouraged from all of whom who are concerned about their livelihood, housing, and the rising cost of living speaks powerfully to the weaknesses of the recovery. the economic data it, in this regard, corresponds to what i have seen firsthand. i have travelled to once robust manufacturing cities in the midwest and have observed vacant lots, burned out factories, metal scrap heaps, and foreclosed homes. i visited unemployment insurance offices and job training centers that have met lots of

people who have been out of work for more than one year or two, so long that some of them are embarrassed to show their resonance -- their resumes. these have called for a forceful policy measures. i will talk now about the conventional and unconventional actions that the federal reserve has taken to foster economic recovery and job creation. a reduction in current short- term interest rates and a corresponding downward shift in private sector expectations about the future of such rates will tend to reduce borrowing rates for businesses including car loan rates, mortgage rates, and other long-term interest rates. this policy accommodation also

raises household wealth by boosting the stock market and prices of other financial assets. the greater household wealth and cheaper borrowing rates come they tend to increase their purchases of housing, cars, and various other goods and services. businesses ramp up production to meet the increased level of sales. moreover, with lower costs of financing, businesses may be inclined to increase their own spending on investment projects that they might previously have seen as marginally profitable. in the near term, firms can meet demand by resorting to temporary and part-time workers, but over time, they have strong incentives to increase the number of regular full-time employees. consequently, conventional monetary accommodation is expected to lead to greater job

creation, though sometimes with substantial time lapse. the federal reserve has used this policy to aggressively since the onset of the financial crisis, in particular, the federal funds rate target which so that -- which stood at 5% which was the creased by the end of 2008 and the target range has been imaintained. in effect, therefore, the fomc has been deploying its conventional policy tool to the maximum extent policy possible since 2008 and there is a vast economic literature regarding the effects of conventional monetary policy. i will simply pose the counterfactual question, what would have happened to u.s. employment of monetary policy

would have failed to respond? economic models, and there are others, suggest that the federal funds rate target had been held at a fixed level of 5% from the fourth quarter of 2007 until now rather than be reduced to its actual target range of zero-zero point to 5%, then this would be several points higher than it is today. in other words, by following the actual policy of keeping the target on the rate at its effective lower boundary since 2008, the federal reserve saved millions of jobs that wouldn't otherwise been lost. substantial uncertainties rounds various specific estimates, but there should be no doubt that the fomc's forceful action

helped mitigate the consequences of the crisis and thereby sparing american families and businesses from even greater pain. given the magnitude of the global financial crisis and its aftermath, the federal reserve clearly needed to provide additional monetary compensation beyond simply keeping short- term interest rates close to zero. consequently, like a number of other major central banks, the federal open market committee has been deployed in unconventional policy tools. there are two types of unconventional policy tools that have been used. first, we have provided additional four-word guidance about the likely patterns of the federal fund rate. that is one area of unconventional tools. the second is that we have engaged in balance sheet

operation that involves changes in the size and composition of our security holdings. broadly speaking, these two types of policy tools effect the economy through channels that are similar to a convention. how can these be helpful in promoting and a strong odor of the summit recovery? -- promoting a stronger economic recovery? one essential element of good policy is effective communication. and in a democratic society, central banks have the responsibility to clearly and fully explain their policy decisions. good communication is also essential for strengthening the effectiveness of monetary policy. expectations about the future play a key role in the decision making the households and firms.

how much to spend, save, work, invest, or higher. when market participants understand how the central bank is likely to react, asset crisis is likely to adjust ways to reinforce policy action and therefore support bank objectives. clear communication can help anchor the public's long-term inflation speculations to approve an extent through which they can promote job creation in a context of price stability. with the federal fund rate constrained by its effect of lower bound, effective communications with the public have become more important than ever. since 2009, the federal reserve has published the committee's

practice that long run projections of the inflation rate, unemployment rate come and economic growth four times per year in conjunction with the minutes of the fomc meeting. based on the adjustments, committee participants judge that an inflation rate of 2% or less is measured by the price index of personal consumption expenditures as most consistent with the statutory mandate of maximum employment and price stability. the committee strives for as low unemployment rate as possible. in our most recent projection, committee participants estimate that the long run rate of unemployment is about 5%-6%. since december 2008, the fomc has been providing conditional

forward guidance about the likely path of the target federal funds rate. for march 2009 until june 2011, the committee of to for guidance indicated that exceptionally low levels of the federal funding rate was likely to be warranted for an extended time. in august, we decided to be more specific about the timing and their two most recent meeting statements have indicated that economic conditions, including low rates of inflation and subdued outlooks, are likely to warrant exceptionally low levels for the federal funding rate, at least until mid-2013. this can provide monetary accommodation by leading investors to expect a longer time of low interest rates. as i noted earlier, a downward shift in the expected half is

associated with reduced long- term and -- the fomc has engaged in two rounds of the long term asset purchases of about $1.40 trillion in agency mortgage- backed securities and about $300 billion in long-term treasury securities. those purchases were executed during 2009 and the first

quarter of 2010. the second round, often referred to as qe2 involved an additional $600 billion in long- term securities which was depleted at the end of june this year. by purchasing long-term securities in the open market, the federal reserve can exert downward pressure on long-term yields thereby reducing the private borrowing rates and raising household wealth. consequently, just as with conventional monetary policy, it helps boost consumer spending, business investment, and net exports. the resulting increase in aggregate demand helps increase the pace of job creation. at last week's fomc meeting, the committee announced that we intend to extend the average maturity of our securities holdings by selling $400 billion

in short-term treasury securities and purchasing an equivalent amount of long-term treasury securities. this maturity extension program, which is referred by some as "operation twist" should exert downward pressure on long-term interest rates and help make broader financial conditions more accommodating thereby supporting a strong grip economic recovery. indeed, recent work by one economist at the federal reserve bank of san francisco suggests a similar policy in 1961 did have the effect on long-term interest rates that are roughly comparable to those of a qe2. another significant policy action taken at last week's meeting is that the principal payment from our holdings of agency securities will now be reinvested in agency mortgage- backed securities rather than in treasuries.

our announcement appears to have been successful in narrowing the spread between a raise on agency mortgage-backed securities and treasury security as a comparable security. the spread had widened substantially in the continuation of such a trend could have pushed that mortgage rates and continued to adversely affect the housing sector. in my judgment, the fed's deployment the policy tools has been completely appropriate in promoting a maximum employment. ideally, such policy decisions would be informed by precise quantitative information about the facts of each tool, but in reality, the estimated the facts of the fomc policy actions are suspect to considerable uncertainty, which is in transit to real world monetary policy making at any time. it is particularly relevant under circumstances with a scope

for monetary policy being constrained on a federal fund rate. that leaves unconventional tools as really the only means for providing further monetary accommodation. although these monetary policy tools have been successful in pushing down interest rates across the spectrum, the magnitude of the transmission of economic growth and employment has been somewhat more muted than i would have expected. indeed, it seems plausible that the effectiveness of our policy tools is being attenuated by a number of unusual persisting factors including an excess supply of housing and impaired access to credit for many households and small businesses. under normal circumstances, residential construction is an

interest-sensitive part of the economy that has played an enormous role in contributing to previous recoveries, especially the brisk recovery that followed the downturn in 1981- 1982. in the wake of the bursting of the house in bubble, however, the housing sector has remained exceedingly weak. there is an excess supply of housing that is even likely to decline gradually despite the record low level of mortgage rates. in this true loan -- in this crucial sector, this has not shown to hire activity under what would be expected under more usual recoveries. this has put downward pressure on home equity values.

a substantial portion of homeowners have-home-equity and her -- have negative home equity and are unable. they have seen a dramatic decline in the equity oftheir homes. restructuring household balance sheets may also be lowering the normal responsiveness to a decline in market interest rate. in particular, lenders continue to maintain other consumer homes. consequently, many households may be unable to take the advantage of the lower bar when rates that are available to those that have a high net worth and pristine credit records. many small businesses also appear to be facing unusual obstacles in obtaining credit.

but this recovery were like others, we would expect a smooth transition in which lower interest rates would fuel credit expansions that would be used for capital investments, inventories come and other short-term opportunities. nonetheless, the latest senior loan officer opinion survey on bank lending practices, taken in july, indicated that although domestic banks continue to ease standards on commercial and industrial loans, this reported easings on smaller firms and was well below that of large and middle sized firms. the national federation of independent businesses reported a notable increase in the proportion of businesses reporting that credit have become more difficult to obtain.

these businesses not only expect credit to become tighter, but have turned sharply more pessimistic of the broader economic outlook. finally, and perhaps more comprehensively, it is more concerning that this has undermined the wealth of many americans. they entered this with little financial buffer against the adverse effect of wage cuts, job loss, and drops in home values. according to the 2007 survey of consumer finances, home-equity accounted for about half the total net worth which made them extremely vulnerable to the eventual housing collapse. families at the lower and shot a substantial drop in their net worths -- families at the lower

and saw a substantial drop. of those in the middle fare even worse. compared with widespread unemployment, housing and stock price decline, and increasing rates of mortgage defaults, foreclosures, bankruptcies, the assets of many american families have been significantly eroded. the effect of these developments may be to attenuate the revival of normal consumption patterns that would otherwise be dictated by increases in consumer demand and growth. even if the usual effectiveness of monetary policy is being attenuated by the factors that i mentioned, that conclusion should not be taken that this would be unhelpful. the opposite conclusion may be the case, additional policies and accommodation being

warranted under present circumstances. my fomc colleagues and i have recently been faced with the use of unconventional policy tools, and while we may not all agree with every decision, i believe that the public can have a very high degree of confidence in the fundamental integrity and soundness of our decision making process. some commentators, in an attempt to characterize how we prioritize maximum employment and price stability. such labels are ill-conceived and misleading. everyone on the committee is fully committed. incidently, since my kids love describe everyone as a hawk, dove, or another type of bird, i

have taken to reminding them of this conviction that i have. my colleagues and i are doing our job correctly, we are neither hawks, nor dogs, but owls. -- nor doves, but owls. in summary, the economic recovery has fallen well short of restoring labor market conditions to historical a typical levels. given the elevated rate of unemployment in the large number of individuals experiencing long spells of unemployment, both fiscal and monetary policy makers should be continuing a wide array of policy. in my view, the deployment of our policy tools needs to be carefully gauged, appropriately time, and it clearly communicated to the public. moreover, to the extent that

some factors may attenuate the usual effectiveness of monetary policy. there's a compelling case to implement policy measures and thereby strengthen the effects of the monetary accommodation that we have already put in place. in light of the economic hardships facing our nation, i want to underscore that the federal reserve is fully committed to doing everything that we can to promote maximum deployment in the context of price stability. thank you, again, for the opportunity to speak with you today, and i look forward to hearing your questions and comments.

>> what are your views on the proposed cost of expanding the dsc refinance program -- gse refinance program? >> the question has to do with the harp program. as many of you know, it is one of the programs the administration put in place to help deal with the issue of people who are under water and need to refinance to lower rates. it is interesting and a good question because, as i talk about in my remarks, is one thing for the federal reserve to put in place and it is another thing to see those lower interest rates to read to the

economy. it is one significant obstacle to having these in housing, then you will pay attention to programs that are developed like the harp program. i have watched very carefully the evolution of the program. my personal sense is that it is a program that it is well conceived. it is intended to help people take advantage of lower interest rates that are currently in place. there are obstacles to it. there have been a number of issues that have kept it from being used in a greater extent, and one such obstacle has to do with the fact that it is very hard for people who are under water in their mortgages, meaning they owe more than their homes are worth to qualify.

the features of the program, i think, need to be looked at very carefully with an eye to see whether those impediments can be addressed and removed from the programs that there can be greater uptick and a greater use of the lower term interest rates that have been put in place. >> foreclosures losses, these are a traditional area of the exclusive state-controlled action. should we look at rational foreclosure laws and standards? >> this is a question about foreclosure laws, in the context of state legislatures and typically foreclosure has been a question of local control and determination. you ask a question of a former

local commissioner of finance regulation for state, and i would have to say that i am of the view that they need to stay in local control. there are clearly big delays going through foreclosure right now. this has very little to do with the fact that state laws are somehow contributing to the backlog. i think we have a number of factors that have made the foreclosure process exceedingly difficult. many of these factors have to do with some of the practices that are going on in mortgage servicing. in my view, and my opinion is shaped by having worked locally

on foreclosure laws, i think reform at the state level is very important. >> ok. what effect does political pressure from the administration or congress have on policies? >> good, ok. this is a question about political pressure. as we all know, the federal reserve is a creature of congress. it was created -- and that is something that congress chose to create. the federal reserve is accountable to congress. it is very critical that we

remember that. one aspect that we want to keep in mind is that when congress created a federal reserve, it created an independent central bank. it wanted a central bank that was insulated from short-term political pressure. perspective i think that congress was pretty smart. what we see in other countries where there are central banks is that if you have a central bank that is not insulated, you do find high degrees of correlation with inflation. for people who believe in price stability and want to maintain price stability, i think you also tend to be of the view that you want your independent bank to be insulated from short-term political pressure.

that is my view. >> please comment about the potential consequences of operation twist. >> this is a question about operation twist. as i described in my remarks, it is the balance sheet operation that the federal open market committee recently took at its september meeting. essentially, in that operation, the federal reserve will be selling $400 billion worth of short-term treasury securities. by june 2012. i will be buying back long-term treasury securities. hence, the twist.

the top -- the virtue of this operation is to keep the balance sheet side roughly constant. this is not growing the balance sheet in any way. for many people, this is something that could have implications for inflation expectations. operation twist keeps the balance sheet at roughly the same size and from that perspective, it is considered a good thing. the market has responded quite positively to it, but as i mentioned, the real effect of it is going to be better long-term interest rates do get translated into greater real economic activity. the question raises the issue all of lower interest rates and questions regarding its solvency of pension funds and other

investor groups. obviously, that is something that we would need to monitor three carefully. again, the overall of fact -- monitor very carefully. the overall effect is one that is intended to stimulate economic activity. >> could we now be facing a normal so that unemployment would remain higher than 6% for a long time? >> this is a question about whether we are in a new normal, whether the rates that we are seeing are going to be the rates that we will be living with forever. this is something that, you know, you will get a different views based on who you ask. i tend to think not.

i think that we are in a recovery. i think that it is moving forward. it is moving forward slowly, but i see a slow upward trajectory nonetheless. i do not see this as a permanent state that is going to go for decades and decades. >> ok, low interest rates stimulate economic activity. do some parts of the economy or do some seasons respond more readily than others? the variation of low interest rates -- >> if i understand the question correctly, it has to do with the effect of interest rates on

different sectors of the economy. it is an interesting question because there are parts of the economy that are more interest- rate sensitive than others. historically, housing has been interest-rate heavy. when you have lower interest rates, you see a higher rate of home creation. other sectors are clearly less interest-rate sensitive. i have to confess not to being an expert in every industry and knowing what the sensitivity is. i would point out to the questioner that it is very important that a broadly speaking, we see a translation between lower interest rates and higher rates of growth. that piece of the transmission is what is important in having resumed economic activity. >> what is the right solution

for qrm regulation? what should down payment regulations be? >> this is a question regarding qrm -- a qualified residential mortgage standard, that is set up in the dodd-frank legislation. it is a piece of legislation that requires the federal reserve, as well as other banking regulators, to come out with regulation that does what congress intended in the dodd- frank act. it is one that is currently out for public comment. there is the chance for the questioner to throw and the views regarding an initial attempt to define qrm and to implement what it is in dodd- frank. there are vast views on this and there have been a lot of

comments. last time i checked on this proposal. it does -- it is a question that generates a lot of interest. in particular, i am guessing that the questioner is concerned about the 20% down payment notion in the standard of fact, i believe, has generated quite a bit of comment. it leaves the regulators with the discretion to determine what will be the gold standard of a qualified residential mortgage.

the question is whether the regulators have done that correctly. obviously, this does have significance for what bank regulation in the area of housing is going to look like. it is important thing to keep an eye on. the second has to do with fiscal quality. what ramifications -- that might emerge from the current regulatory policy?

inflationary expectations. i have to speak for myself that that is something that would be quite weary of.

one of the explicit mandate of congress is price stability. keeping inflationary expectations anchorage is extremely important. -- encourage -- anchored is extremely important. >> would you please address the effect of monetary policy is [unintelligible] of certain expectations of a fiscal policy? >> this is an important question and it is not easily quantifiable, but there is a sense that enhanced uncertainty and reduced competency are what is driving a lot of the slower rebound that we are seeing. if you look at different surveys of confidence, and the one that

i tend to follow most frequently is the michigan survey, the michigan survey has gone down in terms of showing consumer confidence and keeps going down. it correlates a little bit with some of the actions in congress, so i think there was a sense that one of the depths in consumer confidence had to do with the effects of the impasse over the debt ceiling and some of the wrangling in congress. however, if you would maybe think that that effect would be diminished in people's minds. but we have not seen a big resurgence of confidence. confidence is very important because from a monetary policy perspective, monetary policy works out for the development and setting of expectations. if you have a sense that things are going to be bad and are going to stay back and are never going to return to the way of

life that you had come to expect, you will engage in different kinds of behaviors. you may not spend if you have a sense that you are going to lose your job or your income is not going to go up. it may very well affect how you make your spending decisions and you can see the scenario that confidence could be at such a low that it could overwhelm people's sense of consumption, which could fade into -- feed into the sense that businesses do not want to expand, they do not want to hire. you move into this vicious downward cycle. the notion of consumer confidence, i think, is an important one. it is one that has not been highly quantified, but it is one that clearly we are thinking about we are figuring out its

impact. >> this is the last question. i know that you are -- somebody is going to ask a question to capitalize on your experience. what is your boot -- what is your view on appropriate ratios for institutions? >> ok, excellent predatory question. -- regulatory question. one of my favorite areas. i had been a regulator at the state level and engaged in a bank examination, bank regulation, from the height of the crisis until i came to this current role. the question has to do with capital ratios. capital ratios are very important.

they are a significant buffer institutions that are facing loss. you,examiner's will tell and i am completely of this view, capital is but one aspect of a bank's safety and soundness. in addition to capital, we looked at a whole host of other factors. including the bank's management, the bank's earnings, the banks liquidity, the banks sensitivity to interest rates, its portfolio, its book of business. those are all very critical factors as well and assessing the health of the bank. capital, as you know, it is one that is most easily quantifiable. again, i want to underscore the importance of capital. clearly, underscored that it is

necessary in terms of assessing a bank's health. that said, there are other components and i do my best to remind examiner's that we are looking at the entire health of an institution that is judged by more than just capital. we really try to maintain a holistic approach regarding the health of the bank. >> the role of continued capital? -- contend and capital? >> yes. >> this has to do is contingent capital. regarding a kind of capital that into capitalggered t upon certain occurrences are

guarding the health of the bank. it is a concept that is very interesting. it has a certain amount of intellectual appeal. analytical appeal to it. it also has some operational issues that also need to be addressed. there is a full discussion regarding contingent capital. it will be interesting to watch how it develops. >> thank you very much. i will turn this over to -- before i do that, i want to recognize the assistant director for center of financial policy. [applause] >> good morning, everyone. [inaudible] on behalf of the center for financial policy, and all of my

colleagues, it is a great honor and pleasure to have our speaker here today. these are among the most crucial issues that our country faces, that the world faces. it's it's really refreshing to have an open session with such insights and kantor. -- candor. [applause] [inaudible] we have a very small token. [inaudible] of our appreciation of your being here with us today. thank you very much. [applause] i also want to thank michelle. i want to spend 30 seconds giving you all a commercial for next set of financial policy events. it is going to be october 5 at 6:00 here at the ronald reagan campus of the school of

business. it will be our conference on systemic risk and dated issues. this is one that you do not want to mess. we are very excited about this lineup. it includes keynotes from senator jack reed as well as robert and go. -- engel. has tremendous panels of regulators. some of the leading mind and academics on systemic risk issues. this is a session that is sponsored by our center of financial policy. it really is a tremendous joint effort. i hope you can join us your october 5 and sixth. thank you for being here today. let's give a last round of applause. thank you.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> sunday, democratic rep chris on the efforts to identify budget cuts. that is at 10:00 and 6:00 on c- span. >> the head of the american association of university professors says that tenure and academic freedom are in jeopardy and need to be protected. >> tenure creates an atmosphere on campus where people can speak freely. not just in their teaching, but also in terms of university governance. if you do not like a proposal that the board of trustees or the president makes, you have to be able to speak freely about it. administrators should be able to do that as well.

without that, you really do not have the expertise of the faculty available to you. >> sunday night on c-span. >> the house meets on monday at 2:00. this week, members will consider a federal spending plan through november. watch live coverage of the house on c-span. at 3:30 monday, the senate will begin debate on a bill that aimed to crack down on china's currency manipulation. they will proceed to consider six nominations, including henry floyd of south carolina, to be a u.s. circuit judge for the fourth circuit. you can see the senate live on c-span2. >> did regular update of what is on the c-span networks. get tweets once an hour.

it is easy to sign up. just go to twitter. the latest information of what to watch on c-span. >> what role did policy plate in the 2008 financial crisis? john allison points to actions taken by the federal reserve. he spoke recently at harvard law school. 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 [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

for fdot -- maryland rep. chris van hollen. on c- ant 10:00 and 6:00 span. >> the head of the american association of tenured professors. >> people can speak freely in their teachings and governance. if you do not like a proposal, you have to be able to speak freely.

that shared governance is part of what academic freedom represents. >> cary nelson sunday night on q & a."s " >> considering a spending plan through november. live on c-span. a bill to crack down on china's currency manipulation. then the consderation of ciciuit judges -- circuit judges. live on c-span2.

>> this forum, hosted by the u.s. chamber of commerce, is two hours and 15 minutes. [applause] >> when we talk about education, what we really need in immigration is education. the mayor of new york has been sitting on a plan for a long

time. we have been doing a bit of a slowdown here, but i am pleased you are all here, hanging with us. i think this is really important. if we're honest and really work on immigration, we will look at one of the most serious challenges we have and we will understand the fundamental reality that those countries around the world who have good demographics, a strong demographics and highly skilled people win the game. we are lucky. we have a strong demographic face in this country. we have strong growth.

our neighbors to the south are young. we are you -- we're older as a society, and there are great opportunities here. her many points and questions we have to deal with. -- there are many points and questions we have to deal with. and we look at immigration, we have to be looking at every sector of our society and who we want to attract. it is not a matter of keeping people away. our discussion today is going to be very much about who we need to get to come here. i have visited with members of the congress and people all the time about immigration. i hear all of their problems. we're going to lose jobs if we of immigrants. i say, excuse me. if we do not keep the skilled people in this country after their educated in our universities and our institutions, companies have a simple choice. if we cannot get them here and

they go somewhere else, we send the work to where they are. it is simple. so, what we want to do today is have a serious conversation about jobs. and about what it takes to bring and keep jobs in this country, to develop jobs for our citizens and our children. we need 20 + million jobs in the next 10 years. the terrible thing, when we get them, and we have those jobs, we cannot depend. -- cannot fill them. people in the congress say that is crazy. it is not crazy. there are not a lot of ph.d. in chemical engineering walking around. but a lot of them are walking -- are training here, and more than half the people in our graduate

schools are from other countries. we're trying to do here is to drive the system that creates jobs, drive the system decrease innovation, skill and strength in this country. we're going to have to take on a good deal of misinformation. so, then that would shift to the question of eventually getting an immigration bill. i have been trying to change immigration since the day i got here. it is always after the next election after the next, after the next. i want to thank mayor bloomberg. i hope you all are grateful to him. he has a great job.

he is a proponent of big ideas, go big or go home. he is putting a lot of time, energy and money in this, and we want to work with him. one of the things that he and i both agree with -- i am not sure you can do this in one great big bunch. we may have to do a piece of the time. this is a piece that we really ought to be able to get done. i want to thank him. and then, to show you our flexibility here, we went to alejandro mayorkas and said, how about you go on a little sooner and say what you're going to say. mr. bloomberg will be here later. say some of what he is going to say. i reminded him of the time we

spent together when he was advising a company on whose board i served. i encouraged him to come on to the board because there in some difficulty. anyway, he is a dam good lawyer. i do not know how he is doing in the government, but he is a very good lawyer. but he has a big job now. by the way, talking about immigration, he is an immigrant from cuba to the united states. he has a broad legal background and is responsible for running the nation's immigration and naturalization system. he served as assistant u.s. attorney for the central district of california and during that time he served in the crime section. he knows how to catch the bad guys. but the big thing is, he mentored, attracted and recruited a lot of people. good teachers are good managers.

he has a long and distinguished background of which i'm not going to read all of it. he holds a j.d. from loyola law school and a b.a. from the university of california. by the way, the people the go to school in california have agreed you on immigration. they have views on other things too, but we're but to get them. he was named as one of the most 50 most influential minority lawyers in america in 2008. scratch the minority. he was one of the most influential lawyers. since he's taken on this job, he has a two-handed job. yes did deal with our borders and the challenges we -- he has to deal with our borders and the challenges we face and he has the challenge of trying to figure out how to get a legitimate movement forward in

our immigration laws. thank you very much for being here. i will offer you the podium. how long do you want to talk? until bloomberg get here? he can. come on up. thank you very much. [applause] we follow 300 issues here. this issue is fundamental and essential for our country. we are committed to it. all we need to find is a door to >> this issue is fundamental and essential to our country. all we need is a door to sneak through, and you will help us do it. thank you. [applause] >> good morning and thank you. if we were to have a genealogist and identify for as the family ancestry of the people in this room, we would

have in our hands of powerful and tangible reminder that our country is a nation of immigrants and a beacon of hope and opportunity. let those of us who hold the microphone today serve as those examples. more than 50 years ago, the grandson of inference -- of immigrants was born in the bright neighborhood of boston. through talent, education and hard work, he rose to become the architect of the media empire and the mayor of new york city a. i am a proud american who came to this country as a refugee from cuba. our discussion today focuses on immigration, american competitiveness, and the challenge ahead. a horizon is the range of one's perception, and it is important

that we appreciate what we have when we endeavor to define what it should be. we all of knowledge the need to reform our immigration system, and we realize the contribution immigrants can make to the growth and prosperity of our nation. we well understand the impossible set of our current laws when we seek to attract the greatest talent from abroad. at the same time, let us not discount the magnet that america remains. each year, we handle 67 million applications for a wide array of immigration benefits. the grant -- we grant citizenship to 600,000-700,000 people annually. immigrant-founded, publicly

traded u.s. companies employ approximately to under 20,000 people in this country and more than -- two hundred 20,000 -- 220,000 people in this country in more than 400,000 people worldwide. our immediate charge is to realize our existing laws full potential to support the existing u.s. businesses so that we can out-innovate and out- compete in the global economy. there are challenges that define our horizon. i would like to thank the chamber and the u.s. policy association for hosting this today. thank you mayor bloomberg and our distinguished panelists for joining us shortly. your thoughts and vision helped frame our future action.

we approve on average more than 80% of immigration applications. the make it possible for businesses and business people to obtain the benefits for which they're eligible. the path to citizenship has been narrowed, and it is not overseen with the agility or dynamism that the business world requires. i share with colleagues my view that we should not shrink from criticism, but work hard to ensure that we do not deserve it. we are working hard. our work is underway in three main channels of progress. policy, process and people. we are reviewing and revising our policy to ensure that the legislature's intent and the loss objectives are fully realized. we're re-engineering our adjudication process to yield

greater efficiency and we're providing human capital, support and training that our adjudication teams deserve. a few examples are illustrative. in early august we clarify our policy to reflect the clarity of business waivers to foreign- born entrepreneurs. we're providing needed training compliments. we've expanded or accelerated processing of immigrant positions for certain managers and executives. educator'sing our interview of petitions that american businesses filed to transfer their executives from an international office to one here in the united states. we have made significant changes in the way we adjudicate cases in a program that is designed to create american jobs.

we have retained business analysts to support our educator's and receive more than 75 applications for additional economists. we will be hiring corporate expertise, issuing new policy got into the next few weeks, and currently we have a targeted request of proposals to re- engineering our business process from beginning to end. the full filing of 10,000 investors who says has never been reached. in 2008, just over one -- just over 100 were issued. this year, more -- we will more than triple that number. across all lines, we hire all people with business -- we hire people with business experience. we want to more ably address the reality and needs of the business community we serve. we receive thoughtful and

creative responses to our requests for information as to how we can reinvent our entire customer service system, which is currently based on a call center model. we will be issuing a formal request for proposals shortly. he must be able to provide meaningful information to businesses -- we must be able to provide meaningful information to businesses that need it on a real-time basis. we have challenges before us and each challenge presents an opportunity to change and improve, and to serve one of our overarching goals, economic prosperity. the engine of that prosperity is the american business community, a community that attracts the best and brightest from around the world to invest their talents, skills and ideas to grow this nation's economy and create american jobs. immigrants fuel our growth not just today, but the day after.

immigration is an investment in our nation's long-term future. who knows which immigrant will become our next great innovator or which immigrants grandson or granddaughter will build a new media empire and become the mayor of one of our nation's greatest cities? in the shadow of the need for legislative reform of our immigration system, there is a great deal that can be done to realize the current system's full potential. by doing so, we advance america's growth and prosperity , and brighten the future. with a bright 10 future, shout as dissipate and new horizons are different -- brighter future, shadows dissipate and new horizons are defined. thank you. [applause] i do not at all, and if the questions are difficult, my

answers will linder. >> as far as re-engineering year -- your activities, will you utilize the lean 6 process? >> we will. weather was -- whether we will rely on it or not is not a term like an answer. >> one challenge foreign students and scholars have in this country is the number of databases that have proliferated throughout the federal government system. with the re-engineering of the process, and wondering, will it integrate with the student

exchange visitor information system as well as working more closely with the department of labor or the department of state? how will the database is integrate? >> thank you for the question. secretary napolitano has launched an initiative to develop programs and resources for individuals who are obtaining higher education here in the united states. she has designated one of her appointees to spearhead that effort. immigration and customs enforcement has recently revamped its website to make available additional resources and to tackle the very question. that is uppermost in the department's mind with respect to resources that are available and streamlining the process for students who are seeking to obtain their higher education here and remain here, train with that education and obtain what

they can access with that education. >> could you give us some more information on the amounts involved, what the criteria are, and the types of industries you are most interested in attracting people to? >> if i were to respond to the full scope of that question, i would caution people to really get comfortable. it will be awhile. let me see if i can capture that as succinctly as possible. the immigrant investor visa program is built on the premise that individuals from abroad invest in new commercial enterprises here in the united states. those commercial enterprises create 10 or more american jobs

can obtain a visa on a conditional basis for a period of two years. if indeed their capital has been invested throughout that time and the jobs have been created or are reasonably likely to be created, the condition will be removed. the amount of investment needs to be $1 million, unless that investment is made in a targeted employment area, which is an area of accused -- acute unemployment, in which the investment needs to be $500,000. money directly invested in a new commercial enterprise that the investor has founded or helped develop needs to be created from the at -- from that commercial

enterprise. the jobs can be created directly, indirectly, or even induced in order to pass for the immigrant investor visa. that is a quick answer. >> welcome. thank you for being here. this was not intended as a follow-up question on the investor visa, but we of the u.s. chamber of commerce talk to businesses every single day. we have chambers of commerce all over the world. what can businesses be doing to help spur those investors he says -- in the store the sessa -- investor visas? >> i think the first order of business is for our agency to streamline the process so that

the creation of jobs is more fast file -- facile and people can deliver on the promise of their proposals more rapidly. one of the things that i think the chamber needs to do is a profile of the program. i do not know if there is sufficient publicity around this untapped potential. as i alluded to in my prepared remarks, three years ago, the rich just over 1200 -- there were just over 1200 v sayisas id in a program that has an allocation of 10,000. i think we will bump up to 4000 this year. the program is growing exponentially, but i think the potential of the program remains untapped, and i think

the chamber could help in really sending the message out. >> i was very much involved in the development of the comprehensive immigration reform. we had tremendous bipartisan support in the senate'. what can we do in the business community to help dial down the rhetoric on this issue so that we can have a more rational conversation? there is a need for in a -- and need for education on immigration. what advice would you have gone even entering the conversation in a rational way? >> that is a very compelling and

difficult question. i have commented in the context of discussing immigration the challenge of the rhetoric employed on this issue, the challenge it poses on achieving our goals. i find the rhetoric that is so very divisive to not only be counterproductive in achieving reform, but frankly, counterproductive in building collaboration a partnership which is so critical to success within the boundaries of the laws that we currently have. the topic comes to mind is to continue to advocate, continue to participate in the dialogue,

and exemplify the ability that you wish others to have. i think it is only by demonstrating a style of engagement, the replication of which would be to success, can we, i think, succeed. it is interesting. i was viewed as an aggressive federal prosecutor, and by that, people meant i was aggressive in pursuing what i think was right. i remember in a very difficult sentencing argument, my colleague called me a formidable adversary. it struck me quite profoundly because i never viewed myself as an adversary, just an applicant. i think there is a material

difference between the two. i think the debate on immigration should be one that is not characterized by adversity, but one that is really defined by advocacy, and i think that if we continue in this room to discuss the issues in a way that we all have, reason will prevail. >> he mentioned the re- engineering of your business process. those that deal with immigration find that a welcome opportunity. you have something now called transformation. what is the link between the two. is one independent of the other? is transformation driving the changes in your process? >> should you not be aware of

transformation, transformation is our effort to modernize our agency, to move from a paper- based agency to one that is defined by the use of electronic means. those two efforts, transformation and re- engineering business processes, are sometimes one in the same, and otherwise work in partnership and symbolically with one another. we are in the first instance transforming our 539's. we are scheduled to launch the new department for that category this year. we bring into the electronic arena a more efficient process,

making modern an antiquated process. we're trying to reengineer ahead of the transformation efforts, because quite frankly, transformation is a multi-year effort, and we need to bring efficiency to bear in real time, today. so they're working in sync with one another. >> i think this might be follow- on to the previous question. he provided a -- you provided a tremendous the eloquent description of the history of the immigrant in our country. what plans do you have for an outreach that brings to the american public a reminder of what the role of the immigrant has been in our country?

>> we have tremendous outreach effort underway. we had most recently launched a citizenship education and public awareness effort that is designed to reach people who are lawful, permanent residents who may be eligible to be naturalized, who might not be aware of the path available to them or how to take the path. that campaign, that initiative publishes indirectly the power and beauty of our immigration system and the power and beauty of the contribution of immigrants. i'm very careful in what types of initiatives we launch to

spread the word of the power of the immigrant in the united states because the money i use is the many immigrants pay for the benefits for which they are eligible, so i try to balance the importance of proselytizing with the frugality it is incumbent upon us. >> one of the things that we have discussed from the chamber perspective is the specialized knowledge category and a key role that plays in allowing multinational company's management to work. it requires your adjudicator is to understand business models

and so forth. you mentioned in your remarks that the agency is starting a training exercise to, not issue guidance in that area, but to train the officers concerned in how businesses operate and specifically to improve their understanding about the movement of the global work force. could you talk a little more about what those steps might be. >> theory gladly. -- very gladly. i should say, and this is an invitation i hope i do not regret, if you have an example of a request that you believe was apparently denied to to lack of understanding on the part of our agency with respect to how intercompany transfers work in a business environment, we welcome those examples, because those examples help us train our

colleagues and insure that we do not have defects. there are a number of different ways in which we're going to introduce the business community into our agency so that we actually understand the industries we serve. we understand the dynamics of the business world. we're going to be hiring people from the business world to join our adjudication teams. we have already and will continue to hire business consultants to guide our policy- making and help train our educator's -- but to decatur's -- adjudicators. >> i appreciate your insights.