with the leaders of 20 nations that make up the asia-pacific economic cooperation or apec. yesterday, leaders agreed on the outline of a deal that would create a pacific rim free-trade zone called the trans pacific partnership. cameras were allowed to cover the president's opening statement before the plenary session got under way. he talked about the priorities of the summit and the importance of the asia-pacific region to the u.s. economy. >> good morning, guys.

>> [inaudible] >> [inaudible]

>> good morning, everybody. it is my great pleasure to welcome all of you officially to the apec leaders' meeting. this is the first time in 20 years that the u.s. has hosted this form and it comes at a time when america is very focused on how we can work together in a

cooperative, effective way, in the trans-pacific region. and obviously, i am particularly pleased we are meeting in my home state of hawaii, which reflects the deep connections between the peoples of our region. and i hope everybody had a wonderful evening last night. some of youard that wanted to join in the julhula dancing. now it is time to get down to work, and we have much to do. our 3 economies ar, billion citizens are looking to us to increase exports, expand trade and opportunity that creates jobs, and economic growth. and that is why we are here. i'm confident that we can make significant progress. we have done it before. since apec started, we slashed

tariffs and barriers to trade and investment. commerce in the region has soared, creating new jobs, new markets, and raising living standards across the region. and i want to emphasize that the asia-pacific region is absolutely critical to america's economic growth. we consider it a top priority. and we considered a top priority because we are not going to be able to put our folks back to work and grow our economy and expand opportunity unless the asia-pacific region is also successful. this region includes many of our top trading partners. this is where we do most of our trade and where we sell most of our exports. it is also the fastest-growing region in the world. and as a consequence, the asia- pacific region is key to achieving the goal of doubling u.s. exports and creating new jobs.

today, we have an opportunity to make progress towards our ultimate goal, which is a seamless, regional economy. we will focus on three specific areas -- increasing trade and investment, promoting green jobs, and streamlining and coordinating regulations so we encourage trade in job creation. and more broadly, we will be discussing how we can work together to spur on quicker economic growth and more sturdy and sustainable economic growth. the economies of this region have a critical role to play in addressing the imbalances and making sure that growth is balanced and sustainable in the future. so i want to thank my fellow leaders for being here. i'm confident we can continue to make significant progress during the course of this day. before we begin discussing this morning's topic, i want to congratulate japan on the superb job it did in hosting apec in

2010. prime minister noda set a high bar for us. i also want to recognize the outstanding work done by our officials and ministers during the course of this year to move forward on an ambitious set of initiatives. the focus of our host year was to make progress toward a seamless regional economy, and we have made progress in the three themes -- regional economic integration, green growth, and regulatory reform. we agreed to address a set of next generation trade issues, including removing frictions in the global supply chains, helping small and medium-sized enterprises grow, and better plug into the global trading system, and adopting smart

[no audio] >> president obama is in the asia-pacific region this week working on creating a trade zone. the president has met separately with resident -- russian president medvedev and chinese president hu jintao yesterday during the economic summit being hosted in the president's home state of hawaii. the president announce the outline of a trans-pacific trade zone agreement. he will be and honolulu to tuesday when he leaves for australia before going on to indonesia. now federal reserve chairman ben bernanke talks to u.s. soldiers about the economy and the importance of financial literacy for veterans. ben bernanke was at fort bliss in texas. this is about an hour.

>> we have a treat this morning. a unique opportunity to engage with and talk with the chairman of the board of governors of our federal reserve system. unbelievable. and this is actually his first visit to a military installation since becoming the chairman of the federal reserve. but we also think, and looking back in history, that since the federal reserve act this may be the first time and chairman of the federal reserve bank has come to a military installation to engage with soldiers and families. and we know his job is pretty tough. this economy of ours is a tough economy. and so i know we will have a lot of questions that have to do with the economy and other things of concern. but a little bit about ben bernanke. he is from south carolina, a

small town in south carolina. he went to harvard, got his ph.d. at mit, was an economics professor at princeton and stanford, and in 2006, he was chosen by president george w. bush to be the chairman of the federal reserve board, but he has also chosen to be a member as a part of the governing board, which is a 14-year term. but as chairman, that is four years. and he was just re-nominated last year, 2010, by president barack obama for a second term. again, showing the bipartisan nature of his job. in just a little bit about our federal reserve system. as we know, the federal reserve bank is really our central bank. it is a bank of our federal government. there are 12 federal reserve bank regions, and today, we also have the president of our regional federal reserve bank in dallas, mr. richard fisher.

and our federal reserve's bank really has 3 or 4 and general areas. one is conducting a war monetary policy as a nation. supervising -- conducting our monetary policy, supervising our banking institutions, maintaining the stability of our financial system, and providing financial-services to our lending institutions or depository institutions, u.s. government and foreign official institutions, including playing a major role in operating our nation's payment system. as chairman, ben bernanke also meets regularly with the president, the secretary of the treasury and testifies in front of congress. he is a major player in our world economy. in addition to visit here us

here at fort bliss, he took the time voluntarily to greet our soldiers coming back from iraq this morning at 3:00 a.m. sir, we thank you for that. [applause] and we just appreciate your being here. let's give a big texas welcome to ben bernanke. [applause] >> thank you, general. it is >> as somebody who puts a high value on public service, i want to thank the soldiers. thank thr helping to make the world a safer place. i admire your professionalism and dedication. i want to thank your family members as well. service members could not achieve what they do without the support and sacrifices of their families.

he should all be proud of what you accomplished and what he stands for. you may be wondering what the chairman of the federal reserve is doing traveling to a army base in texas. as part of much of my meet regularly with all kinds of groups with different backgrounds and experiences on the economy. i tried to explain what the fed is doing and try to see what people are understanding. i think this is a good opportunity for me. i know that people in the military service are facing lots of challenges. your home towns may be struggling with foreclosures. you may have difficulty getting a loan to buy a car or house. you may have family members finding trouble to find employment. he may be working -- you may be worrying about your own job prospects when it comes time to leave the military. i appreciate these concerns. i thought i would spend a little bit of time telling you what we are doing to strengthen our economy and increase opportunity.

i also want to make sure that you are aware of some special plants are protections for people in the military. just this tuesday or earlier this week, i met with the office of service member affairs in the financial protection bureau. we share a common commitment to ensuring the men and women who protected the security of our country are protected from predatory financial practices. i will also share a few thoughts about what each of you can do to give yourselves the best shot at a promising financial future. two words about the federal reserve. at the federal reserve, we are working hard both as the central bankers and as financial regulators to help restore our mission to talk prosperity. in 2008 and early 2009, he world suffered the worst financial crisis since the war great depression. had it been left unchecked, it would have resulted in a

financial meltdown and collapse. working with policymakers it around the world, a federal reserve acted creatively and and forcibly to help stabilize the financial system. our economy has been growing adding jobs for more than two years now. for a lot of people i know, it does not feel like the recession never ended. the unemployment rate remains fairly high. more than two fifths of the unemployed have been out of work for six months or no. these problems are very serious. we have been focusing on supporting job creation. supporting job creation is half of our marching orders. in the language of the law that sets the mandate for monetary policy. the federal reserve is to seek maximum employment and crisis

stability. we pursue these two important goals by influencing the level of interest rates and other financial conditions. my colleagues and i on the federal reserve committee equipped price stability with inflation being asked supersensory bit less. that rate is low enough that people can make financial decisions without having to worry about rising costs but high enough to keep the economy away from the flushing, falling which is of course his pride that is both because and a symptom of a weak economy. spikes in oral and it food prices, the push inflation up earlier this year, inflation appears to be moderating. based on the best information that we currently have, we think it will remain -- close to our projection of 2% for the considerable future. in the longer term, monetary policy is the main determiner of

inflation. we have considerable latitude to choose our inflation goals. in contrast, maximum employment -- the other half of our mandate depends on many factors outside of the federal reserve to talk control suggests skills of the -- my colleagues estimate that to the u.s. economy could sustain an unemployment rate of somewhere between 5% and 6% without a buildup of inflation pressures. regardless of whether this rate is 5% or 6%, with unemployment at 9%, our economy is falling far short of maximum employment. that high unemployment rate is why the federal reserve is focusing at strengthening the recovery in a job creation including keeping short-term interest rates near zero and

longer-term rates had to the lowest levels in decades. keeping borrowing costs very low helps. overtime it leads to increased activity and employment. like other central banks and around the world, one where we have put to pressure on long- term interest rates is by purchasing high-quality longer- term securities in the open market. >> we will sell the securities back into the market or all of them to mature as part of the process of tightening monetary policy when the economy improves. in the meantime, we earn

interest on the securities we hold. in fact, the federal reserve securities purchases during and after the crisis have had the side effect of reducing the federal budget deficit. last year and the year before, we returned a total of $125 billion of those earnings to the u.s. treasury. and payments to the treasury and the current year will be substantial as well. in addition to our monetary policy role, the federal reserve shares responsibility with other government agencies for regulating and supervising banks, protecting consumers, and fostering financial stability. we're working with other agencies to increase the financial reserves that banks, especially the larger banks that can put the financial system at risk, must hold against possible losses. the fed are toughening the restrictions on the kinds of financial transactions that

banks can undertake, and working to ensure that bankers compensation packages do not give them incentives to take excessive risks. we are requiring banks to compensate an assist homeowners who are unfairly treated. importantly, we are working to increase the resilience of the financial system against financial and economic shocks in future. we're also collaborating with the federal deposit insurance corp. to implement new rules that will make it easier for the government on wind -if they get into trouble, rather than being faced with a terrible choice of bailing them out or risking the collapse of the financial system if they fail. of course, the federal reserve was never intended to shoulder the entire burden of promoting economic prosperity. fostering healthy growth and job creation is a shared responsibility of all economic policy makers, in close

cooperation with the private sector. spending is of critical importance, but a wide range of other policies pertaining to labor markets, housing, trade, taxation, and regulation, for example, also have important roles to play. the federal reserve, along with other agencies, is working hard to enforce an array of regulations that protect mortgage or worse, credit card holders, and another -- other consumers and financial services. the people in this room should be aware of the special rights and protections provided to military personnel by the service members civil relief act, scra. this law's purpose is to allow service members to perform their duties without worry of foreclosure, eviction, and civil prosecution under those circumstances. it caps interest rates. it prevents creditors from foreclosing on a home or

repossessing a car. it gives service members the option to terminate residential property and motor vehicle leases. it stays simple procedures wall service members are on duty. it entitles them to reinstatement of health insurance that was in effect before military service began. the department of defense rules regulate the terms it in certain kinds of high-cost loans to service members and their families, such as payday loans, tax refunds, and motor vehicle title loans. it takes more than rules, however sound, and enforcement, however digit, to provide families are promising financial future. while i have your focus, let me offer you a few pieces of advice. first, while you are in the midget -- military, take advantage of training opportunities. many specific skills learned in the military, nursing,

healthcare, mechanics, computer programming, security work transferred to civilian jobs. . this morning i visited a community service training center that offers topics and understanding credit in car buying. they say it help them get ahead in life. they said it help them to measure. the value means the unemployment rate for veterans is to be lower. when you leave the military, takes advantage of the education benefits.

the post-9/11 to a bill pays for these, a monthly housing allowance, and supplies. on average, compared with high school graduates, people with college degrees earn about twice as much and supper about half the rate of unemployment. finally, educate yourself about your own personal finances. research by the federal reserve here at fort bliss shows that financial education can pay off. beginning in 2003, the federal reserve collaborated with the army emergency relief, the u.s. army's own financial assistance program to provide an education course in two days. it was taught to younger enlisted soldiers, mostly men, in their early 20s. we survey that about their

financial history and activity at the time of the course and we did follow-up surveys in 2008 and 2009 of service members who had participated and soldiers who had not. we found the soldiers who had taken the course were more likely to make smart financial choices such as comparison shopping for major purchases, saving for retirement, and educating themselves about money management. they were less likely to make questionable financial choices like paying overdraft fees, taking out car total loans, and continually running credit card balances. making good well thought out a financial decisions can mccaul the difference in your financial future. i began my remarks by describing some of our country's near-term economic challenges. i want to end with a note of optimism. the u.s. economy remains the largest in the world with a highly diverse mix of industries and the degree of international competitiveness that has improved in recent years. the united states continues to be a great place to do business with a strong system of law as an entrepreneurial tradition and flexible capital and labor --

labor markets. our country remains a technological leader with many of the world's leading research universities and the highest spending on research and development of any nation. ultimately, these trends will reassert themselves if our country takes the steps necessary to prepare for the future. by putting the federal budget on a sustainable path, improving our primary and secondary education system, for example. the federal reserve will do its part to restore high rates of growth in employment in the context of price stability. let me and by expressing my deep gratitude to all of you for your service to your country. i am happy to respond to your questions, thank you very much. [applause] >> anybody have a question? yes, ma'am? >> thank you for visiting us today. what lessons can the nation learn about healthy if not robust economy in army-towns?

>> bell passover is a great example --el paso is a great example of military and civilian cooperation. fort bliss is expanding and bringing people here. it is creating services on the base and off the base. it looks to have been a real plus for the local area. el paso had a downturn like most areas of the country. it was less than in other parts of the country.

it is clear that this has been a very productive development and it is very positive the way there has been cooperation on issues of education, housing, development. it has been a real positive and a role model for how military civilian leaders can create a good economic apartment. >> yes, ma'am? >> i was deployed in afghanistan last year. the congress engage in risky processes by not passing the budget until the 11th hour and raising the debt limit when soldiers were faced with the threat of not being paid while they were deployed. what kind of influence del the federal reserve have in the budget process to attempt having the congress avoid making such risky practices?

>> that is a great question. ultimately, the federal budget is developed and passed by the congress and approved by the president. that is where the responsibility lies. we try to help and advise where we can. it is not our decision. that being said, we were very concerned about the debate in july and august about the federal debt ceiling. these expenditures and taxes had been decided by the congress. the difference between the two is how much you have to bar. that had already been decided. they were fighting about if we're going to pay these bills are not and if you make a decision about how much you will spend and giving your in come once you make that decision, you should pay your bills. it created a lot of problems because people were concerned that if the debt limit had not been passed either would have defaulted on the government debt

which would have been a huge problem in financial markets or the government could not have made its payments and would have had to cut back and any number of things. it is hard to know which order it would cut back but a large portion of payments would have to stop. this was a very negative event. we saw that consumer confidence tried -- dropped quite a bit during august and i think that had to do with how well our government is doing what it needs to be doing. the credit rating agency downgraded the u.s. treasury bills and bonds and its reason for doing that was not because they did not think the u.s. could not pay its bills, they're concerned that the political process could not deliver good results. that is a real concern. but is in everybody's interest to work collaboratively together and to stay away from that brinksmanship. it is very important that we address a long term fiscal

issue. we have a super committee right now that is thinking about that and they have more to do after that. it is important to do with the right way. yes, sir, over here. >> i have two questions -- with the recent release of the vatican financial manifesto and the recent calls within the united nations for debt jubilee, what is the federal reserve position on that? with the possible breakup of the eu, how will that impact the united states if the eu slims down to a smaller member nationsbloc? >> those are two tough questions. on the first one, it is true that debt is a big part of our problem. we have an overhang of debt.

we have a lot of debt which is in diligence your default and that causes problems for a our financial system and for the borrowers. households trying to improve their balance sheets and try to pay down their debt and reduce their credit-card balances are part of the reason why spending has been relatively weak and that has been a factor slowing the recovery. i think where possible we need to address the debt issues and there are various ways to do that. one good way to do that is for dealing with people who have mortgage issues. but the reserve has been an advocate for a long time -- the federal reserve has been an advocate for a long time working with troubled borrowers to modify mortgages so that people -- the bar or can stay in their house and make payments. -- the bar were can stay in the house and make payments. t --he borrower can stay in their house and make payments.

it is something that has been very constructive. likewise, whenever there are other debt situations which are unsustainable, when an individual family snowed under by its debt, clearly, counseling or bankruptcy is needed to get that situation straightened out and that is one option. on the question of the eu, as you know, there is a lot of stress now in the european union in the euro is own related to the debt obligations of grease and other countries. to give you some background -- there are 17 countries and was called the euro zone that share a common currency, the euro, and have a european central bank. bureau's own a similar to the united states in that way.

in the united states, we have a federal government which oversees the budgetary and fiscal decisions for the country as a whole. if one state has trouble and cannot make its taxes and expenditures match, the federal government is still there to pay social security payments, medicare payments and transfer money as needed to help states for individuals in trouble. in europe, you have 17 different countries without a single central fiscal authority. it is much more difficult for them to move money between countries because it requires the cooperation and coordination of 17 different parliaments. that has been the nature of the problems.

you have a number of countries starting with greece who have had difficulties meeting their debt obligations. there is no single fiscal authority that can help them out the concern the europeans have is that the banking system of europe owns a lot of the debt of these countries and therefore, if there was a default, that would cause a lot of pressure on the banks who would lose all the money on their balance sheets and that would in turn create a huge amount of financial straits in europe but in the world as a whole. the europeans are quite aware of this, obviously. it has created a lot of stress to their economy. they have been through a series of plans which have attempted to help the country's in trouble to pay their debts, to help the greeks meet their obligations by lending them money and secondly to strengthen the banks by making them have more capital so if they lose money they will

still be strong and third by trying to put up a fire wall that is a guarantee that if another country comes under pressure that the europeans as a whole will protect the country and prevent the problem spreading from country to country. it is a phenomenon called contagion. so far, they have not stem the crisis that have taken some actions necessary to stop the european crisis. this is important for us and europe and the emerging markets because if the financial system become -- comes under pressure, that could have bad implications to the economy. it is very important to do that. that is really the current issue, whether they can stabilize the system and ensure confidence in the budgetary situation of a number of

countries under pressure from lenders. any other questions? the gentleman over here -- >> sir, why found on our small business owners and i am curious as to what you are doing -- my wife and i are small-business owners. alone rates don't help when we have to have 100% collateral to secure a loan. what is the federal reserve doing to help small businesses help create jobs? >> that is another very good question. as you point out, small businesses especially young businesses are a big part of the job creation processed.

it is in the interest of the whole economy, not just individual small business owners, to get small business lending activity back on track. it is a significant problem. banks are lending quite freely to large businesses and they have access to corporate bond markets. credit constraints are not really a problem for the larger firms. smaller firms that rely on collateral and the value of their home or other types of security are finding it very difficult. there is no easy answer. the fed is engaged in this issue. we have been meeting regularly all over the country with small businesses, with lenders, with government officials and. others we just had a small-business conference at the fed yesterday and i delivered the opening remarks. the idea was to talk about solutions and approaches to help small businesses to provide them with whatever assistance we give them whether technical or

make a better law and publication and so on. -- better application and so on. as bank regulators, we try to take a balanced approach. we give guidance to the banks and to our bank examiners. we tell them when you evaluate a small business loan, if it is a credit-worthy law, if the borrower can pay back, even if the collateral value has fallen, you should make that loan. it is good for the bank, is good for the bar were, but it is good for the economy, too. we don't want banks making bad loans. that is how we got in trouble in the first place. we have to be reasonably prudent and make sure the bar were as bo --rrowers have appropriate prospects and what ever collateral is relevant but we are pressing banks to look hard and many banks have taken a second look programs where if you are denied and you say you like a review, they will do a

second review or you can meet with a counselor and they will make suggestions about how to address it. i would suggest meeting with a number of different banks and trying to get advice about what parts of your application needs to be strengthened. it is difficult but our evidence is that things are getting a little better as banks have become more willing to lend. as the economy strengthens and the prospects of small businesses look better, i think the situation will improve. sir? >> i had a question -- you mentioned earlier that our credit has been downgraded by standard and poor's. what is the likelihood of another agency doing that to the united states and what affect would such a downgrade have in being able to read --

repay our interest in getting people to invest in the economy? >> as i noted earlier, we downgraded -- there was a downgrading of u.s. treasury debt earlier this summer. that was based and our ability to have a reasonable balance in our budgetary matters. i am not aware of any near-term plans. as far as i know, other agencies don't have any immediate plans to downgrade the u.s. they are always reviewing and they try to make determinations about what the bonds present to investors. in some ways, it is a secondary issue. after the s&p downgraded u.s. treasury debt, interest rates we pay on our debt actually went down rather than up. in other words, the downgraded not scare off investors in terms of being willing to buy u.s. treasurys. in fact, u.s. treasurys remain a safe haven and whenever you see a situation where there is increased volatility in the

market because of concern about your for something else, you see people come in and buy treasurys. that is among the most safe investments in the world. in that respect, the downgrade are any potential downgrade has not made any significant damage to the united states economy or our fiscal situation. the underlying point is that we are not on a sustainable fiscal path. on our current programs, our national debt will begin to

accelerate and eventually it will get completely out of control unless other actions to change that go into effect. it is important and the super committee is one step and more needs to be done beyond that. is important that we take measures to try and establish a stable path for our national debt over a. time one of the key issues which comes up again and again is the fact that our economy is aging. our average public age of our sisson -- our citizens are increasing over time. more people retire and be on social security and need additional health care as they get older. health-care costs are rising at a rapid rate we don't necessarily have that much better results in our health- care system even though it is the costliest in the world. we have a serious long-term problem in terms of our ability to survive decent living

standards and good health care and applying that to our rapidly aging population. i would say the biggest challenge on the health care side, if we can find ways to deliver quality health care to everybody efficiently in a way that does not break the bank -- right now we are on a track that we cannot sustain. >> good morning. in regard to the european union and their economic issues -- what type of far-reaching effects world -- will there be from this and how will they affect the u.s. specifically? >> there is definitely a significant risk of there. the world financial markets are highly interconnected. if there were to be a substantial increase in financial stress in europe because of may be an unexpected default by one the countries that would create a freezing up of credit, a withdrawal of

short-term funding, a decline in stock prices -- all those negative things would happen not just in europe but around the. world as a result a few years ago when the financial system freezes up, it has serious implications for the coming. it is in the interest of the emerging world and ourselves and the europeans for them to find a solution to that situation. it is not something we would be insulated from although we do all we can at the fed to maintain stability and keep monetary policy easy and do whatever is necessary to minimize the damage.

i don't think we would be able to escape the consequences of a blow up in europe. it is important that they try to address these issues. yes? >> yes, sir, i helped prepare taxes one year and it was very interesting. it was also heartbreaking to see people dip into their retirement and no one wants. do that they would dip into their retirement to help pay for their mortgage to save their home and at the end of the tax year, they get double hit. is there any, of influence the federal reserve has on tax policies for that? >> on what specifically? >> they would hold a lot of money on taxes which they could not pay because they dipped into their retirement to save their homes or save their children's homes and then they got a double hit at the end of the year for doing that with more taxes.

>> that taxes are the same as they would have been otherwise. it was just a question -- not just -- it was a question of having to pay the mortgage payments and taxes in the same year is what you are saying. is that right? >> they got penalized. >> oh, i understand. >> does the federal reserve have an influence on a tax benefit? >> you are saying they took money out of there for 1 k or something, not just their bank account. that's right. to take money prematurely elevate 41 k, you can be penalized there are a number of things you can take money out for.

i thought housing might be one of them. you can either take it out on a tax-free basis or borrow against 401k and pay that back overtime. i think that's a possibility. there have been various exceptions made overtime. there have been exceptions made for charitable contributions and the exceptions are made around the time of hurricane katrina to allow people to rebuild. this is not really my specialty. these are rules that are set by congress and approved by the demonstration as part of the tax law and any change would have to come from them. i would be interested to get more information from you if you can share it with us.

my impression is that there is some things you can do either in terms of getting special dispensation or borrowing against the savings that can allow you to do that without penalty. if you can get your mortgage payment down, that would not be betty there. -- that would not be bad either. there are programs that allow people to refinance even if they are under water. a benefit is a very low mortgage rate that the reserve is able to generate in the economy is that if you are currently paying 7% mortgage and you are able to refinance, you can cut your monthly payments substantially. a lot of people have been on able to do that because they don't qualify because of their credit or they are under water which means that they owe more than their house. is worth

there have been new initiatives including a program call harp by fannie mae and freddie mac that would allow people who are as much as 25% under water to refinance their mortgage and lower their monthly payments. yes, ma'am? >> good morning. i wake up every morning to npr and it is the rare morning that you don't hear statistics about the unemployment rate and housing starts and the debt crisis in europe. i have no influence or control over those things but it makes it a very scary time as an individual investor. it takes nerves of steel to put money away especially for last three years. we continue to do it but it is hard to do it with confidence nowadays. what is your perspective on the noise in the media about getting back on track and getting the unemployment down and getting housing starts back to where they would be?

we're not in a good place back in 2008 when things crash. we were doing things we should not have done and perhaps this is the way of working it out. as a good thing for us. i'm wondering what you think about whether or not we should be looking to get ourselves back to where we were or are we in the middle of a serious fundamental shift in american life such as we were after the great depression when it comes to how people live, buy homes, save, invest, consume, waste? how will we be different or not at the end of all this? >> that is a very deep question. first of all, i don't think anybody wants to go back to 2005 if they are sensible.

house prices were too high relative to their long run value. when of the banks and other financial institutions were taking risks. things were out of balance and it is true to some extent that we are experiencing the hangover from the correction of both. problems that being said, i am not a believer in the old tested a theory of business cycles. i think we can help people, we need to help them. the couple reserve is trying to do what we can -- the federal reserve is trying to do what we can to get things back on track. we are far from where we want to be. i would break down my answer into two parts -- in the short run, the economy is still far from where we would like it to be. credit has not returned to normal particularly for small businesses and many household mortgages.

the housing sector is still in very bad shape. unemployment is at 9% which is well above where we think it should be and many of those folks have been unemployed for six months or more which has long-term implications for their skills and ana ploybility. there are a lot of short-term issues. volatility in europe is still pretty much with us. we're focused on the short run issues and trying to get more stability to get the economy moving slowly toward full employment and a stable situation and that is taking a.

time understandably, people are impatient and worried. i fully understand that. i would offer a little bit of optimism. i think the fundamental strengths and problems of the u.s. economy today are pretty much what they were before all this happened. we still have the size and diversity of our economy and the market system we have an the conjures pri norhip, the technological innovation. we have many other aspects of our system which have produced the wealth this country has ever years. we also have problems like the health-care issue and our fiscal budget, deficit issues but we have those before the crisis as well in some sense, we are trying to get back to more normal position and i have no doubt that we will as we try to deal with these individual problems we are addressing. in the longer term, i believe that taking into account and things like the growth rate of the population that we will return to a more normal growth rate.

i don't really see any reason why we could not. you are right in that 2005, 2006, 2007 was abnormal and we don't want to do that again but we want to get to an area that is well balanced in terms of trade with other countries and give people opportunities to be employed and is financially sound. i think we can do that. hang in there. yes, sir? >> how can veteran soldiers or retiring apply for lower interest home loans? >> we don't have any programs that i know of specifically that

focus on veterans in terms of lower interest loans but there are programs through the va and other parts of the government. we are focused on working with the department of justice and the department of defense to make sure that people -- veterans are soldiers who have mortgages don't get unfairly treated. for example, if you have a mortgage and you go out on active duty, there are rules whichban any increases in your interest rate while you were on duty. to give you another example, the federal reserve and other banking industries are requiring the banks that service mortgages that were found to have deficiencies and that practices, it requires them to go back and look at mortgages made in 2009 -- mortgages in which there was a foreclosure

action in 2009 or 2010 and compensate people for whom there was any kind of problem there or mistreatment or failure to follow the applicable law. we are putting special attention on veterans in that case. we are requiring the banks to look every single veteran mortgage that was in a foreclosure process in 2009 and 2010 and see if there are any problems. we have detected some violations of the service members civil relief, actthe scra, which protect service members and their families. we are trying to be helpful in terms of mortgages that are already out there. we want to make sure that veterans don't get a bad deal or get badly treated. in terms of new mortgages, the main thing i can say is that the fed got mortgage rates down pretty low. if you can qualify for a mortgage, the interest rate at

this point is certainly among the lowest it has been in 50 years. the lady--- >> good morning, chairman. when i buyer is going to purchase a foreclosure, i don't see the banks being pro-active towards a buyer. i don't understand why that is. >> you have to say it more slowly. >> if i put an offer in on a new home, i will get a response back from the seller by put an offer on a foreclosure, i am waiting one month-three months to hear from the bank.

>> i see. the foreclosure process has been dragging out. it is taking months and months to go for. the process if you're making an offer on a proper rate which has already been foreclosed upon, it is just bad practice for a bank because they would like to sell it as soon as they can. it is puzzling to me that i would not be responsive to you can get back to you. i would encourage you to keep pressing and try as hard as possible to find a single person who you can deal with on an ongoing basis. if you have any consumer complaints or concerns about mortgages and how you have been treated on a mortgage or credit card, the federal reserve does have a consumer complaint facility on our website, federal reserve.gov and a helpline and if you call it is not our particular area, we will transfer you to the appropriate agency or whoever can help you. if you have a concern like that, you should let us know. with this particular problem, we are encouraging banks to get

going on the market and get through that process as quickly as possible so the housing market can be normalized. it is very much in their interest to do that and we would encourage them to do that. if anyone has more information on this, i would be happy to receive it. yes, sir? >> good morning, mr. chairman. i have known several marines and soldiers here who are in thrall to one of the public can predict republican candidates to say you should not exist. i like for you to talk about the consequences. >> it is not a very realistic

proposal. it is responsible both for managing monetary policy and to support growth and to help the financial system stay stable. the only alternative is there. let's suppose it was. the gold standard did not create stability over the short run. it created the money supply. there is a lot of inflation. it cannot prevent of the crises

that were quite common. it most historians believe it played a very important role in the great depression. because it transmitted monetary shocks. given the constraints, the central banks thought they were restricted. with the system tha tled to the creation in 1914, there was a panic in 1907. it was created to address those problems. after the 1903's, the gold

standard disappeared and was replaced with others. the one that is dominate inovlves floating exchanges rates, a bank, and around the world, the performance in terms of inflation and stability has been q uite good. the record is good. alternatives are not successefful. the fed is not perfect. people can make mistakes. instituations can be improved. you see more alternatives.

no country has anything other than a central bank. >> over here in the red. >> my name is veronica. i am a disabled veteran. i work for the army as a civilian employee. it has been said that war can be good for the economy, maybe more so for the local economy. it is good for creating jobs. mine in particular. with the war drawing down and troops coming back from afghanistan, what is the foresight you're predicting as far as jobs and the economy in regards to the products that will not be needed any more?

>> war can be good for the economy in a very narrow sense. you have to supply the army. this is a balance against the weight of war. this is necesarsary in some circumstances. even though they create jobs, you have to account for the fact it is blown up. it does not help peopl eae at home. it leaves us with a large debt. after wwii we had a large debt. i do not advocate military operations. it is sometimes necessary for other reasons.

local areas like el paso, it is relevant to what is happening. in el paso, because of the expansion of the fort there has been more expansion and job creation. why not spend them on roads and bridges and things that can produce benefits? it it is not necssary, you are better off reducing rescources in other ways. jobs have short and long problems. we have not recovered like we got knocked down and not back up. we have a while to go before

the rate is back oto normal. the fed is not the only hta thas influence. we are trying to keep rates low and providing stimular. in the longer run, it will come down to our skills. we have a world in which there are hundreds of millions of poeple without high skill. the manufacturing jobs did not require a whole lot of skill for education. they will either disappear entirely where they will not stay very well. eventually they were dumb by

low-skill, low-wage wokers. we have to compete with more sophisticated products. that is why it is so critical for you to take every opportunity you have to build y our levels and be highly trained. that is the way you will have a job. for our society and ability to compete, the signal most important factor is making sure our work force has the skills. the military adds to that. things like the gi bill. i encourage here to take

advantange of increasing yo ur training. thank you very much. [applause] thank yo u. >> i feel pretty comfortable but the leadership have and the complex economy we have. the issues we have. we are in pretty safe hands. thank you for talking to our families and soliders here at fort bliss. we are in the middle of a desert. we're the largest training area.

we have 1.2 million acres. part of that is the to walwyn desert. chihuahuan desert. we want to turn fort bliss into an oasis. we will do this one rock, one son at a time. as a part, we would like to give you this rock that came from our desert. it says on behalf of soldiers and members of team bliss, thank you for service to our nation. thank you, sir. >> thank you very much. [applause] and smooth sailing for our economy. >> i hope so.

>> thank you all for coming today. c-span3 c-span [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> in the new memoir karl marlantes finally comes to grips with his post vietnam. >> i started talking about my symptoms. running out side effect even knowing what was going on. car would hall could behind me. -- cars would honk behind a. i would be angry. he says, have you ever been in a war? it hit me so hard. i was in the middle of this room with 80 people. i started bawling.

snot coming out of my nose. have you ever been in a war? it was that simple. he says, you have ptsd. >> war but his life tonight on q&a. >> house democrats hold a forum on voting laws. speakers expected are michigan congressman, maryland congressman, and the president of the naacp. you can watch that live at 2:00 p.m. eastern on c-span 3. >> c-span.org is now easier to use. it is easier to watch today's event. there is a section to access our most popular series and programs. we have added a handy channel finder so you can quickly find where to watch our three c-span

network on cable or satellite systems across the country. all at the all new c-span.org. >> a discussion on the potential impact of the deficit- reduction committee post a proposed cut on the defense budget. this is 15 minutes. host: do you think the deficit reduction committee will come up with a plan? guest: everybody is having a hard time getting a straight read on this. it sounds as though they may pick up one or two republicans or something that will look like revenue enhancement, another name for tax increases, which might give them what they need to get a deal.

on the other hand, i'm also hearing from people on the committee or close to it that it is not coming together. we have a president sang over the weekend that he will veto any effort to repeal the sequestration acts that will come down if this committee does not come up with a deal. if congress as a whole does not accept the deal. the stakes are very high. i think it is too soon to tell if there is something that is going to come out of this or if it is going to prove to be a real train wreck. host: let's hear what leon panetta said from last week. he was warning that if the deficit reduction committee fails to reach a deal it will lead to a hollowed military. >> a hollowed military has the

organizational structure but lacks the people, training, and equipment it needs to get the job done. it is a ship without sailors. it is a brigade without bullets. it is an air wing without a pilot. it is a paper tiger. an army of barracks and bombs without enough trained soldiers to be able to accomplish the mission. it is a force that suffers low morrell, pour readiness, and is unable to keep up with adversaries. it invites aggression. host: leon panetta speaking on thursday at a press conference about what could happen if the deficit reduction committee does not come to an agreement. he was talking about what those

cuts could lead to. give us an impression of what he was saying. guest: i think he is right with one small caveat. that is, he is understating the magnitude of the danger. i think he is failing to recognize that the cuts that he and president obama have already embraced are likely to give rise to the sorts of outcomes he is talking about. this is a point that is not entirely understood by people on capitol hill, let alone the public at large. that is that even before we get to what ultimately comes out of this sausage making operation on capitol hill at the moment of the super committee and perhaps this catastrophe of sequestration, there has already been half a trillion dollars slated for cuts in the military post a budget over the next 10 years. i think what the secretary says

describes a hollowing out process. i am concerned. i am concerned we are of gosh approaching the point where we are looking at it this rich and the military -- i am concerned that we are approaching the point where we are looking at it eviscerating the military. the point we should all be thinking about is this is not happening in a vacuum. it is happening against a backdrop of a world that is becoming vastly more dangerous by the day. there is a high probability that before the next election we will see a major regional war breaking out in the middle east. the next war for the survival of the state of israel. if we are in fact inviting aggression by taking steps that make us appear to be a paper

tiger or at least unable to defend our interests and protect our allies, that does make this dynamic that is already in evidence in the middle east and in other places around the world vastly more dangerous. host: looking at reporting on this. a story says the defense secretary used the strongest rhetorical weapon in his arsenal. mandatory defense cuts would embolden enemies to attack the united states. 700 and $8 billion, two hundred dollars billion goes to readiness. whatever $59 billion to the wars. $139 billion goes to military pay. with the war is changing, the war in iraq winding them.

is there room to make big cuts in a way that would not result in a paper tiger? >> we are going to find out. guest: we are taking half a trillion dollars of defense spending. the thing that is troubling to me is not only that i believe it assumes that when we withdraw that that is the end of it. that there will not be further problems from either of those places. i think that is foolish. it is probably reckless because the trouble is the adversary is we have been confronting in those places are going to see the vacuum of power we are creating as an open season on

us, perhaps, on our interests. when you add on top of that the fact that what we have been doing already under the cuts that have been mandated before the latest half a trillion dollars was directed by the president is putting on hold all the modernization programs of the united states military. if we are not putting them on hold, we are pairing them back. what is so boring is we are talking about a military that is not -- what is so worrying is we are talking about a military that is not going to be able to contend with future threats. the military to date, living off of, when i was in the government, investment that was made then, being broken or

in tearst or warn theorn down of operation, you have a force that is desperately in need of enhancing the performance of existing equipment and replacing it. that is not happening. it will not happen if another $600 billion is taken out which is what is in prospect. host: frank gaffney is our guest. president and ceo at center for security policy. you can join our discussion by calling these numbers.

let's hear from a republican in north carolina. good morning. >> good morning. caller: thank you for excepting this phone call. i am a german citizen. i came in the spring of 2000 because i have to establish an american institute of security and defense with the european institute of security and defense as a nonprofit organization in the office of the secretary of state in north carolina. the name of my sister -- this is the reduction committee. how to address --

host: i am having trouble understanding you. you are talking about addressing the deficit. did you get a sense of her question? guest: i did not. she is a german national who has migrated here to work on these issues. host: the phone connection was poor. let's talk about this idea of reducing the deficit. heavyweight in in a given your input to members of congress and others -- have you wade in and given your input to members of congress and others? guest: i do not think it is advisable to be taking for the cuts out of defense. i have been joined by president obama and leon panetta and i think the military more

generally. they are trying to figure out how they are going to take the hat trillion dollars that has been slated. my purpose has been to urge the super committee, the congress more generally, to not take more out. it cannot figure out other ways to do it. there are people in washington who have great ideas. i have not found one that does not mean we are leaving part of the world and covered -- parts of the world uncovered, allies abandoned, all of which simply makes the world war dangerous. my beef -- the world more dangerous. my beef is that these things almost always turn out to be

penny stupid and pund insane. we wind up making false economies that turn out to create conditions and accelerate dynamics that are hugely expensive to repair, not just in terms of rational -- national treasure, but the currency we hold much more dear. that is the lives of the men and women in uniform and our civilians. this is the route. if you wind up doing what we do, a bust and boom approach to national security, there is not a country that would operate that way. we think that is the right way to operate the most important business of the country, to provide for the common defense. pressure and property and so on, it is a false economy.

host: joining us from cape, massachusetts, the independent line. caller: thank you for taking my call. i agree with your guest. the only area we would be reasonable and cutting defense spending is requiring our allies to put their pound of flesh into the game. we defend our allies. they provide not as much of their own defense as they should. i do not believe this administration has any interest in a strong military. look at the way they are caught selling to the chinese -- cow towing to the chinese, saudis, palestinians, iranians. something needs to be done to safeguard our people. i think our allies need to start stepping up and paying a larger

share of their defense than they are. japan is a good example. guest: good points on both counts. what we find is most of our allies are not pulling their load. what they have done, which i think has been helpful to us, is paid, in many cases, all of the cost for our deploying in maintaining a were forces on their territory. there are some who say that is one -- let's bring our troops home. my concern is not only do we lose the protection capabilities that it does represent for us, especially at a time we are going to these budget exercises it is going to be more volatile than ever. we are gwen to find it cost us a

lot of money to bring those troops -- we are going to find it costs us a lot of money to bring those troops home. you have to build facilities to house them. bases, air fields, shipyards, the like. this is not going to leave us stronger. all i would agree with the caller, we should be pressing our allies to do more, none of them is likely to do it. i would make it a principle that we would not compound the problem that there's been a year to supply their own defense represents by withdrawing -- that their failure to supply their own defense represents by withdrawing. i have said i believed that the president's doctrine is emboldening our enemies and undermining our allies and

diminishing our country. if you look at what he has been doing around the world. he mentioned a specific examples. i think that is the practical effect. it is contributing to a more dangerous world. add on top the hollowing out of the military and it could become fatal. >> tomorrow, with the cult member opposite the -- deficit -- deficit reduction committee can work out a solution. others talked about the report on student exchanges and international student enrollment. new york times reporter looks at the small business administration program which helped but loans to small companies. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> i want to make work that we have taken every step possible

to bring peace of mind to the family members of our fallen heroes. for that reason, this review commission will look at the processes and procedures and make sure we are implementing the highest standards when dealing with the remains of our fallen heroes. in addition, i want to make certain we have taken all appropriate disciplinary action. >> with respect to the most recent accusations, i have never acted inappropriately with anyone, period. >> with hundreds of hours of new public affairs programming, the video library is the online resource to find what you want when you want. in debt, searchable, sure will. it is w