haven't seen the legislative text but from what i'm reading in the press, that's part of the deal, you have to prove american workers do not want the job first and there are sectors, believe it or not, that there are not american workers who want to do the jobs. i think you could argue that picking lettuce in the middle of the summer in yuma, arizona, is not a job that a lot of american workers are lined up to do. i'm not saying there aren't workers who wouldn't do it but not a lot and they're struggling to get those products to shelves because they don't have the labor to get done so it's always a balance of trying to find the balance between making sure american workers have the opportunity but not having the economy suffer and businesses suffer by holding out and not allowing them to bring in labor for jobs that american workers are not able to or willing to do. host: robert, pasadena, texas, democratic caller. caller: i'd like to make my point very clear that the

immigrants that are coming across the border right now are taking jobs directly away from the american people. in the construction industry, they've taken up so much of the work where 50% of the workers, work is being done by immigrants and it's taking construction completely out of the equation. also, i don't think that the numbers are true about how many are over here. there's no 11 million. there's probably closer to 15 million and that's just the male factor, the male of the family. have robert, i'm going to rebecca tallent take your last point. guest: the numbers, that's a good question. we are talking about a population that's illegal so they're not on the books most of the time so inherently that

leaves it up to question as to how many people are here. believe it or not, they actually do census numbers on the illegal population and this is -- 11 to 12 is the best estimate we have based off of those numbers. during the 2007 debate, there were many who said it could be up to 20 million. the going perception right now is that we're within net zero immigration because of the state of the economy but what does that mean? i think you could debate these numbers for a long time but based on census numbers, 11 to 12 is the best number we have now and that also, because those are census numbers, accounts for full families, not just those employed so that's the number we have now but i also think there is a big question about if you put through legalization program how many of those people would come forward to be legalized. that's an important question because a lot of people may decide to return to their home country. they might take the temporary

status off work here for a few years and rather than get a green card, go back to their sending country because a lot of immigrants are coming here for two, three, four years, working, saving up a pot of money and going home so you're talking about the actually legalization of how many people are going to be getting green cards and eventually becoming citizens that, number drops again from the 11 to 12, maybe even by half. >> when you look at what the gang of eight, so-called gang of eight in the senate is proposing when it comes to a pathway to citizenship, what does it look like? >> the best intelligence we've gotten on this has been from senator graham who, speaking on one of the sunday shows a few weeks ago and talked about how they're looking at redoing the entire immigration system so right now when you come to the country legally, you come in as either a temporary worker on a temporary visa, you come here as a visitor, but if you want to come to permanently stay,

become a green card and become a citizen, you come through a family category or employment category. the majority of people who come here for green cards right now are coming on family categories. that is not necessarily consistent with many developed countries around the world so people have thrown around the idea of shifting that from being more family based to be more employment based. that's one of the things that derailed our proposal in 2007 was that they actually did away with all family and employment based categories and funneled everyone through a points based system so it sounds like from what senator graham is saying is they're going to keep higher level family categories so the immediate relatives of citizens, possibly immediate relatives of green card holders -- spouse, minor children -- and roll everyone else into a points based system which is a significant, probably the biggest overhaul of our immigration system in the last 50, 75 years and it's incredibly tough and incredibly

complicated. when we were doing our points based system in 2007 we spent at least two weeks behind the doors saying, does that earn you three points or two points and how many points does someone need to get a green card? you can look at the british system, canadian system, system in new zealand and australia, they have a points-based system where you earn points to get a green card and i think negotiators are looking to those as a model but the important part they're not going to be eliminating all the family categories like we did in 2007. in 2007, you could still come in as a family member but you had to earn enough points to come in as a family member, as well, whereas this proposal it sounds like is going to still keep at least the higher level uncapped family members still in place so they're trying to strike a balance between the two and have everybody funnel in through that system. it will be interesting to see the construct. i think it's going to be

complicated and i'll be really interested to see how the house reacts to it, huge overhaul like that. host: new town, north carolina, cindy, republican caller. caller: good morning. i wanted to say that i feel like this is out of control, this immigration is not a democrat, a win, a republican, a is actually should be is for nothing but the citizens of the united states and we all need to look at that. democrats are going to win on this? sure they're going to win. if the republicans fight against it, sure they're going to lose but the real loser are the citizen, tax paying citizens of the united states. thank you. host: on twitter, grace says "will mr. graham make sure it takes 20 years to become a u.s. citizen or nearly imsnoble isn't that his agenda?"

guest: that's a better question to pose to senator graham but based on the articles that have come out in last 24 hours, it sounds like they're looking at a 13-year path to citizenship, which is an eight-year path for a green card. you have to hold a green card for five years before being eligible to apply for citizenship so that's in law and won't be changed but the question is how long is the path to get point where you get a green card and much of that is based off of the border security, trigger, whatever that trigger looks like and the clearing out of the backlog which is people currently outside the country waiting legally to come in and how do you clear those people out and make sure nobody who's here illegally gets a better path than people who have been waiting outside the country legally and generally they --

the estimate it's going to take about eight years to clear those folks out and make sure that they have the opportunity first so that's why they're looking at approximately 13 years to citizenship but in that time they are going to be here on a legal status. they'll give them a type of temporary work permit that's not so temporary and that will eventually let them work through this new system to get a green card. host: joanna in maryland, republican caller. caller: good morning. two issues i'd like to see you address. the first one is, i think we tend to focus too much on latin americans and i'd like you to talk a little bit about folks that come over here, say, from african countries and russians and ukrainians and other countries that come over here on student visas or visitors visas and they just overstay. they stay here for a long time. i live in suburban maryland and trust me, there's a number of those kinds of violations that are here. and because i get worried that

we have a tendency to demonize people in latin america. and the second issue has to do with latin american countries. what are we doing as a government and is this going to be part of the bill to foster economic growth in those countries. people come over here for a reason. mys isn't a whim to risk life to cross the border. they're coming here for a reason. oftentimes these governments are corrupt. the economy is so poor and there's two elements there. one is getting those governments to cooperate with us on immigration issues but probably more important what are we doing to foster economic growth there, in latin american countries, so folks want to stay in their own country. guest: joanna, thanks for the question because you bring up an important issue. i referenced this earlier with our work at the bipartisan policy center but that is an issue we hope to focus on

specifically, how can the united states work with mexico and other sending countries to help build infrastructure back home that will afford people the opportunity to stay there and work and be part of their community if they feel like today they have no other choice but to come to the united states to find work so how do you help build the banking infrastructure, the homeowner infrastructure -- in a lot of these countries people don't have titles to their own homes -- so how are their basic trades, not in the economic sense, but how can the united states work with the governments of these countries not necessarily in a financial way, not in a sending money to help build the infrastructure kind of way, but in a trading of ideas kind of way to help establish those pieces that build up the economy in the sending countries and make it less pressure for people to have to move north. if you look back to 2001, you can see bush worked with vicente fox on the partnership for prosperity.

because september 11 came so quickly after they signed that agreement, it's a chapter lost in history but they were laying the groundwork for work with canada for work just like what you're talking about and back when we wrote our original immigration bill, jeff flake, jim kolbe, john mccain effort back in 2005, we had a small piece in our bill that referenced building off of that work and i'm hoping that as the bipartisan policy center we can help congress to maybe formulate another proposal that's similar that will address exactly the issues that you're talking about. the other issue that you brought up was that not all illegal immigrants are from latin american countries and you're absolutely right. the irish population is very invested in what happens with the undocumented population here in the united states because they actually have tens of thousands of people of irish descent here legally.

50% of the population, estimated currently here undocumented, are visa overstayers so it's not just an issue of securing the border and building a fence and putting in all of that infrastructure down there which is very important to this debate but you have to address the matter of these overstays so how do you monitor how long people have been here and when it's time for them to go home but also how do you afford people opportunities if they are contributing to society or receiving education or contributing to the economy, how do you afford them the opportunities to stay rather than put them in a position where they're choosing to stay illegally so we can capitalize off of their entrepreneurial attitude, i guess we could call it, and try to facilitate that process while making sure that if people are overstaying for nefarious reasons or if they're not contributing, we know who they are, where they are and that they're going home so you raise two very important points and thank you for your call. host: john laurie on twitter, will illegal immigrants who commit i.d. card be considered

criminals? guest: this is a complicated issue, what do you do with people who are here illegally who are working off of somebody else's social security number. what's interesting for me is that i think somebody is working off of my social security number. i was trying to get a replacement card and they kept asking me where my first job was and i named every state that i worked in in the nation and none were the state they had on record. i was born in del rio, texas, which is a border town and grew up in tucson, arizona, a burdener town so it's possible somebody is working off of my number. what does that mean? there are people working off of numbers and identity theft, yes, legally it's the same thing but is somebody working off of a number is the same thing as someone taking out credit cards and mortgage under your name and ruining your credit? there are illegal immigrants working under tax i.d. numbers which are not stolen social

security numbers, not stolen tax i.d. numbers but their own tax i.d. number and when people are here illegally as a green card holder they can get a social security number so it's a really good question. we've gone around and around about this. there's been several amendments on the senate floor asking exactly how to deal with this. i don't know what the -- i don't think anybody knows what the population of undocumented is that are working off of somebody else's number but i think when this really gets tricky is somebody's been working here 20 year, let's say somebody's working here 20 years using my number. they're contributing to my social security account so when they're, under current law, when the population is legalized, they're allowed to take the money out of my social security account they've paid into it. they are due those social security benefits if they can prove they made the contribution. they're not taking my contributions but they're allowed, if they can prove they've been contributing to social security, they are eligible to get those funds.

it's a little secret in there but it's law so how do you address that situation, how do you clean those numbers up. that's a huge part of the ongoing debate. host: how would social security even know, the administration even know how much these people put in. guest: that's the point. you have to be able to prove it. you have to show your receipts, you have to have all your paychecks, showing your receipts saying this is how much i contributed each month. it would be hard to prove but technically they are eligible to receive those benefits. host: independent caller from alabama. caller: good morning. i have a question and a point and i have been watching for quite a few, 40 minutes, and, you know, people calling and complaining and some of the complaints. i myself from mexico, i'm in

this country since 1998. i have been paying my taxes since 2003. i have family with american citizen, i have been trying to live -- i was not able and i'm glad congress doing something to help benefit me because i have been providing, paying my taxes and now that i have family, it's tough for me to go back to my original country and not be able to come back because i create my family on this side of the country but another thing, my main question or my main, what i was going to say, is that what we go to our grocery store and buy our groceries, we taxes there. last let's take that point. guest: that is an interesting

point that's overlooked is that people who are here illegally generally are paying taxes. like the caller was mentioning, you're paying sales tax, you're paying gas taxes. but a lot of individuals, again, if they're working off of a fraudulent number or somebody else's number, are also paying income tax, they're paying social security. a lot of people who are here working are not getting paid under the table in cash. i think that's a misperception. i would say the vast majority of working at resource and construction sites and going through the regular payroll process the rest of us are going through so they are paying taxes, income taxes are helping to pay for the school. this is not how the system should work. i'm not going to argue that but i do believe there is misconception that everyone here illegally is taking advantage of the system and not paying into it at all and even if they were paid cash under the table, they're paying taxes at

the stores, paying taxes on gas. is that enough? you could argue no or yes but there is a misconception that people are just taking from the system and not giving anything back and i don't think that's necessarily an accurate perception of the individuals we're talking about. host: rebecca tallent, coming up, we'll ask our viewers what role religion should play in politics and here's a poll that was done by the pew research center, views of immigrants by religion broken down by protestant, catholics, et cetera. immigrants today strengthen our country or are a burden. white evangelicals, 32% say they strengthen and 55% say they're a burden on the country. catholics, the numbers are reversed. catholics say, 55% of catholics say they strengthen our country while 37% say they are a burden. what role do organized religious groups play in this debate?

are they player? guest: they absolutely are players and players even more this time around than they have been in the past. there's a group that's organizing around religious interests specifically as it relates to immigration reform and the idea of compassion for our brothers and sisters and being a compassionate society and showing the love of christ, et cetera, as it relates to this issue. i do think what's interesting about the numbers you put in order, if you're looking at the catholic population in the united states today, a large portion of that population is latino or hispanic so i think that that could affect these numbers. i'm not saying that accounts for all of it because the catholic church has been involved in this issue longer than other religious organizations have been. what's not on your chart there, i don't think, because i can't see it, is the mormon religion. they've taken a very progressive stance on this in the last few year.

you can look at some of our mormon lawmakers and that i think might be affecting their position on this. senator flake is mormon. senator mike lee had positive steps forward on immigration after he came into office so i think their church's chance could affect where they end up here so i think that being -- the term compassionate conservative is one that we're all familiar with but i think that that feeling is playing out in churches around the country and conservative churches, too, but i also think break down the demographics of what those religions are and they might also even play more of a role in their opinions on this subject. host: rebecca tallent with the bipartisan policy center. thanks for talking to our viewers. appreciate it. guest: thank you very much for having me.

the next "washington journal," will talk about air traffic control towers that the faa is closing due to sequestration. our guest is former inspector general for the transportation department mary shiavo. a look at the future cost of health care under the affordable care act with "the wall street journal reporter. and we look at the irs and hoyt processed the tax returns last year with james white of the government accountability office. "washington journal" is live at 7:00 a.m. eastern on c-span. president obama and his family attended easter services today at st. john's episcopal church near the white house. it is known as the church of the president. st. john says every president has visited the church since james madison. you can see the obama is as they began a short walk from lafayette park to the white

house. as they began a short walk from lafayette park to the white house.

>> next, a discussion on china's relationship with north korea. then an obama treasury official -- and obama administration treasury official discusses park and the dodd-frank financial regulation law. then a look at cyber security and international law. how relationsn between china and north korea affect the u.s. will hear from john park of harvard university's center for science and international affairs. he talks about the strength and relationships -- relationship

between the two countries communist parties, and the consolidation of power by kim jong-un, and the unintended consequences of financial sanctions against north korea and its nuclear program. this program is about an hour. welcome to the korea society. my name is steven parker. and the senior vice president here at the korea society. we would like to walking -- welcome you all here, friends of korea, and this afternoon we would like to welcome our c-span viewers. delighted this afternoon to be talking about a very timely topic on the issue of north korea-china relations. to help guide us in the discussion is john park. he has been an mit faculty fellow. he is also an associate with harvard university's associate -- kennedy school.

john was with us two years ago for what was a very wonderful set of insights. he is here to update us and guide us along in a discussion on what really are pressing issues. we know there has been a resounding rhetoric which has concerned the international community, not a pyongyang -- coming out of pyongyang. we will ask john about his current thoughts on the security dilemma on the peninsula. and we will move into issues of china's relations with north korea and vice versa. welcome. >> thank you very much. it is a pleasure being here. to share some thoughts on the current developments in the region, i would like to contextualize in terms of how i am seeing some of the trends going on through the lines of new leadership in the region. this is something that is not a surprise frankly. this has been anticipated in

terms of change of leadership in all the countries in the region. approximately in the same time period. with that, there is an opportunity to see the consolidation of power in some countries, as we see in north korea, and also in china, with new leadership there. the power consolidation introduces interesting elements in ways to look at some of these recent developments. when we zero in specifically on the korean peninsula and these daily threats coming out of north korea and reactions for the u.s., south korean alliance, , this isb-52 bombers by many accounts different from what we have seen in the past. in terms of one type of development that i would zero in on, and his eyes and how it is different, is the way in which north korea has walked away from these hot lines.

there can be enough -- and to petition that this is more symbolic in the heightened threat. the crisis management capabilities within which the parties can manage crises or potential escalations that to happen, those bases are drastically reduced when you have these measures, such as walking away and announcing a one void mechanisms that have in the past have been quite pivotal. the key thing here is to look very carefully at a new leader in north korea who, from an outsider's perspective, is probing the different parties around him in the different countries. as way i free met is almost if the north korean leadership in kim jong-un is conducting a lot of observations. for each threat, looking at the different reactions and almost died in those down in a book of flinches to see how these new leadership elements react to this elevation of tension.

i think that is very important operational intelligence for a new structure like the kim jong- un leadership. it is something that can be configured in certain ways for future interactions later down the road. from seems the reaction the international community, townte the hysteria out of young, has been muted. has beenf pyongyang, muted. the president has put in gentle reminders relative to her commitment to trust. how deeply that against the expectations of north korea with this language? theith the crisis language, big marker of the current round of escalation can be traced back to the passage of the u.n. security resolution 2094.

their reaffirmation of priebus measures but also new measures, or use of the designation of north korean diplomats, in terms i think for north korea, that type of cooperation is legal if it is maintained, because it drastically diminish as the space. -- that type of cooperation is maintained. is heightened tensions between washington and beijing, where the chinese come in and andcally asked -- ask essentially get the triggering of criticism from washington

that china is coddling north korea rather than reining in an ally during a critical escalation period. the critical elements that you can see in terms of this almost north korean ratcheting up of tensions to get some sort of response from china is the u.s. use of their b-52 bombers last bombers thisr b-2 week. the deterrent stance of the united states and north korea is very strong and should not be evoked at any time. china, ain elements in those types of capabilities right at their doorstep feeds into their concerns about containment, that the rebalancing is not a about in circling

china.- encircling if north korea were to get that point right, you certainly have -- you suddenly have an elevation. >> a tipping point. let's move more fully than into the china-north korean relationship, -- more fully then theo the north china -- china-north korean relationship. the concern about missiles, the concern about the missile shield being something that reinforces the china-north korea relationship, looking at it from a larger, strategic vantage, or is it something not quite that much? >> one of the interesting things in china is the growth of

different interest groups, vis a vis relations with north korea and also with the united states, so when we see things like the north korean missile threats and the threat to attack the united states with nuclear-weapons resulting in the u.s. beefing up their interests, there are currently 30's, and now there are plans to 44 -- there are currently 30, and now there are plans to go to 44. korean threat is seen as serious, but not at the capability to provoke that response, so there is this fear of containment, and with that, there is the concern that north korea is causing problems that directly put the united states and china on a collision course. i think those groups in china have to see the importance of cooperation, especially with with theates, --

united states, but there are other groups in china in terms of the david and goliath relationship they see with the united states and north korea, and this is disproportionate, contributing to the escalation of the crisis on the peninsula, so you have different narrative's on the chinese side, which again makes this more challenging. on theerent narratives chinese side. >> what does this mean in terms andkim jong-un's rise consolidation over this year? how do you see these new leadership's coming into place, and how does that impact the china-north korea relationship -- how do you see these new leaderships coming into place? in many cases, they were

reviewed independently. i think there are very interesting, some medical and if you look specifically from that period where kim jong-un has that devastating health crisis in 2008 -- where kim jong il has that devastating health crisis in 2008, there was the idea -- their efforts to engage chinese -- the chinese with how to deal with north korea. at that time, you saw the of one party going to p'yongyang, videotaping everything. kim jong il was videotape to

being in full command of his speech and movements and what not, so it quickly ended those suspicions and those worries and is very large worst-case themrios, but you see doing this process. during the period of about may 2010 until may 2011, again, the analysis was predominantly done on a post-trip analysis. the readinge went, of the tea leaves, but if you take a step back, there were very important, -- very important things. you see the beginning xishe xi jinping -- of jinping.

this was happening in a way that was quite startling. kim jong il brought a very senior delegation, and he was met by every current and future leader on the congress party side, and the tide of red carpet treatment they received was unprecedented -- the type of red carpet treatment they received was unprecedented. there is something more going on. my take on what the big factor was was this was a chinese effort to rebuild what was essentially a broken relationship. if we look at what i think in many circles is seen as ancient chinay, in august 1992, decided to normalize relations with south korea. china was in desperate straits. they had basically been the subject of intense sanctions themselves. you see a situation where china needed the type of benefits that south korea was offering at that

time, and in return for the trade credits from south korea to china, the south korean help, they fundamentally reoriented northrelationship the koreans responded by calling this the great betrayal. decade between china and north korea, and if you recall this time period, they go by the way of putting their aides all in one basket, in one basket, and the north korea goes through the great famine. late 1990's, early 2000 period, we see the advent of -- this is in many respects

the bailing out of north korea, and it is this type of relationship that you see north korea slowly recovering. >> fuel and foodstuffs. >> exactly. survival. with that, the combination of what we see as this process -- the culmination of what we see as this process. the 17 years of the tim gaughan kim jong-ilthe period. if you think of a broken company, he jettisons many parts and focuses on the so for 17and he does years, where the party atrophies in north korea, and it is this decision of how to facilitate this with his son, kim jong-un,

where we see a rapid resurgence of the party, so much so that the first quarter of business is voting in a more delegates, because more delegates have died. tos point about the party party is significant, because right now, i think what we are seeing is further institutional as asian of that relationship and the succession of xi jinping, their respective party structures. is the chairman of the central military commission of the party. kim jong-un holds the other titles. usually holds first minister or something first to deny that his father has the official title. to signifything first

that his father has the official title. military and the the party structures. so within that, i think what we see is the chinese effort to have what they call a balanced korean peninsula strategy. sees always interesting to when we see empress from washington or seoul to do koreahing via their policy. that is one piece of it, but without taking into account the larger chinese game plan. >> let me pick up on that, because we talk about a china's strategy towards korea, but it seems that there might be multiple strategies -- we talk -- about a china

strategy towards korea, but it seems there may be multiple strategies. how do you interpret that, and how you interpret the official line relative to that discord and policy approach? >> one of the key factors is interactions with north korea. very strategically important as a buffer state, and some groups believe it is still and some others believe that is no longer important. i do not think that is as black and white. a think tank, following an idea that those that speak, do not know, and that -- and those that do not know, speak.

buts still a factor there, it is not as big of a chunk of the pie as it once was. >> what does that mean? >> it was meant to keep u.s. forces at bay, and in more recent formulations, it was to prevent this view of a unified korea that has a hostile view. important points that she mentioned are different chinese policies. that is actually true, and one way we see that is the periphery, the frontier. the peripheral chinese have much more in common with their peripheral north korean neighbors. it is counterintuitive. there is still the tendency to view this -- for everyone to be in line, and while the goal of

standard economic development is universal, there is a vibrant debate in china of how to do that. others want to reform. both of them are aligned. as pertains to north korea, another phenomenon that is new is large-scale modernization of relationships. the peripheral chinese. the chinese provinces that are on the border with north korea, they are the focus of very high- level consideration on how to close the gap between rich and poor, so they are given a lot of leeway. they have much more autonomy than one would imagine. there is an interesting relationship. senior party officials at the provincial level are extremely powerful individuals, so when they have certain policies and measures in place, they are not easily forced to abandon those policies, so i think that is,

perhaps, one of the causal reasons why during the period of sanctions you see reports of trade continuing. in some cases, business as usual. we hear other instances where things are being held up for inspection. we are also hearing other stories of construction continuing in some of these development zones and trade on both sides of this frontier economy. >> given that, tell us a bit about this ongoing study you are involved in with the sanctions and the border, what that means. >> sure. thesanctions now are primary policy tool that i think many countries and international organizations are using to deal with north korea. if you think of it as madison, overdicine, it is being prescribed. what is the real impact? the policy definition of it is

that it raises transaction costs, makes life very difficult for some companies and individuals to do business in their activities, and the hope is in doing that, you change the environment for the decision making, an, altman z, they will see the path -- and ultimately, they will see a different path rather than proliferation. it is not just nuclear censure. they will only be lifted if the north koreans seize doing those sanctions activities. very objectively, what are the unintended consequences? some of my preliminary research looks at the growth of privatized companies acting as middlemen. in many cases, the focus of the sanctions.

there are three key points. why is that increasingly, these are happening more often inside of china. ofre are heightened levels fees that are demanded, and the prices of certain items are also very high. in other cases where we have seen the application of sanctions, that is usually the impetus for the growth of underground economies and so forth, and you create legacy issues. economy. globalizing they are no longer exporting to china. the art inside of china. trading that, the companies of north korea no longer have to go to the four corners of the world. they merely have to contract with private chinese companies, and the bottom line in all of this is that the sanctions lead

to privatized companies. they demand commission fees to do a transaction for a trading company, and that, in turn, attract more sophisticated things, to the point where, in readice, an opportunity to the capabilities of these middlemen, and that is a function that did not exist before. this activity -- they have the opportunity to rent the capabilities of these middlemen. this requires more research. >> if you are in north korea, and you are trying to purchase, say, agricultural equipment that they build in china, that is a definite possibility? >> i think that is a growing reality. especiallyanies, those involved in things like industrial equipment, manufacture and all of that, in many respects, they only have to

go across the border and engaging privatized company with a contract and go so far as to take out insurance on the transports, so it follows legitimate channels in a way, but the key point is when the privatized company goes to that european companies to procure the industrial equipment, the company really believes it has sold something to a chinese company, so this is the type of activity in this the to do it instance i think has implications, but in other areas, in terms of and the luxury goods, as you have standards of living in china, again, going across the border, procuring other items that are banned, -- forum wheree to the the sanctions have been tightened, and we recently had a

security council resolution, 2094. does the chinese agreement on this marked any change in behavior? or vetoingg resolutions? in one way, i think this is a pattern, in regards to the first nuclear test in 2006 and the second one in 2009. it was about three months of coordinated statements of beijing and washington appearing to be on the same page, but the three-month honeymoon period does not normally lasts longer than three months, so we see a reversion back where we see the commercial ties deepening. that is not to say that the trading companies are the main reason for that, but if you look at the broader context, it is interesting to note that the north korea-china trade is

growing at a pace that far while some things looking atheld up, 2008, the nature of which it spikes is interesting. i think the chinese government is very sensitive to be doing a booming business with them. there is a tendency to underreport. to see those high growth figures, you have to take them with a grain of salt, because they are likely to be much higher. and we see the north korean entities piggybacking over the transportation infrastructure that exists in many parts of china. this is an important infrastructure. will be am jong-un transitional leader or not, it

is a dilapidated country. the absence of transportation infrastructure makes some of these economic reform initiatives more of an academic situation. >> let's pivot a bit from china to north korea, and given what you have just said in terms of the time line, the assistance provided from the early 2000's, the relations from 2009 to 2010, last year, where do you see kim consolidating relative to china? his uncle was there during the transition period and was seen as a marker. the chinese sent a delegation when kim jong-un officially rose to power, and there are communications back and forth. the then later this month,

central communist party meeting in p'yongyang, where there may possibly some economic reform package. that has been suggested. thisw do you take all of and kind of digest this relative to the north korean look back to china? >> right. my early take on it is with kim jong-un having successfully gone thru leadership succession process, essentially being militaryby senior officials and hand-picked by his father, we are now in this period of power consolidation, so we have seen the removal of the very officials that his father put in place. there seems to be a rebalancing. the redistribution of the economic pie, where the economic

concessions where they want to monopolize, in some instances, it looks like bringing them over to the party side and the cabinet's sides. i think those institutions, viewed from institutional perspective, the reason that may be significant is that the party and the cabinet may be the architects and those trying to do something. perhaps one of the earliest ways to turn around some of the consumer benefits that they enjoy. that being the game plan. so with that, as you mentioned, with the announcement that there is likely to be a party gathering, a meeting of senior party officials, and within the party, those affiliated with the military -- some are speculating that we will see one person assume a formal title related to a modest economic reforms. that, i think, if you look at the progression of what his acceleratedthat

visit to china, and demurring of institutions -- and the irroring of institutions -- think this view of putting the personnel and having different means of production and given sources of revenue from economic concessions to enter this effort, it is not to say that the outcome is guaranteed, but it looks more substantive. the fundamental difference about this effort from, say, the july 2002 economic reform, this one seems to have a lot of backing from the communist party of china. the interesting relationship there is you look at the chinese ambassador in p'yongyang, he is not a career diplomat. he was with the communist party of china. so the relationship between the two are at a level where you have direct connections, and it

does not translate into immediate results, but it is an unprecedented interaction. bis is the kind of interaction that is continuing even though we have heightening tensions on the military side, in many cases unprecedented in scale and scope. to wonder which spier is reality. i think right now, we are seeing multiple realities playing out at the same time. how those are managed is a crucial test of leadership. a it is it not, john, possibility that the chinese are looking at the military bellicose language, the missile tests, the nuclear tests -- are there concerns about accidents, mishaps, a flare-up intentions? if you are a military planner in argue that tend to

china is the loser in this situation. >> i think for many of the chinese military establishment, it is not new. they read the tea leaves from 2010. the sources of escalation, it was counterintuitive to outside observers, but right now, the in itskorean military -- baristas form, it means that if north korea were to attack south korea again, there would not be a proportional response. it would trigger the destruction of the north korean command structure. now, the latest report is that they will take up the statue of il-sung.il and kim

will the south korea's be able to control escalation? that seems more of an academic debate rather than a military discussion. once you trigger the exchange of that it wouldbe happen very quickly to a point where you would not have a response time. if you think of the situation and try to conceptualize it, again, the concern in south korea, but from a western perspective, it is north korea playing a game of chicken. onechever campillo are in, story told is if you want to win a game of chicken, the most clearest way it is to send a idea, to york serious

rip off the steering wheel and throw it. from the u.s. perspective, some that thise constitutes that kind of bar. it is a dangerous situation that you can misread what one of the parties have done, and your response may be due to a false diagnoses. a question to ask you about seoul.ifications for there has just been an observance since some perished. there are concerns about that type of activity again. what does this pose for the present two has assumed office?

the response has been cautious, trying to remind them to be peaceful, but what does it mean? >> to start off with one reading of what i think north korea is doing right now, and this is another reality, another path happening concurrently, north korea is determined to become a full-fledged nuclear weapons state. this means militarizing a nuclear warhead. with that full nuclear weaponization, then to invite conversations about nuclear arms control. concessions. but the implicitly be a recognition of north korea as a nuclear weapons state.

if it would come to eight decision about discussions. it puts the united states and south korea in a very difficult position, because in the midst of that, i think we are seeing play out in the relationship between the chinese and north is a, the sunshine policy reference to progressive government, but the chinese characters, the major one is that north korean state trading company is engaged in economic activities inside of the chinese national economy. not one single north korea state trading company operating before, and yet we see this. the other characteristics are quite different from what the

u.s. and south korea have got, and one is something that exceeds a positive security situation. if it was the subject of an attack, there was a letter that hu jintao sent to the chinese leader. reportedly, the letter said china would have come to the defense of north korea in that instance. court characteristics is regime's survival. in its court -- in its current information. to help the party of korea revive, essentially. in contrast, the best that the united states can offer is a package deal that includes negative security insurance, promising not to attacked south korea. that is no longer sufficient.

what they need is assistants to help the party get on more stable grounds. the coping mechanism is that you have a lot of means of the north korean side operating inside of china. toefully, they will be able start some very modest economic measures. ofyou have a configuration the metrics, a new south korean version, and it would have to measure up. another bar that it has to a corporate -- has to incorporate. it is a new element. seoul play into that?

how are we balancing that part of the relationship? those efforts from south korea are predicated on the importance of a china-south korean relationship, and if it i viewed that way from seoul, think that neglects the chinese strategy. implicitly, it looks like the south korean are giving them the choice, it is of or north korea, but from the chinese point of view, it is to have a rebuild china-north korean relationship. becausevibrant pillar of the incredible benefits to both countries have been able to drive. the china-north korean relationship is a toothpick. you're going to have two stable pillars.

the priority right now is to rebuild that pillar. so for them, it is not a choice of choosing one korea over another. there will be, even if there is another limited exchange, hopefully it will be limited and contained -- we will see the chinese sticking to that game plan, as they did in the aftermath before. >> john, thank you. we have about 20 minutes to turn to questions from our audience. we ask you to please step to the microphone and identify yourself and your affiliation. if you would like to come up, that is fine, and by speaking into the microphone, it helps those that are streaming live as well as rc fever -- as well as our c-span viewers.

i am sorry. can you speak up? some favor the development of the south's nuclear deterrent capability. response fromny the north or china regarding this development? >> sure. think chinese, some of the analysts, coming from the south korean public, and i believe you are referring to an institute survey, but also, the south korean elite, and they view it as the u.s. nuclear tactical weapons in terms of the south korean population -- in response in terms of south korea

developing its nuclear capabilities. china is concerned. there is a concern i think among chinese academics about virtual koreaeration as north continues to make progress. they have a ways to go, but they are definitely in forward movement in terms of conducting morear tests, many movements towards militarized war, and technology, where in december of last year, they put something into orbit. there is usually a discussion of the reality of a nuclear north korea on its border. it could be a potential strategic threat. as some chinese analysts will say, that is certainly not a desirable outcome, but it is not an earth shattering development,

because if you look on the western and northern borders of china, they already live next to nuclear states. certainly, north korea has a reputation of being an unstable regime, but it is not a decision point that would create tipping point. thatnk there are issues make the situation much more complex. >> first of all, that was a terrific presentation, and you ought to be congratulated for that. [applause] two questions. after the sanctions, in which china and the u.s. act together, the north korean sanctions have been designed to draw at -- to drive a wedge between them. if so, is it the logic of the u.s. position not simply to reassure our allies with the b-2

bombers, but to actually move towards china to actually tampa down the issues of containment issues ofwn the containment? that is question no. one. question no. two, there is a long korean history, that you are more familiar with probably than i am, and no korean leadership wants to be totally dependent on any one neighbor, so is it the logic of the north korean position to reach out to south korea at some point, and it is obviously that is something interesting to seoul, because they do not want to see china as being the influence. >> trying to allay concerns -- longntainment

standing. what is different now is that the u.s. is fully engaged. it was first called a pivot, and now they are rebalancing. this is probably the biggest piece of evidence, so even 52 and the over the b- b-2 bomber flights as well as the increase in of the interceptors, those discussions are, i think, muted by the broader concerns and about rebalancing. with respect to your second point about the u.s. efforts to coordinate more closely with , that being perhaps the most effective way of dealing with north korea, i think there

is a desire at the highest levels to do that, but the different types of internal politics, the interest groups that both sets of leaders have to deal with, it makes it very difficult, so if you look at it if that werele, really to work out in a sense, it would require the u.s. being more flexible, with china doing what it is doing vis a vis north korea, and in some cases, they're implementing certain measures. those metrics are so publicized but i think it would be hard to convince the skeptics, so while on paper that would be the most effective and perhaps desired, i think the manifestation of it most clearly is at the u.n. security council resolution 2094 -- it is always a question of

durability. these are usually not sustainable. >> but, john, are we making the assumption that china really has as much influence as we think it does, given the history and nationalism? how do you read that? >> it depends on how you define influence. for me, influence denotes the ability to affect a certain desired outcome, and in this case, if the chinese wanted to send a crystal clear message to the north korean, i think it would be shutting down -- and also seizing what are known to innorth korean bank accounts china-based banks. those would be completely unambiguous. in the past, we have seen

certain chinese constituencies telling us this is the way they do it. we have had the chinese signaling technical difficulties in the pipeline. we will boost shipments in the future. it is hard to know what was behind that. the opportunity andsend messages are there, i would observe reports and see if anything comes close. >> thank you. >> john, again, i think you hit a home run. my question has to do with the fact that, as you mentioned, we are in uncharted waters, nuclear wise and missile wise, and given the hostility with two korean regimes, what about the stability of the peninsula

devolving upon the u.s. and china? is the expectation of reining in p'yongyang or could be made to do so? what i see happening is you have got something like a beijing and two step. you have sanctions and then a return to the six-party talks, which have not accomplished anything except some statements for 10 years, so are we in a cul-de-sac, so to speak? can you address those two points? ,o what extent is this de facto and to what extent do deletes -- understand that? and as a corollary, do we expect that beijing can put the pressure on. what i see is a possibility onthin a few years of icbm's

a warpath with nukes on the top, and then what? >> it has now been elevated. there is a plan where the u.s. would be shoulder to shoulder in responding. game, thecreasing the potency. one aspect of deterrence that has been operational lies is the delegation of local commanders to respond. the days of coordinating and making sure everything was in lockstep, given the reaction if there is a legitimate attack from north korea, then local commanders will respond,

and that could be a trigger for the escalation on both sides. that is a very alarming development. operationaln an sense, even if united states wanted to restrain, he discreetly, south korea, this, i think, -- there has to be much more thought given. on the china and north korean whereyou see a situation the chinese shuttle diplomacy -- because you had the military that they were going to do a live artillery exercise into waters. the north korean said, "do not do it. those are our waters." the south korean went ahead and did it, and there was an altercation the lead to some

a very and then you saw bizarre situation where they said they would complete that in december 2010, and as we led up to that date, both sides were getting ready for an escalation, and we saw look -- luck, because there was some fog, so the date was pushed back. and then there was the u.n. security council. of that, china sent and p'yongyang. there was this haphazard trip. they wereren't that to have a meeting. protocol due to

the sense of urgency. protocol.ucked of of these photographs holding hands. diplomacy and then with both north korea and south korea at the time, that took go back to the north koreans walking away from the military hotlines. effects from beijing and washington. we just will not have time for those capabilities. please. >> my name is ken. i am just an ordinary member of the society. i was thumbing through a copy

of a work, and his analysis about the state of north korea still holds, despite the changes that you have outlined, and i think the chinese will not abandon north korea under any circumstances, and i do think the american policy is really whistling in the wind as far as that is concerned. with thequestion broughtthat dr. noerper up, about the north koreans buying german-made equipment. they can also buy american-made acquitted. the u.s. will be supplying them. i just think of computer technology.

the north koreans have proven themselves, especially now, where they have the program of , king major american cities that they are technologically savvy, and, ironically, the korean society may have had a hand in that since they have a program of bringing north korean over and introducing them to computer technology. the maxwell school program is separate from the korea society. we are going to have to wrap that up. >> my point is by closing down the communications with the south, the u.s. activity, especially with the b-52's bring back memories of the korean war, and that is why you have an

escalation of threats and menaces now, so the u.s. policy is very dangerous, i think, in my opinion. >> do you want to comment? >> sure. i think all the countries involved are in a dangerous situation, so it is a response getting into a response cycle. i mentioned the u.n. security council resolution seems to be a trigger. if you want to look at all of the different triggers, there is a big debate of what was the original one. one way to assess this is reaction feeding into reaction, and once in a one to zero in on in terms of technical analysis. when the booster rocket fell just south of south korea, the south korean navy salvaged it in order to look at the various

parts, and there are two very interesting outcomes of that study. one is that the rocket capability looked like it was indigenous, that the north korean had developed that technology, and the welding showed a type of resourcefulness. it may not have been the most advanced, but it worked. the second finding is the technical guidance systems, it was deemed not to have been able to have gone to north korea, as they claimed. there may be other intermediaries. so it is not to say that sanctions should be abandoned. it is more that it should be viewed as a part of a larger set of measures. if there is too much reliance on these, then some policymakers may legitimately think that the sanctions are taking care of all of these things, so i want to mention, in terms of financial

sanctions, there is no answer that going one way or another will lead to a vastly improved situation. policies asg at the they relate to north korea. >> thank you. one last question. i am also a member of this society, nothing more. about encouraging the chinese, companies to invest in north korea, which, was, in the early 20th century, noted for its hydropower. it seems to me that everybody else who is interested, whether they be russian are japanese or american or south korean, they stand to gain.

and since all the emphasis is on sanctions, there is quite a way to go. labor, other, incentives? northre are thousands of korean workers in china. labor wages, labor shortages in some parts of china, there is a natural synergy to bring in north korean workers. setting up chinese factories inside of north korea is a very daunting because of the fact that you would have to build all of the roads. it is much more than just turning up a factory for production. with respect to the hydroelectric component, tremendous opportunities, as there are in the mining sector. mining sector,he there has been an increase in exports of coal to china, but there is an interesting

practice. this is where i emphasize again the important and significant relationship between the chinese .refer a and the other the key parts of the chinese side, they have coal, as well. that coal andg shipping it to other parts of china and getting a good price for it. they are importing cheaper north korean call, in some cases underpaying. who are they going to complain to? and then they on the chinese side are making a tidy profit. sense of theou a sophistication of some of these interactions, but your basic point about incentives, a chinese investment in north korea, it has been an arduous process in north korea, not only for the physical difficulties of the infrastructure gaps but also, as they report, the north

korean counterparts changing the terms of the agreements and what not to a point where we now have a long list of chinese companies that have walked away from these ventures. >> john, thank you. i would like to thank all of you, our studio audience, our viewers at home, and i would encourage you to visit us at our website for all of our policy programs coming as well as information on membership. we would love to have you as a member of the korea society. koreasociety.org. john.you, >> thank you. [applause] [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] >> next, a former obama administration. after that, a look at cyber warfare in international law.

then, targeted killings of trustees. sequester will reduce our grants by about 5%, which roughly equates to $22 million or so, which will be distributed among the various licensees, so we have, in fact, taken about a 13% cut in our overall federal funding in the last two years, and if the entire federal government had sustained the cuts we had sustained, the budget would be $500 billion smaller than it is now, so we feel we have made a significant contribution to deficit reduction and retiring the federal debt within our own context. >> the impact of spending cuts on public television, monday night at 8:00 p.m. eastern on c- span to -- c-span2.

>> now, talking about the troubled assets relief program, known as tarp. he says tarp was needed to avoid a recession and that the u.s. economy would have been worse off without it. he also talked about his work on the dodd-frank financial reform law. he spoke at the university of maryland. this is about 90 minutes. >> ok, we are going to get

started. it is a privilege for us, in cooperation, to host this series. the centerrector for of policy. it is really a privilege to host this series, and i am glad that to here arere here featured guest today. our featured guest today. where michelle is. she is involved in the logistics of this event. ok, she is not here. to give you a brief -- michelle is back. for thebeen responsible logistics of this event, and she has been impeccable.

the center came into existence in the wake of recent events. we thought we should have a center that a couple of years ago, featuring a hotly debated topic. we are forged -- fortunate. a variety of activities, round tables, conferences, in partnership with a number of [indiscernible]

berkeley, nyu, so on. but as a research arm. today a's briefing is an example. series do in the [indiscernible] benefits students on issues of current interest. the latesteast of developments. i want to point out this is not the first time the center has interacted with the legislature. most of our events are in washington d.c. we're fortunate to have the congressman to

keynote at our signature events. one of which was a conference. phillip swagel will introduce appeared before he does it, -- introduced. before he does it, i want to announce our events. it of 15. it will be featuring a general manager as our distinguished speaker. them, april 23, we will have another congressional speaker. are held in events college park barracks also hold events in washington d.c.. we will have a big event on april 26.

that will be a forum for emerging markets. we will be looking at opportunities by emerging markets, bringing together diplomatic circles, and a variety all round groper -- all around the globe. so we have a pretty heavy april coming up. i am going to end with that. then i will give speaking time to our partners in the school of and the school of business at the university of maryland.

swagel in particular has at the center.r he will be making an introduction of aaron klein. thank you. >> thank you. thank you to the center of financial policy for organizing the event. it is my pleasure to introduce my friend and colleague, aaron of thethe director regulatory reform initiative in washington d.c. i am also involved in that initiative. the mark -- before moving, he was the assistant secretary of the treasury department. there, he worked on a range of issues, including financial regulatory reform, the enactment of dodd-frank legislation. he worked on the implementation

of the housing policy on transportation on infrastructure. he has a lot to account for. service, for eight years, he was at the senate banking committee. ended up as the chief economist there. the first senator from the state of maryland. dartmouthaduate of college. and princeton university's woodrow wilson school. he will explain he also has the connections here to the university of maryland. .lease give a warm welcome [applause] >> thank you. thank you all of you for having currentlycated, i am the project director for the

financial regulatory reform initiative and the by hals the project bipartisan policy center. to bring democrats havingublicans together been the chief economist for president obama, both phil and martin at the bipartisan policy center, we try to bring democrats and republicans together to solve and propose common-sense solutions that face -- of the problems that face our country. we are saying, what is going well, what can we do better, and what was missed. dodd-frank was a sweeping change of our financial regulatory landscape in response to the single greatest financial crisis and panic of our lives to date. and hopefully for the rest of

them. anybody who lived through that process should not want to repeat it. i thought i would talk about that. i thought i would also try to frame context in my talk regarding this crisis and past crises i had while i served in the senate. namely the accounting crisis. we will talk about the role of congress and the legislative branch. and mostly in rap with you in here questions and thoughts on your end. somefree to stop me at point, raise a question, asked for clarification. notou are thinking it and asking, someone else is probably doing the same thing. before i do any of that, i want to say how grateful i am to be here. my mother is an alumnus. she earned her doctorate and -- in french literature.

i am a lifelong maryland there. -- marylander. i did work for a professor who later served with me in the obama administration as director of the senses. be here with to john, who is a professor at the university of maryland and was a colleague of mine at the treasury department. of maryland's serves not only its campus, community, state, but also its nation. ago, terps. it is a privilege and honor to be here today to speak to all of you and to be back on campus in college park. to give you a little more context, i spent 8.5 years on the committee, starting as a professional staff economist and becoming chief economist for the

senator, the longest serving senator for the great state of maryland during my tenure in the senate. left, i stayed on and was asked to stay on by the incoming chairman, senator chris dodd. i had the great honor of serving as his economist through 2007 when he took over the committee, through 2009. then, in the beginning of 2009 with the incoming obama administration, i got a fantastic increase -- opportunity to go to the treasury department. in all my career, there is something special about serving your home state senator. i am in maryland. i served for a great senator from maryland. there is a value that everybody gets in their lives from giving back to their community, whether you define it as your state,

your nation, your church, your community organization. how you do that, i would argue, do it as an integral process of your career, whether it is through your business, after spending time in or out of government, government can always benefit from expertise from a wide variety. think about integrating that through your career. i will touch on how business interacts with the formation of policy, to improve it and in some cases maybe not so much. theduring my time with senator, we had a huge crisis in the region in america. it was a major crisis in which publicly traded companys' numbers appeared to not be accurate. they had a domino effect.

this sounds a lot like a financial crisis. aig,said, lehman brothers, that should sketch a familiar timeline. fannie mac. crisis timeline in 2002, enron, world calm, these four major companies, many of whoseeclared bankruptcy, accounting numbers were not accurate. ther amounts of capital in market moved toward these companies on the basis of numbers that were demonstrably false. there were major distortions. the next time you see the stock market from the year 2000, you will see to giant the spirit one is the accounting crisis in

2002. the.com bursts, the market goes back up, and there is a huge fall. although lows touched during the financial crisis or the lowest from the county crisis. what happened? business and industry and investors could not believe the rules of the road. they thought the rules -- they were not sure what the rules were anymore. they were not sure people were obeying. major shock in the equity sector, of all companies, good books and that boats. that was solved through a public response, commonly known. it was a really big deal. at the time, it was signed by president bush, called the most sweeping financial regulatory reform since the great depression. that was true at the time and also true for dodd-frank. but it did not create a structural recession. it did not create a recession at

all. we were actually coming out of the recession in 2001. it did not reverberate through the broader economy the way the financial crisis did. why? as much of a concern as you may have had on accounting, it caused people to entrench in the equity market and to you could fix the rules of accounting. when you have a financial crisis, it costs the market itself to cease to function. a very different space. a also has a ramification of financial crisis in the debt market and the change of companies between each other to do maturity transformation of operating and capital expenses you do not see in terms of investing in firms from accounting perspectives. there was a bit of a this time is different mentality but there is a big difference between a financial crisis and its

reverberations in the real economy, and an accounting i t crisis, the misallocation of equity capital, the inability of financial institutions to provide debt and liquidity into each other and companies in the broader market. in both cases, you saw a big, sweeping laws that had major ramifications. the timeframe was more narrow. the mark of the crisis was not as clear. when the senator became chairman, he beat -- which party, i do not know your congressional history, but one senator from vermont switched five months into the bush administration. whole tenure for what

his time and chairmanship would be in the next 18 months. you will never find a word accounting in there once, even though that was the one we had the most hearings and pass our most sweeping regulations. the seas for what became the financial crisis were evident even then. problem --e the anyone who says nobody saw the problem does not know their history. mortgages were being originated that later became the toxic assets. at the very early on. period in the origination process in 2002, the city of baltimore had them and other -- more than other match bertolt -- metropolitan areas, many were saying these would not work. you have folks said, to provide credit. it costs more. these are new and innovative

products. homeownership is a good thing. so, it is not such a problem. as it turned out, the very products misaligned incentives of lenders, are worse, and investors, to the point where they eventually affected the entire system and cause the entire financial system here and globally to go on to the press of this of collapse. just from what began as a seemingly benign, helpful, predatory mortgages to real people. in one of our hearings, we had a real retired subsidy teacher testify about how she lost equity in her home. to drawpoints i want from that experience are three. talking aboutwere

the crisis. there was not a consensus as to the problem. there was a tension between legislative oversight and drawing attention to the problem, the desire for innovation, in an area, especially mortgages, which had historically been a safe investment and a large accumulator of well for people, and the kind of mentality that the market will take care of these problems. people will not lend money unless they know they will get paid back. if they keep doing that, they will eventually to get put out of business. i might pause here and ask if there are any questions? i laid it out. i am happy to go on. before i leave, i want to say one point. thebiggest opponents in beginning of the legislation were the accountants. they said, you will put us out

of business and have always honors with rules and regulations, you will gum up the works. it will be impossible to do all this. there were a lot of accounting- firm relationships. and -- the gross consulting, you could grow a lot and the street was very opposed to it. accountants came through. this was in 2002. as a staffer, you are always very cognitive of where your boss is during his term. loses, his staff are all out of work. is not just the member's job at stake.

theily, the framers gave senator six-year terms. 2006, the growth for the accounting industry was compliant. they were setting and praising it for its great work. we were the first in line to say the senator's wisdom during the crisis was the reason he should see reelection and we would support him. he made another point. you serve at the will and pleasure of your member. when a member retires, when the member loses. a very real connection there. it creates excitement. it also creates a real risk. the broader point i am making in

the accounting area is where business is during the discussion of a regulatory time, if you think globally, you can have a time where the market determines it, and hopefully not, but sometimes a crisis. redrawing of the regulatory structure. there could be a lot of debate about an input from people in the industry. once it is drawn, the viewpoint as to whether or not that will be a success or failure, could change radically from where they were at the argument of the redrawing. this is not a bad thing. industry business should be arguing and rigid on behalf of their own incentives. smart people say, why did they not see that? they thought the compliance of

the a gold mine. that is a good question. you can also see the concern that there would be a new set of rules. i am afraid i will not know these new rules and they will be bad for business. uncertainty is bad for business. certainty is good for business. if you think in a different way, from a broad perspective, the government job and policy job is to set the rules and certainty and allow business to interplay in that space, and innovate and profit and serve their customers in that space. when there is uncertainty as to whether -- what that place will be, that is where you get concerned and interplay. sometimes, as we discussed, there is -- when the rules are set, people start to see that maybe the rules are not working. passed a homeess

ownership and equity act, which required the federal reserve to have rules about certain types of loans that were high cost. they got a red scarf -- star. there was going to be a stigma attached to that in the marketplace. require agencies to issue rules. there was no enforcement mechanism to that other than the annual corporation cycle. for very good reasons, the vast majority of financial regulators are off of congressional appropriation. that.nnot really enforce the rules required to be written -- 2006 and not finalized in 2008. any serious study of the financial crisis shows the build up and concentration of risk in

proliferation of the toxin intgages, the die was cast 2006. and nothing's happened in the system and they were sliced and diced in so many different ways, even if you cut off any new supply in 2006, which did not happen. supply of cut off the these well before any regulatory star to came and -- red have an impact. people were talking about this. >> talking about accounting firms, i would like to ask for your thoughts on the concentration. when i started little ones, is this a too big to fail situation? what are your thoughts? >> that is a very good question. very analogous. are certain economic

reasons for accounting. first off, just complexity and size to handle large firms. second of all, a desire to have brand accounting. one of the big companies. that is a natural value to having a large program. then there is a pressure. there are two separate ones. one is murder. the big eight to 85. the failure of anderson, the account that failed in and run. -- enron. there is an analogy in the banking space. it was very hard to have a big bank in multiple states. congress changed that. for a variety of reasons. a lot of great innovation, national branching and atm's, people move along a lot -- around a lot.

then you have a crisis and what happens? firms merge with each other. .ou get down only large firms can absorb other large firms in distress. is too small, versus two, verses 8, versus six, i do not really know the answer. i do not have enough knowledge. enought know if there is to get out there to show a certain amount. two would be problematic. four is better than two. it could be better than four. you cannot have 30 household

accounting firms. but it is a concern. what happens after the next crisis? what if another one of these go under? due to bad management or competition or desired merger between two of the big four? that is a real big concern. turning just for a second to the seeds of the crisis, because my committee was banking, housing, and urban affairs. urban affairs is public transportation for the most part. why are these things together in congress? why do they form a committee? it used to be called the banking and currency committee. the same committee controlled banks. it is an interesting question. housing and banking are

inherently interrelated issues. good policy a very purpose, and in america, we have created a three-year mortgage with a one-way option. that is a pretty unique situation globally. it allows for a tremendous amount of growth of home ownership. home ownership, for the most part, was the greatest way that middle-class families, particularly families of color, could accumulate wealth. you pay the mortgage, 30 years, interest rates are in your favor and you can refinance, and you are fine. at the end of the day, you are home free and clear. it is kind of a stealth retirement savings way, but also a way to transfer. guess, whato percentage of houses in america are owned free and clear?

20? five? 30? close. one-third. luckily, one third. that is a lot. right? of-thirds have some sort mortgage, and not all are 80% or 20%. another reason it is a financial the fight -- fantastic vehicle, you can work money in the stock market. you can never beat the market. regardless, you really cannot get leverage in the equity market as an individual. you get leverage in the housing market. even at 20% down. the traditional down payment level, pulled aside 10% or 5%. when you are leveraging on your home, the largest asset for the vast majority of americans, that is a vehicle to create wealth in a long-term, sustainable way.

historic the very safe. i will make another analogy. cars are fantastic. we all use them. they are really safe. you drive around. you have to be careful. you can get into an accident. for the most part, we drive thousands of miles a year relatively safely. with defective brakes, you would be in a world of pain. you would have very little chance of making your destination safely. when your care crash would be, cars are really risky. think about a more simple analogy about mortgage products. traditional, pretty safe. interest only payment, undocumented loans, pretty risky. balloon payment option arms, pretty risky.

>> to follow your analogy, taking away the descriptions of driver's license, we let people in the market who have no business owning homes, risky and on, nothing at stake, and then we were surprised we treated volatility in the housing market. >> hold on. sentence.th your i would say, we is the market. to be very clear, the very types of products you are describing, , the best part, they originated by mortgage brokers, not by banks, it is not sound underwriting. it is not a good product. it is not what banks do. community banks say they did not make bad mortgages. i think they are take -- telling the truth. large banks did not indicate the product for the most part,

either. brokersen mortgage falling directly through in securitization on the private mortgage market, private labor security side. financing chain. the alignment of sentiment in the chain that allowed that to happen were such that everybody was getting paid based on volume, not based on quality of assets. at the end of the day, the only gate keeper of the quality of assets was the rating agencies. , a simple model errors, let's model off the last 50 years of housing crisis, there are no heroes, i can start my day in a positive range, did not contemplate the situation. discussing this with rating agencies, a lot of different folks, saying, if you

take 100 that mortgages together, that does not make one pool of 80 good mortgages. that makes 100 bad ones together. if any of you are taking the assume 0 between the mortgages. tampa, you to 28 in have nothing in common with the 228 in fresno. that is a mortgage in which, a 30-year mortgage in which the first two years are to appease your interest-rate. i can underwrite you in the scenario based on the rules of policy makers, for the question of whether or not there is a high-cost loans. i could underwrite you to your right. as long as you could make payments for the first two years, even if you cannot make them for the next 28, that is

fine. shockingly, that does not work out. it will work if the house value continually increases so after a few years, you can get paid. in that mortgage space, there ae frequently large payments, pre payment penalty, penalties and fees only unique into these other spaces. that created assets that were aaa. these assets that were aaa were viewed as housing assets. it has historically been considered less risky for a series of different types of investors, including financial institutions, to hold on to their balance sheets. investors thought they were buying something safe come with a little bit higher yield. you could sell the security on the blend of interest rates of all 30 years, so that is

appealing if you are an investor. if you are an issue or, you pay by volume. the more and more you can create, which created an incentive in the marketplace to get more and more people into the types of loans that give higher and higher fees. >> a question on one of the statements he made earlier. -- you made earlier. we know interest rates go down. earning a long-term bond as an investor is not a good investment. short of long-term bonds, which is what homeowners -- it has been that the average homeowner would have been much better off with a four-year mortgage. have floated down.

what the fixed-rate mortgage has done is given financial institutions the chance to charge over and over again as people refinance their mortgages, at rates higher than they would have otherwise done. in some cases, a dozen times. question.answer your let me do something first. campbell answer your question with a question. if i have a life insurance policy on my life for my children, say i want to do a 20- year term. my kids are 20 and they can take care of themselves. i live for 20 years. that insurance policy, does it produce value for me? has it? >> it has produced insurance. >> yes. the insurance has value. by that, i would take your point. in retrospect, in hindsight,

always having a variable rate mortgage would have been the answer. having gone the other direction, having 30 years would have produced the opposite. but they have the 1-way option. the homeowner, by fixing your rate, he gets the value of the fix and, because we have a 1- way for repayment, a unique structure, they have the ability to take advantage of the downside. do they get the full advantage? nope. that is correct. but they have the value of protection in the upside. if people view the risks and the cause of four " -- foreclosure is incredibly high, and i am willing to pay premium to have a certainty of value in that. penny on how you measure the insurance premium we discussed. to go the other way.

>> a 30-year mortgage has been a rather expensive pathway for people to have a peace of mind. does not help people to build wealth. you pay for an insurance policy never used. going forward, i probably agree it is a good idea because interest rates cannot go down too much more. >> i would have said the same thing several years ago and been proven wrong. the prospective ability to forecast on behalf of interest rates is difficult. fourverage of a family of on a $50,000 a year income with some college education, the median level of education in america, may not want to constantly be making forecasts of future interest rates. is, andr point to you the chairman said this, he said,

i am perplexed -- perplexed why people opt for a 30-year fixed. very different from a no documentation, no money down, there is a long history of available alternatives. people opt for that. you can pay people are steered. you can say different aspects there. those types of products are available. it is a very different product than a 228 no money down. >> the other point, 36, [indiscernible] >> we can go back one more crisis. it is an interesting point. this will relate back to the dodd-frank point. the savings and loan crisis date back to a time when there were things called banks and things called threats. a lot of people in the country do not recall those distinctions.

they go back all the way to the great depression and before that when banks had the federal reserve system and the federal home system. over time, the distinction between a bank and a thrift, to the average consumer, oppose 1990, is impossible to distinguish. they were still regulated by two different regulators. then the various federal banking regulators, the currency of the fed, the fdic. they were not even emerged in 2005. the fdic operative both of them. he said 2006. you are right. >> the merger was way back when. the fdic kept two different

funds in a safe. the bank insurance fund and the savings association insurance fund. they charged and had different rates and statutory guidelines. you may be right. i worked as a staffer. it is very hard to remember what year sometimes laws passed. work on them for so long. from the beginning through to the end. frank ended one regulator. the office of supervision. it was the only regulator that basically ended in dodd-frank. problematic most loans originated through the thrift. if you look at the larger --ifts, country ride, countrywide, and they had a greater share in this space of toxic marches, i want to pause because we have gotten deep into

the housing side of the crisis. is an important crisis. highlights why banking and housing would go together on a committee of jurisdiction. this is why we had the advantage, as congressional staff, of knowing both markets. the banking market and the housing market. when you are a congressional staff for a committee, you are assigned as the head democrat or had republican of the committee, when is a chairman and one is the ranking member. that is the head of the minority. he served other members of the committee to ask questions. that is your boss. it goes back and forth. areas with in that committee's jurisdiction. things outside of that are not in your control. one way to think, if i can impart anything on the audience, as a better way of students as you go forward, to think about congress, think about committees

and jurisdiction. it is a world of jurisdiction. when the jurisdiction of committees align with the reality, that tends to produce a better policy. when there are abstractive is as between the two, if that makes sense. in this case, the banking and housing jurisdictions were aligned. in fact, if you look at the legislative chronology, the first major sweeping reform in the financial crisis was the housing economic recovery act. it strengthened the regulatory alsoight, combining that with the regulatory oversight of the federal banking system, which i mentioned before, funded a lot. was the first legislative process. the second was the enactment of the emergency economic and stabilization act.

tarp. most peopleis what know the bill by, after those two laws, there was an attempt to do a similar legislative fix for the auto companies. offices of banking housing and urban affairs industry, if you think about a nature,cy as a systemic a company being so large it goes to bankruptcy and the finance is the government. does this makes -- makes sense in a physical contests, the private market, for whatever reason, is unable to provide better finance, either it is too large, or it is itself. you cannot find your own recapitalization. you can think of the government alloy. chrysler went through the committee in 1979.

that legislative attempt failed for gm. after president bush signed off and the house voted for it and it was filibustered in the senate. after that, we did a reform with a credit card industry. then dodd-frank. i put the markers out there. the attempt to do the otto, which were then dumped through tarp. the credit card act, and finally, dodd-frank. hindsight, to, in understand how to tackle the problem. one was emerging crisis to crisis. of reform bill, the basis which dated back to the 2005 attempt, which passed the house but not the senate, why, because fannie and freddie were on the press this and had serious problems and the secretary of the treasury said, his famous line at the hearing was, i need

a bazooka. i hope never to use it, but i need a tremendous amount of firepower. it was enacted very shortly after. a power the regulator lacked under the previous framework. that pass at the end of july. past october 3. i will take a liberty because i think it might be fun. the staff experience this in a way that is different from a member spirit also different from the general public. the secretary of the treasury and the chairman of the federal reserve and the leaders of congress said, we have a real problem and we need a lot of money and we need it now. there was a series of debates back and forth in a beat -- in

the legislative process to craft that framework, and it met with tremendous public opposition. the president went on national tv and stepped in front of the podium and said, if we fail to act, we run the risk of another great depression. that is a startling statement for the chief executive of the country to make. the state of the union is strong. there is a certain amount of optimism inherently put forth by all chief executives. that is also true in a business context. i do not think that is unique to government. if you're chief executive of your company walks into the board meeting and says, we are at the risk of imminent bankruptcy, that should startle a lot of folks. he is not quite an elected official in the same way a politician is. pressure, an

agreement was reached on a deal. the agreement was signed off in a press conference, the president has clearly delegated almost all of 32 in the debate. the majority leader and the minority leader in the senate. the speaker of the house and the minority leader of the house. this is a signal to everyone in the world this is a done deal. and everybody at that level, the heads of the party in power and the heads of the opposition, and a blessing of the two presidential candidates running at the time, neither of whom campaigned in opposition to tarp. the market resumed they had it fixed. we will understand the rules of the fix and how it will enter play through. what happened? the house went to vote on it. while the house was voting on theirnate democrats had emergency meeting where they

were getting briefed on what the deal was. the staff was waiting outside the room. the democrats always meet in the lbj room in the senate. the staff was sitting right outside the lbj room to join the senate floor, waiting to get called in to answer any of the more technical questions about the deal. there was a tiny little cancer -- camera to watch c-span live on the floor and see what is going on. we took to the security guard station tv over and turned it over to cnbc, which had a famous shot of the market watching, a split screen of the doubt and house call role vote. it was going down. it was going down primarily because of opposition -- opposition among republicans and congressman. the market dropped 1000 points like that. it looked more like you're watching and nasa countdown.

than you were watching the big boy. one of the white house legislative affairs focal worked out of the vice president office in the senate, the head of the senate, according to framers, and we ran into a man he looked at us and we look at him and said, plan b? like there was a plan b period this was a surprise half -- plan b. this was a surprise. they did not know who was in charge. they did not know who was setting the rules. if the president, and the speaker of a different party, make a deal, and the minority leader is on board, these things to not go down. -- do not go down.

given the uncertainty of the crisis happening in the real economy, the fact that the government said they had the deal and did not have a vote to make it happen, added a layer of fuel to the fire and panic that was gripping the market, that was palpable and real, potentially avoidable, potentially necessary, depending on how you look at the view of elected officials in responding to constituency. polls were 90% against this thing before the vote. there was an election eight weeks later. after that vote, the market fell. when we came back, the senate voted with 74 votes to approve. a very similar package. there have been minor modifications. other kinds of legislation tacked on that had nothing to do with the financial crisis. with 74 votes.

i ran a little bit of a congressional pull, march madness. there was no money at stake. i asked all the democrats and republicans to work on this to give me their vote total. out of the guess is i got, only want one crowd of 74. only one person guessed 75. we knew it would pass. we did not know it would pass with that sport. you had a question. >> [indiscernible] i want to know what the best way .s >> a very good question. the first thing, congress gave them the same regulator.

prior to that, the banks had their own regulator, a large board, the homeowner bank board, not what i would call a premier regulator. this town is a little bit silly. there is truth to this in washington and the business world. the business context, people said there were investment banks by prestige. the they collapse exactly in the inverse order of the prestige. that is a little bit of here, too. a regulatory system is only as good as the people operating it. at the end of the day, the best people make the right calls. not aswho are experienced or knowledgeable with as much connection, have a harder time. i say connections because there is regulation with power rules, and this and that, then there is

regulatory soft heart. we would really like you to do this. we think this is a good idea. or we think this is a bad idea. different regulators listened differently when they say that. at the height of his power, the fed chairman -- people listened. board, whose bank share was during the mid 2000's, was indicted for illegally for underneath -- fund raising from embassy was deregulating from. that regulator was not as aggressive or lack procedure and capability. the office of federal housing enterprise oversight failed, which was one of the few financial regulators still on appropriation, subject annually to a budget from congress. if people regulated them to not like what they were doing, they could go to congress and say,

why did you cut their budget? the regulator was moved off of appropriations. the feesle to exist on it charges. given far greater regulatory authority as i mentioned before. given one single director. the intent was to produce a strong regulator, where you get a more qualified person to regulate the system. a place where more people would want to learn where the institution had more power and authority.

how successful or not, difficult to judge. they were put into -- shipped so quickly after the law was enacted, it is hard to say whether or not. regulating the conservative is different than regulating a company outside conservatorship. the home loan bank system, which, you're absolutely right, plays a vital role in security, you may or may not know it is the first holder of assets of a failed institution before the federal reserve. before the taxpayer gets paid back, the home loan banks is paid back first. it is a super lean party in debt. they are private cooperatives owned by different institutions. they are not government entities. federal reserve banks are not government entities. they do not return dividends to shareholders. they were analogous in theory

when they have seven things. the hormone banks themselves use to regulate their local threats, much like the federal reserve regulates to this day the state member banks. has changed due to prior crises. differentt talk for a day could be the history of thrift crisis. is the major attempt. we do not live in a normal world today in housing finance their 90% originated today involved a guarantee. a healthy or sustainable market in the long run. goes to show you after any government role, there would be no to rent housing market. you have a question? what is the level of staff for support?

what is the background? >> fantastic question. i worked in the senate. i would stress there is a real distinction between cannibalism and party that i do not think is fully appreciated. if i was giving a lecture, i would say study cannibalism more. it is real. average senator has a legislative staff of about 30. the have home difference offices. the senator from california and the senator from wyoming, equal senators. california is a 500 people. pretty different. one may have more mail than the other.

legislative staffs are much more comparable pierre the average office has about 30 legislative -- 10, 30 staffs legislative correspondents, where usually, people laid out of cut -- straight out of college. --y handled tense situation constituent. broken down by committee assignments. some of the committee specialists, this gets back to the jurisdiction issue. everysenator has to have issue covered. there's one legislative director who manages to -- manages. the chief of

staff. you have a separate scheduling actually cataloging and handling the mail, a pretty gargantuan task. you have graduate degrees at a lunch lead to lengthy experience on the senate side. one of the reasons i went to graduate straight out of gradgraduates is i saw the the greek buys into the l.a. world, legislative assistant in the senate. in the house, the average congressman probably has seven or eight staffers, usually, one person with four legislative assistants. usuallyage congressman one committee, maybe two, usually one. one person does that committee. the other three or four split up the rest of the world you're

there may be one or two legislative correspondents. one just helping the committee person or committee plus a few pretty other handling everybody else here the average congressional is about 600,000 people. it is a different order of magnitude than being a senator. you have the chief of staff, district offices, which may play a little bit of a larger role in a congressional office. veryommittee staff's depending on the committee itself, the committee budgets very a lot. there were a dnc committees. -- a,b

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