there is a song, i am told, by power band tommy tutone called "867-5309." >> i think your version of younger and ours are two different things. [laughter] who thinks that justice kagen knew this and who thanks one of her law clerks slipped it in? >> i'll go for the law clerk because she said a couple days ago in an interview at the aspen institute she, it was pointed out how she brought up mortal combat on an oral argument on violent video games and she asked one of her clerk, i need an eye donic video violent video game. and so one of them volunteered that to her. so i'm not sure how much she had played it and how much a clerk helped her out on that.

>> but she is our youngest justice. >> and do any of you think that these kinds of things could have gotten into a supreme court opinion 30 years ago, 50 years ago at all? did they have similar? >> rehnquist quotes gill better and sullivan. not totally different. >> i guess that's his version of an pop bapped. >> for 50 years ago touf ask tony or david. >> thanks, bob. >> we can't remember. >> we've talked about what good questions justice kagen asked and justice ginsberg asked. we passed yet another term with no questions from justice thomas. but he did say something one morning and it created quite a irestorm in the press. are you up to date on that? >> i remember, we all kind of -- and the press gallery looked

at each other and, did he really say something? it was hard to tell. t was sort of a quip made in passing. but he was -- he leaned toward the microphones, which certainly seemed like he intended it for it to be heard. and this was a case that actually ended up getting dismissed, boyer versus louisiana, about the appointment of counsel in a capital case. there was some discussion about he quality of the counsel, and justice scalia said something like but i see the defendant had a lawyer who graduated from harvard and yale, as if this is great. and anyway, thomas leaned forward and he said, what we

now have documentation from the court is that he said, well, there see he did not prostride good counsel. and -- provide good counsel. and in context, this was read s sort of a jab at yale, his alma mater, and he had sort of a complicated relationship with yale law school. so i think that's, that gave it even more interest. but we all kind of went crazy trying to report this and figure out what he actually said. >> pathetic but true. >> sometimes it's like this is what the supreme court reporters do for fun, is to try to figure out obscure quips from the court. but actually that sentence that i just read, well there, see, he didn't provide good counsel, that is like the third

iteration of the court reconstructing the transcript. they must have done some forensic voice detection work to get that sentence, because in the original transcript it was incomprehensible. so anyway. >> but i think there's still dispute to this day about whether it was harvard or yale that was on the receiving end of that joke. i'm inclined toward the yale view but my -- >> i think it was a general ivy league slam. >> it was such a joke or nonjoke because, first of all this is what passes for humor. but they are all harvard or yale. they're all ivies. and scalia who made the original comment about harvard of course went to harvard law school and tony is right that justice thomas has this complicated i hate yale but now i'm starting to like yale a little more his alma mater. but recently along these lines

justice kagen was speaking and she happened to make some joke about all the ivies and she referred to the fact that justice ginsberg actually started at harvard law and finished at columbia because she moved to new york city with her husband and as she was talking about the harvard and yale thing olumbia. the most triyl thing became the

sort of story of the day on whether a question did he try to speak did he say anything? did any words come out? it seemed like a rather modern matter. >> until you talk about questioning something that's happened which they all sort of talk about but i don't know that they know how to control it is that there are a lot more questions asked, there's a lot more rapid fire lawyers who come before the court often have a really hard time getting their -- getting anything out before another question comes. and all of us have seen a number of times this year when the lawyer gets up and before he or she can say anything, there's a question asked and i think that the justices are starting to take notice of that a little bit. the other thing i would say, since you're trying to get me in trouble with justice alito, is that when you talk to lawyers who practice at the court and ask them who do they

-- which questions are they worried about, i find that those who are arguing a conservative point of view say that they're worried about justice kagen's questions being the hardest to answer, and those arguing the sort of liberal side talk about justice alito's question, that he really distills it and goes for the soft spot in their argument. and so it's interesting because the two of them sit next to each other down at that end of the bench but that's the place that i think lawyers worry about. >> you think the court is starting to take notice of the fact that they dominate the argument with their questions. is there any hint that they're actually going to do anything about that? >> not really. the chief is -- has said publicly that it's an issue. i mean he stood there 39 times. so he knows what it's like to

be cut off so quickly especially in rebuttal twhen lawyer finally has his or her last chance to say the core of the case and some justice jumps in and inevitably it's justice sotamayer constantly jumping in at those moments and the chief justice, he tends to have a face that doesn't reveal much but you can tell that that irks him when the advocate is cut off. and i know that's been an issue for him over many terms but it doesn't seem like anything changing. >> one thing that he tried to do is in that situation where someone is eating into the rebuttal time he will let the argument run longer as chief justice rehnquist would not. and the fourth circuit conversation he again -- and this is not a chief justice who very often talks about the internal workings of the court. the justices are quite alert to this but there are eight of them who like to ask a lot of questions and there's only an

hour to do it in. but the number of questions is quite high. justice sotamayer asks more than on average 1r questions per hour long armment. that's a lot of questions from a single justice. >> does that kind of style make it even more important for a litigant to have an experience as a supreme court practitioner representing him or her? i think many of you have written about the increasing specialization of the supreme court bar and you wrote a very funny story about a guy from guam who had his pro se case accepted this term. maybe we should start with that. would you like to tell us this story? >> well, i think all of us have written in one way or another about the -- how the elite bar is contracting and there are more and more clients turning to this core group of private practitioners. and it's become more pronounced because of course the courts'

calendar has been shrinking over the years. what i wrote about was the phenomena that has very pretidges lawyers chasesing after cases looking to pick up more cases volunteering to do cases for free, once the supreme court has taken it. in this case it was a man named steven levin who was a pro se lit gant living as far away as possible in guam a u.s. territory and he had gotten his case accepted. it was a claim for a medical battery from a botched cataract surgery and as soon as his case got accepted no fewer than a dozen law firms jumped on him saying please pick me. which i thought was a bipe product of the competition for cases now. and there's a -- i think there is some debate over how helpful it is to have a really seasoned litigant before the justices.

the justices certainly seem to appreciate it. they have talked publicly about how they like the fact that they can get really high quality advocacy and i think that is a pitch that many of the advocates themselves make to clients, is that i can speak the language of these justices. or when you were talking about the very active bench we have here, some of these advocates say well we know how to get in there, we know how to make our point and we will not be thrown by the fact that justice sotamayer will be asking as many questions while justice alito from the far right will be trying to jump in, too. >> i think it really has become a much more difficult task to argue than it was certainly when i started coming to court. it's like it used to be the matter horn now it's the everetts and you need the best she werea. and you need a lawyer who can be hit with three questions

almost simultaneously, keep them in or her head, and respond to them in order of seniority. it's just, it's not easy. i always am amazed at how well they do. there are stories of lawyers fainting during oral argument. i think stanley reed when he was solicitor general did that. and i can fully understand it. it's really a blood sport. >> it matters at the briefing stage, too. the specialists are very good at knowing how to get a crert petition granted. the very fact that up a brand name super star gets it probably read more closely and they're better at talking to the court in the terms it wants to be talked to. it doesn't want to know that your guy should have won. it wants to know why this is an issue that is worth the court's attention and that will give rise to some general legal

principle whether your guy wins or loses that's the right legal principle. and that's not the terms in hich most lawyers think. >> they've grown up several institutions to try to help the nonspecialty. do you have any sense of whether those things are really worthwhile to the nonspecialist lawyers? do they really help? do they give them a fighting chance against one of the regulars? >> well, i guess the thing i would point to is the georgetown moot project where they really -- georgetown university has a supreme court institute which i think had a part of every single case. so there are places in town that especially that one and what you've mentioned that want to help practitioners getbetter

questions from these justices. >> i think those are sort of one and the same too in that those groups, stanford, the one at yale, have very experienced practitioners who run those programs. and so it's a little bit of the same thing. >> let's move from inside the courtroom to outside the front of the court. probably everyone saw photos of the enormous demonstrations sout on the sidewalk during some of the arguments and last week during the decision days. united rule there states against grace is that you can have signs and blah cards and demonstrations -- plaque cards but you couldn't have any on the marble plaza which is up i think four steps from the sidewalk and is most of the real estate there in

front of the court. and then tony on june 12 just in time for the end of term hoo hah -- that's what we call it. >> who is a fairly young, meaning newly appointed judge on the u.s. district court here struck down the rule banning demonstrations on the plaza. and what happened after that? >> well, just to set it up a little bit. it's always, it seemed bizarre to me at the supreme court which is the guardian of the first amendment you can't demonstrate on the grounds of the court. well, you can across the street at the capitol but you can't at the supreme court. and one of the rationales behind this law, which is passed by congress in 1949, was that the court didn't want to be seen to by the public as

susceptible to being wayed by demonstrations. which seemed like a very far-fetched rationale for a first amendment restriction. but the law has been uphe would numerous times -- upheld numerous times. there are lots of cases, lots of demonstrations every year whether it's death penalty or cornell west or minister dropping to his knees and praying on the plaza in front of the court, they get arrested. and they usually challenge this law. it's usually in superior court and then it goes to the d.c. court of appeals. the local court of appeals. and the law is upheld. well, this case that art was mentioning instead went to the federal district court and finally at long last the law was declared unconstitutional.

it's the law that prohibits ssemblages and banners on -- and processions on the property of the court. and as the judge said, if you read this literally, it could cover a group of preschoolers tethered together going up on the plaza for their first visit to the supreme court. of course i couldn't quite imagine preschoolers visiting the supreme court. i don't know if they would get much out of it. but obviously the law i think was overly broad and it was struck down. but the court had a quick response. they invoked a different federal law, a law that allows government buildings to set up rules for order and decorum. under this different law that hasn't been challenged they

basically promulgate it had rule saying the same thing. you can't demonstrate on the property of the supreme court. that too will be challenged, no doubt. but i hope the whole process, this litigation process is given the court some cause to reflect on maybe there's some middle way, there's some other way of allowing for demonstrations on the court plaza. there's a lot of other first amendment activity that is occur on the plaza. the court -- the media stakeouts, the press conferences with lawyers, it seems like there's a lot that goes on there. it seems that you could have some kind of demonstration with regulations but some kind of demonstrations on the plaza in front of the court. >> although as i wrote when i wrote about this, i think it would be hard for anyone to

think won't people be surprised to find out you can't demonstrate at the supreme court? because certainly there's constantly footage of people on the sidewalk and after the prop 8 -- the doma decision, you certainly saw a huge turnout in front of the court and certainly looked like a demonstration of some type. >> especially considering for just about 355 days of the year the general public doesn't even know the building is there. it is not like there are people coming there to protest every day. they're -- very rarely do you see anyone who wants to protest outside to supreme court on a regular basis. >> although my impression is it's gotten more and more over the last ten years, say. i can't remember demonstrations there in the 90s. maybe one or two. but now every big controversial argument and certainly the end of term decision days have both encampments of the press and

hundreds of people, abortion cases and gay rights cases i guess being the two biggest draws. and is it your view that the whole plaza should just be a public forum and people can demonstrate up to the doors? >> i don't see why not. like i said, there could be regulations, time place and manner regulations. but i think that would be an expression of the court being made of sturdy enough stuff that it can welcome first amendment expression. >> the justices go in and out through the basement garage pretty much. so it wouldn't interfere with them. chief justice rehnquist i remember used to take a walk around the block before arguments in the morning. i think i read in somebody's piece that it had to do with his bad back that he was

stretching out. but i haven't seen a justice outside the building since then. we've got 15 minutes left to go in our program. so if there are any of you who haven't yet been thinking about questions you might want to ask let me give you a five-minute warning. we'll try to have some questions starting in about five minutes. in the meantime, let me ask a general question and see if anyone has an answer, which was were there any big surprise this is term? >> i thought there was a big and small ones. i suppose the biggest surprise for us was that with the affirmative action case which they heard that case in october. it seemed very well set up for the conservatives to real by pull lack in a big way on affirmative action. i think that's why they took the case. there were five on the right very skeptical of any sort of race-based admissions program then they held it all year long

until the last week and it turns out to be a 7-1 decision that didn't decide too much. so i don't know what to make of it. but i put it sort of you would not expect a decision that several of the liberal justices are on with several of the conservative. rirt was a big clue when they took the michigan case for next year that they weren't going to throw affirmative action out completely. because if they were what was the point of taking the michigan case for next year? >> different area of law i guess. i don't know. >> i went backwards and forwards on that question about what to make of the fact that they took yet another case. i would have still thought more likely that they strike down the particular program before them, this program out of texas which had a race neutral component, the race conscious component. and then you would still need to do that second step. so i would agree that for seven of them to get together on such a contentious issue is interesting.

>> how about another general question some years some of the panelists here have identified sleepers, decision that is didn't seem terribly important at the time but that contain the seeds of major change down road. the most successful such prediction i remember was aprendi against new jersey which someone i don't remember who said just watch, it was a case about sentencing. just watch that's going to be a big deal. and it sure has turned out to be an enormous deal. does anyone have any pet sleepers that they think may have occurred this term? >> there was a piece in the arizona voting case which looked like a liberal victory saying that federal law preempted state law that required evidence of citizenship to vote. and it's beyond my expertise really to make sense of this but it's a clue that scalia wrote and there's a discussion in the case about the

qualifications clause in the constitution and that states are allowed to decide for themselves who is qualified to vote as opposed to the manner of voting. and there are people in the election law community who think that was a kind of sleeper time bomb compromise that scleia got into that. >> i agree with that. it's at least the case that most divided the people who should know the answer. and so that a lot of election lawyers thought it meant one thing and a lot of election lawyers thought that it meant something else or portended something else. and so i think that is one to think. the other is not a sleeper obviously but certainly as we discussed doma decision certainly laid out a lot of language that i think is going to be analyzed by a lot of courts in the future. >> and prop 8, everyone says it

goes off on standing but the kind of standing it went off on is to make it much harder for citizens of a state to put a ballot initiative into the constitution and essentially allows state officials if they don't like it to effectively veto it by not defending it. and that rejiggers the process substantially. they were looking for an exit ramp and this was the one that was available. >> i was going to cite the same case, the arizona election case but a sleeper for a different reason. in that case justice sca leah said the election clause gives congress very broad power to regulate federal elections. after the voting rights case, i think that very few people think that congress is going to pass some new formula to some special situation where the south is under federal oversight. on the other hand, if congress could agree on some national standards on elections, for example early voting hours,

that i thought this decision really opens the door for congress to say there need to -- basic minimal standards to protect the right to vote nationwide. and that case seems to sort of invite that sort of law. >> i think that's right. and but and it also seemed to really foster some agreement on the court that states decide whod gets to vote which it would seem to have a lot of importance for voter id laws or for other things that the states can decide. >> we've got about 10 minutes left. let me invite your questions, which can include comments as long as they have a question mark at the end. and we have a traveling microphone. here's hand up right here. >> the texas affirmative action case, is there another case or are there other cases that are

working their way up through the courts that the supreme court might -- emphasize might have in effect batted the fisher case back in order to have a combined result with the others? >> if there is i'm not aware of it. the only cases i'm aware of are the two that we've talked about the michigan one for next year and the texas case. but as you suggest the texas case itself will in short order get decided. and if it turns out the standard announced in fisher now back at the fifth circuit or trial court requires the texas program to be struck down that's very same case might ebound into the court later. >> just -- some people have pointed out that these affirmative action cases are

very difficult to mount. it's a solo plaintiff and especially now with this heightened standard there's going to be a lot of discovery, a lot of witnesses. so that effectively some of these successor cases are going to be harder to bring unless they're well funded by some organization like the fisher case was. >> this is a follow-on to the sleeper cases discussion. and clearly the voting rights act case seemed to be a follow-on to the 2009 decision that was a warning shot about the concern about relying on four-year-old data. do you see other decisions from this term that might be a warning shot in coming terms? and if so what are those issues? >> well, most directly what we've been talking about the affirmative action one, what kind of burden might be on universities to justify these programs.

but there is i think seing what we saw in the 2009 case you're referring to that involved utilities in northwest austin water district that had challenged originally section 5 of the voting rights act and an eight-member court led by chief justice john roberts said that that water district actually had an exemption, qualified for the bailout and wouldn't go forward. but we now see so richly what was laid there with the help of the liberal justices. and i think that's why the question has come up so much in the texas affirmative action case. did the liberal justices sign on to another opinion that could lead down the road to a complete undercutting of oofl firmtive action because of the suggested changes in the fisher case? but it's interesting just how these -- everything is built on precedent there for better or for worse. and i think it's not just a matter of the law but how the

justices will sort of tee up a case for the future. >> it's not a warning shot exactly but they've taken a campaign finance case for the next term which citizens united having laid waist to the expenditure side now is a first >> anyone else?g away at the we wait for your potential questions. joe? >> hi. i hope this is not a semantic quibble. we use the terms conservative and liberal as if they make sense for the voting block on the court. left and right might be a little more accurate. the conservatives who ruled that corporations are in an individual, is a classic conservative position. i want to ask about the terms liberal and conservative. >> who wants to reflect?

>> i think it's the shorthand that makes sense to people. when you say conservative or liberal, they know which justices you are talking about. it is a shorthand that doesn't require a degree in moral philosophy. they do array themselves across the spectrum. you know which justices we are talking about. >> can you suggest a better term to use? >> left and right. [inaudible] >> it is your suggestion that conservatives are not pro- business? >> [inaudible] it is a semantic question, but political science question and

general question. it is confusing the public to call people conservative when their views are all over the place and not conservative considerably. and for a liberal, the same thing. >> people are pondering, yeah. >> i think it is one of those things that is hard for journalists to decide what is the right way. i think it makes more sense to the general reader to describe the court that way than it does in other ways. may left and right would work.

thosek sometimes we use somewhat interchangeably when we talk about the justices. >> maybe we should refer to them by the party of the president that appointed them. [laughter] >> they say who appointed us doesn't dictate how we vote. pro-metimes you think government antigovernment might work. anybody else? well, we have got a couple of minutes. one more question. william suter is retiring after many years. the court has announced that scott harris will take over. does the person who is the clerk of the court make any difference to the jobs that you guys do? shouldg else the public care about? >> i think in a general way the

online docket is extremely helpful and well done. bill of policies that suter instituted have been customer friendly. and lawyer friendly. i think it does make a difference. the clerk of the court is the face of the court in the legal profession in many ways. i think it is very important that public position. >> does anyone know scott harris? i don't. no? >> seems like a nice guy. [laughter] >> don't want to get on his wrong side. >> much more important for the lawyers than us. the lawyer sit in the front and the press right next to them. he is advising that they hold

onto their wallets. >> thank you for coming. i hope to see you next year. thank you to the panel. [applause] [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] >> you can go online to listen to oral arguments from the supreme court's last term and interviews with justices and interviews about their work, at cspanvideo.org. >> if kern county was a state, it would be in the top 5 oil producers in the nation. to put this in context, 75% of

oil production in california is in kern county, 50% of the natural gas produced is right here in kern county. we are looking at -- in this county, oil, along with agriculture, are the two largets industries we have and it really turns the economy. >> explore the history and literary life of bakersfield on span 3. and c- >> former diplomat mohamed elbaradei is the interim prime minister of egypt, days after mohamed morsi was removed as president. of thermer director fo th

international atomic energy agency. we will continue the conversation with eric traiger, who gives us a historical perspective. marilyn werber serafini about the federal health care law -- and the new york times elisabeth rosenthal talked about maternity care costs. starting at 7:00. next, a federal reserve board talks about future capital requirements. part ofrequirement is the dodd-frank law. this is an hour and 15 minutes. >> good morning.

>> i'd like to begin by welcoming our guests. is an important step -- to provide financial stability. there is a comprehensive capital from work that the board has for some timeg with our international colleagues in central banks and regulatory agencies. provides the organization to have higher-quality capital. future lossesrb for those taking excessive risks. we hope to have safe and sound banks to whether financial and meet the credit needs of our economy. this fulfills the u.s. commitment to revise

international regulatory capital framework. with the largest and most active international banking organizations. that complement the broader financial stability agenda. we will also try to conform with the final rule. we have many of the staff to spend long hours working on this rulemaking. they should be commended for their conscientious effort. i look forward to today's discussion of this initiative. they are joining us by the conference call. let me now turn to governor tarullo who is late a key leadership role. >> thank you. adoption of the rolls will be a milestone in our crisis efforts to make the financial system safer. while strong requirements alone cannot ensure the safety of our

financial system, they are essential to good financial regulation because they are available to absorb all kind of losses no matter how unanticipated. along with the stress testing and capital review measures we have artie implemented in the additional rules for large institutions that are on the way, they will be an essential component of a set of mutually reinforcing capital requirements. they will have several important consequences. they will consolidate the progress that has been made by banks and regulators over the last four years in improving the quality and quantity of capital held by banking organizations. this assures that as memories of the crisis phase efforts to build and maintain higher capital levels will not be allowed to wayne. they would remedy shortcomings in our generally applicable calculations that became apparent during the financial crisis.

they would also enhance the effectiveness of the collins amendment which we have strengthened our making it out a couple to capital out there -- buffer as well as requirements. adoption of these rules means that we will have met international expectations for u.s. implementation of the basel three capital framework. this gives us a firm position for which to press our expectations that other countries implement it fully and safely and promote global financial stability. in characterizing this role as a milestone, i should note that this marker has quite different meanings for baking organizations and systemic importance on the one hand and the thousands of smaller banks on the other. markeal weird. today will

the end of major modifications. most of the significant changes from the proposed rules we issued last year that were made in this final rule are intended to reduce and simplify a number of those from current standards that will be applicable to smaller banks. in respect to larger organizations, we have a number of initiatives that remain. before turning to those initiatives, i know that work continues on simplifying some of the more complex provisions in capital requirements applicable to a higher institutions. of particular interest is work on standardized capital requirements that would provide a sound backed up for model derived risk weights. as to what remains, beginning in the fall we will extend full stress testing plan reviews to

the dozens or so organizations with greater than $50 billion in assets that have not fully covered in the exercises we have undertaken since 2009. we also have rulemakings that will enhance capital requirements for the eight organizations already identified as those of systemic importance. we're very close to completion of of a proposed rulemaking that will establish a leverage ratio threshold about the required minimum. despite the innovativeness, it seems to have been set too low to be an effective counterpart to the combination of risk way to capital measures that have been agreed internationally. we should be ready in the next few months to issue a notice of proposed rulemaking concerning the combined amount of equity in long-term debt. they should maintain in order to facilitate. third, after the basel committee has completed final

mythological framework of global systemic importance, we will issuesystemic importance, we wil notice of proposed rulemaking to implement this framework in the united states. given the current state of the work, you may have noticed this late this year. fourth and finally, the staff is currently working on a recommendation for an advanced notice of proposed rulemaking to see comments on possible approaches to requiring additional measures that which are rectally address risks related to short-term wholesale funding. -- which directly address risks

related to short-term wholesale funding. capitalld round out a regime of complementary requirements that focus on different vulnerabilities and compensate for the inevitable shortcomings. this regime would conform to the mandate given to us by congress to apply to large banking organizations, more exacting supervisory becomements that progressively strip to the combination of risk theih -- structure as it increases. the capital rule we consider today is a broader elements of the regime. as a foundation for the forward- looking requirements embedded in stress testing and as a base on which to add all surcharges. >> i will focus my remarks on those elements that are most hurt and to community bank. i want to begin by emphasizing that having adequate levels of capital is just as crucial for

smaller banks as it is to the largest institutions. thatrisis demonstrated community bank can still be devastated by economic turbulence if and when they did nothing to cause the problem. standwere able to with the adverse conditions and continue to serve their committees with those that started with solid capital positions. as proposed last year, it would have achieved the objectives of increasing the quantity of capital in banks of all sizes. it also would have created substantial regulatory burden on community banks. i believe that we have maintained the objective of capital requirement but what about the more onerous burden. it received 2600 comments with the majority coming from community banking organizations. in addition, they sought input from community bankers or in person meetings. they held several large are reached -- outreach sessions. i met with representatives from organizations of various sizes with different business models. i know several members of the

board did the same. this is critical to understanding how different elements would affect organizations. after hearing their concerns, changes have been made to the proposal to reduce the complexity and to minimize the potential burden that would be placed on smaller community banking organizations. we will discuss these in detail. three to comment on changes in particular. it might've comments or concerns about the burden of calculating the risk, there is the potential reduction in credit availability due to the proposal with the other mortgage related rulemaking. it would retain the current risk way for residential mortgage loans. second it would allow the non- advanced approaches to make a

one-time election to opt out of the requirement to include most elements of a oci. while they would not be required to recognize unrealized gains and losses in the capital, they would not be permitted to back and forth to take advantage of unrealized gains and see unrealized losses. this is part of their tier one capital. communitytion of banking organizations little -- limited access, it would grandfather certain existing securities as permitted by the dodd frank act. ultimately, the relevant measure was not to compare to the proposal but to evaluate it against existing regulatory requirements. i believe it was strengthened the quality and quantity of bank capital without introducing necessary complexity or capital volatility. it would require all things to hold more common stock and retained earnings than is the case under current requirements.

because most capitalize with common stock and because retained earnings, i view this as a validation of the community capital model rather than an additional burden. be requirement would increased from 4% to 6%. the turkeys have become an important element for community banks. -- these have become an important element for community banks. it would also create a capital observation buffer that would work to limit distributions as they approach regulatory minimums. community banks stressed their limited access to markets and resulting dependence on retained earnings. this is especially appropriate for community banks.

it simply mandate earnings retention until this is above regulatory minimums. who knew this would have more stringent lists? there are high concentrations of either these assets. lessese crisis there are than expected for observing losses. ases would increase as well high volatility and commercial real estate loans called hbcre loans. when it applies only to a small subset of commercial real estate loans, construction loans are of the type that resulted in large losses during the recent crisis in the savings and loan crisis. one-taff has prepared a page summary designed

specifically for community banks that describes the key changes discussed today. i am hopeful this will allow community bankers to quickly zero in on the changes that affect them. staffd like to inc. our in finalizing these requirements. i am glad it will contribute to a more resilient banking industry that will benefit the overall economy. i will now turn it over to mike ipsen. >> thank you. i will briefly discuss how the final rule fits into the larger package of reforms that have been undertaken in response to the financial crisis. then i will turn it over to describe the final rule in more detail.

the stronger ones are a key part of our regulatory reform program. , eric the hallmark is that they should increase -- the hallmark is that they should increase in stringency. today's role deftly needs the principles -- definitely meets the principles. many changes have been made to reduce word in on community banks. many provisions of the role do not apply to medium-size banks. they build on the stronger capital and increased tendency. three briefly mention these other areas. stress testing, capital surcharge, and resolution. this will have the stronger definition of capital in today's final rule as these changes come into effect.

this satisfied the principle of stringency. bank holding companies below $50 billion in total assets are not covered at all by supervisory stress testing or rule. the very largest holding companies are subject to a tougher stress test that includes a global shock to financial markets. as he mentioned, we are working on a proposed rulemaking to implement the surcharge. uponurcharge will build the fossil three framework in today's final rule. obviously, the surcharge meets the principle of increasing stringencies in only eight are currently on the list of sins we -- systemically banks. we may measures that will make them more resolvable in the event of failure.

these are beginning to summit resolution plans are living wills to the fdic and federal reserve which will improve their prospects for orderly resolution. haver supervision, we designated resolve ability as a core expectation. resolutionwork on meets the principle of increasing stringency. it only affects large bank holding companies. all elements of this program taken together are intended to increase the resilience of the financial system and ensure that the banking sector can support strong and stable growth in the economy. >> the final rule is the result of an extraordinary team effort. it represents a major step in the regulatory capital framework. the final rule enhances the agency for capital regulations to help ensure that they

maintain strong capital positions that will enable them to continue the creditworthy borrowers even times of financial stress. they found stronger capital requirements with lower the probability. this morning i will highlight some of the main provisions that would achieve this goal as well as key revisions that were made to the proposal to address burden concerns by community banks. my colleagues will help answer questions about the details of the roles following my remarks. the final will restructure the rules into a harmonize comprehensive framework. it incorporates requirements consistent with the basel three capital standards established by the community on banking provisions. including minimum capital requirements for depository

institution holding companies and the requirement that all federal agencies remove credit ratings from the regulation. the mpr includes alternative standards of credit worthiness to credit ratings contained in the final rule. the agency's final rule applies to all banks, bank holding companies that are not subject to small bank holding policy statements, and certain savings and loan holding companies. the companies raised significant concerns about the appropriateness of the proposed regulatory framework for their business models.

in order to provide the board more time to consider issues, it is not apply to savings and loan holding companies with more than 25% of their total assets held in underwriting companies. the final rule does not apply to grandfather even terry savings and loan companies -- grandfathered unitary savings and loan companies. the final rule increases the quantity of regulatory capital for all organizations by establishing a new minimum common equity tier one capital ratio and a stricter set of eligibility for instruments. most organizations already meet the higher capital standards and the role will help preserve the benefits of the stronger capital he related to the financial crisis. it also advises the framework to revise the capital standards. the final one establishes limitation by capital does it -- capital distribution. this conversation buffer is to provide incentives to conserve capital during the nine

times so they can withstand severe stress events but still remain but the minimum levels. the final rule and the sizes common and equity because it is the highest quality form of capital. the final rule also revises the roles for calculating risk weighted assets. that important to note certain provisions of the final rule apply only to large internationally open banking organizations. the final rule layers on a

number of macro prudential features for these firms. they are subject to a countercyclical buffalo but allows regulators to increase capital, -- conservation. in addition, these are subject to additional credit requirements as well as an additional requirement that takes into account off-balance- sheet exposures. they miscalculate their risk- based cap chelated ratios. they use the more conservative ratios when determining compliance with the minimum and capital conservation buffer. it establishes a robust requirement for organizations of all sizes. at the same time, it reduces complexity and regulatory burden for non-java nationally active banks. since this closed at the end of october, if you'd over 2600 common letters. most supported a more robust

standard. concernsessed regarding the burden imposed by the capital. they requested exemption from the most notable concerns relate to be for posttreatment of accumulated comprehensive income. the proposed risk week for mortgages, the regulatory capital treatment of securities that currently count as tier one capital, and the timeline for the client requirement. -- compliance. with the requirements. under our current rules, most components secure and are not included in regular trade capital. -- regulatory capital. would have required institutions to include most components in their common equity capital. most asserted that this aspect

will cause significant volatility in capital ratios due in large part to fluctuations in benchmark interest rates. recognizing that the tools used by more complex banking organizations for managing interest rate risk are not readily available for all banking organizations, the final rule addresses this by allowing non-internationally active banking organizations a one-time option to keep excluding most from regulatory capital. most have concerns about the proposed treatments of residential mortgages. the proposal would have introduced more granular framework for residential mortgages by providing -- dividing exposure into two categories. then assigning risk weight.

it would limit this and jeopardize recovery. it asserted that the proposed weights were not appropriate. the burden has an impact on the such as thedustry. qualifying mortgage standards. in view of all of these comments, the final rule contains the current treatment. another significant change is related to the treatment of securities and other capital and that will no longer meet the criteria under the final rule. it would have required all banking organizations to take out such nonqualifying capital. many encourage them to grandfather nonqualifying capital for banking organizations with less than $50 -- $15 billion

in total assets. in light of the smallest firms, limited access to capital markets, it allows banking organizations with less than $15 billion in total assets to grandfather securities and other nonqualifying capital instruments. it is subject to limits consistent with our current rules. larger institutions would be subject to the proposed phaseout with the dodd frank requirement. turning to the timing for banking organizations to come into compliance, they requested more time to comply with the requirements of the final rule. in response, it requires large internationally active organizations to comply with the final rules including the provisions beginning in january of 2014. other organizations are subject to the rule and would have until

january 2015 for compliance. this simplifies provisions for banking organizations and allows the more time to make the requisite system changes and retain earnings. the analysis of the proposal indicated that the overwhelming majority already have sufficient capital to comply with the proposed rule. our analysis for the final rule indicates that an even greater number of organizations would meet the new requirements if they were imposed without transitions today. more than 95% of bank holding companies that meet our current requirements would meet the minimum equity tier one ratio. nearly 90% would meet the common equity buffer level. the aggregate shortfall for institutions not meeting the 7% buffer is about $2 billion. this has decreased by $1.5 billion since our analysis of the proposal which we attribute

to increases in retained earnings as well as modifications from the proposal i have described. all larger holdings meet the minimum common equity tier one ratio and almost 95% meet the minimum buffer with an aggregate shortfall of approximately $2.5 billion. in closing, it improves the quality and regulatory capital. it leads to a more resilient banking system. the final rule meaningfully addresses concerns regarding implementation burden of the proposals and maintains this toward a more robust banking system. my colleagues and i will be pleased to answer your questions. >> thank you very much. thank you for your recitation. thank you for your hard work. we technically have two votes. one is on the capital proposal. the other is on market capital rule.

i propose that we have a single round of questioning, followed by the two votes. let me begin with a question. one of the criticisms related to basel is the idea that banks calculate their own risk rates using internal models. some people have called this the banks grading their own exams. it is related to the issue of comparability across country and whether banks in different countries are assigning approximately comparable risk weights to risk assets. can you comment on the protections and validations, what we do to ensure that the risks being assigned are in fact reasonable?

how does this relate to our stress testing and what we have learned? >> the federal reserve system has implemented a coordination committee that is used to basically set and compare established standards for exiting banks from parallel runs. there is a supervisory requirement that they had to meet the standards in order to exit parallel runs. they use this as their minimum capital requirements. to date no banking organization has received that approval to exit parallel runs. we have taken a number of steps to make sure they are well on their way to achieving that point.

some of the exercises include having specalized examiners who are able to take a consistent approach across banks and understand what they are doing. and using supervisory process to help move them to where we think they need to be. looking at the validations of models, it is a very important component of the final rule as well of these guidance on validations that we used as part of the examination. there is in the united states a standardized floor for risk weighted assets. while there may be some variability and there will be in the model by design, banking organizations under our current rules once they have exited will have to calculate two sets of risk based capital requirements

when using the advanced approaches and when using the standardized approaches. they are bound for the minimum capital purposes in determining where they are in the buffer based on the more conservative of those two measures. that provides a baseline level of comparability. >> i would just add, we have been spending a lot of time recently on the point you make about comparability of risk weighted assets across different banks or lack there of. they published a paper that reported on a horizontal exercise that was done across the trading capital models. there is one coming looking at capital models for risk requirements. they found a loss of variability of risk weighted asked -- asset calculations. the committee is focused on the issue of how to address concerns. in the u.s., we have a capital

floor and have been putting banks through a stringent process. other countries have done different things. some have imposed different floors in different areas of higher risk with uncertain proposers where they have observed models giving results they do not have confidence in. it is definitely an issue we are paying a lot of attention to and working on. >> thanks very much. >> thank you very much. i just have question i want to ask. the proposed rules that we put out a year ago suggest the risk weights on the value ratio residential loans and high volatility cre loans. the final proposal has kept the higher weight on cre loans but has abandoned the higher weight

on higher lt residential loans. they express concerns about both proposals. i was hoping you could explain to me why it was decided to alternate one area but essentially leave it alone in another. >> with respect to commercial real estate -- >> go ahead. >> with respect to high volatility, these are ones that have been associated with higher risk both in recent crisis and in past financial crises. the staff would recommend the higher was great -- risk rates reflect that. we did make some changes to the definition of high commercial real estate loans to clarify

that they would only apply to a subset of acquisition development and construction loans. the loans that are actually safer because they have a lot of equity commitments and would not be subject to the higher risk. i would like to clarify that agricultural loans would not be covered and certain developmental loans would not be covered. we actually did make some changes in response to comments that were particularly targeting the concerns that were raised. with respect to residential mortgages, we think there are some advantages to going with the current risk for now. for several reasons. one reason is a lot of commenters were concerned about the burden of calculating the

ratios as well as differentiating mortgages based on product categories. keeping treatment and not raise additional burdens on smaller banks in particular. the other aspects of comment that commenters focused on was that the proposed risk weights could interact with other residential related regulations that are either coming into effect or that will be coming into effect. exactly how that will affect the mortgage market at this time may not being known. it may not be prudent to wait and see how they all affect each other in mortgage lending before it is adding additional regulation. not changing the risk weights at this time will give the board time to see how they all interact with each other and

affect mortgage lending prior to adjusting risk weights. it does mean there is less risk sensitivity. that means there is less risk sensitivity in assigning weights, but they can do that in the future if they choose to change the risk weights. that is the reason for the difference in approach. >> thank you very much. >> ok, i will turn to governor duke. >> two questions. i talked a little bit about the comments we got from community banks, but also savings and loan holding companies, particularly about the exemption for small bank holding companies, but not for small slhc's. there are a number of slhc's

whose activities are predominantly nonfinancial. talk about how we address those comments for these institutions. >> with respect to the smaller savings and loans holding companies, in dodd-frank there is a provision that provides an exemption from the requirements for small bank holding companies, those with $500 million or less in total assets. there is not a similar provision in the act for small savings and loan holding companies, so we do not have the latitude to provide an exemption. as was mentioned, we are providing a temporary exemption from the rules for insurance savings and loan holding companies, in that the requirements are bank centric, they do not take into account the business model, the

asset liability matching practices of insurance companies. they raise concerns about for certain firms that only prepare their financial statements according to statutory principles and not that there was a burdensome principle there. they raise concerns about the reaction to requirements that we proposed and how that interacts with the state regulatory requirement required by the state insurance regulator. so we thought it was appropriate to take more time to look at what adjustments should be made to address the specific insurance companies' business model concerns. with respect to the commercial savings and loans holding companies, given the activities that they are engaged in, we thought it would be worthwhile to wait until the board proposes some kind of review for intermediate holding companies, largely to allow that regime to come into play until we

establish consolidated requirements for those firms so we are not moving out of lockstep with one another. so you put the framework in place first. >> thank you, and the second question, we talked about the parts of the basel agreement, included in the rule, but tell me the main differences if any between what was agreed to in basel and the united states' final rule and how we differ with the implementation. >> i will take the first question. the primary difference in the u.s. implementation is the basel accord uses credit ratings to risk weight certain exposures. in the united states, we are not not able to do that. we are asking to finalize alternative standards that do not involve credit ratings in the final rule. there are a couple areas where the final rule is more stringent

than basel, and i would highlight nonqualifying capital instruments. it has a statutory aspect where we are required to phase out instruments over a time, whereas basel would require a lengthier time. another item i would highlight is for tier one capital instruments. the final rule requires they be gap equity, where the accord is more flexible and certain debt instruments could qualify as tier one capital under the accord. so we are tighter on that. >> with respect to the basel 3 rules, with the u.s. now finalizing our basel 3 rule, europe just finalized their text within the last week or two.

that will nearly complete the basel three implementation and the rule-making sense across the major basel committee member countries, because other jurisdictions have limited their rules. they will take effect on january 1, 2014, so we will be moving to get started with the phase-in periods. there is a couple areas where the european final rules are not in line with the basel standards. a couple we have heard about from commenters are treatment of credit risk and treatment -- risk weight on sovereign debt. the basel committee has a process that involves regulatory capital, comparability of assessment across countries, so both the u.s. and european union will be going through that process now that our final rules are final. we will see what the committee

says about our rules and the european rules. these will be reviewed for the comparability of their rules against the basel standard. >> thank you. i want to follow up on the question and april's answer, particularly with respect to the residential mortgages. as you explained, the final rule is not making any change in current residential mortgage risk weight. is this an area where the complementarity of our capital will make a difference, at least for stress tests banks? won't the adverse scenario and the portfolio's specific stress testing mean there will be a higher capital expectation for those $50 billion and above banks?

>> the stress testing of residential mortgages is very sensitive and we gather a lot of data on the loan level, and we will capture things like loan to value and other characteristics, and it will be a risk-sensitive calculation. we're giving up risk sensitivity in the changes we are making to the final rule, but we have retained a lot of risk sensitivity to the supervisory stressed testing. >> thanks. >> i would like to commend the staff for the intensive work on this final regulatory capital rule. i would like to thank the fdic and the occ for their participation in what has been a long and challenging process. i am pleased to say the efforts have culminated in a set of decisions now reflected in this final rule. this rule appears to be an improvement and reflects the comments.

while i applaud the work reflected in the final capital rules, we should not pretend that these are a panacea to the development and the mitigation of all financial crises. capital is a very important indicator of a bank's ability to turn to hedge shareholders for significant losses before they implicate the insurance fund or taxpayer resources. capital is one measure of the resilience to losses to much of the value of financial assets. but as was experienced during the financial crisis, capital can be quickly eroded and risk weights are imperfect. a bank can quickly defend into a failing mode. before capital is eroded, before capital plans are triggered, and before liquidation authority is

indicated, supervisory safeguards play an early and necessary role in slowing a bank's dissent into failure. such supervisory safeguards are meant to assure that banks are able to identify and correct their own emerging risk through good governance and appropriate risk management. capital requirements do not compensate for good governance and appropriate risk management. as we know, the federal reserve and the prudential banking regulators do not regulate the entire financial system. these regulatory capital rules do not apply to the entire system. this is all to say that strong levels of capital are necessary that are not sufficient as a feature of an overall regime of prudential supervision. my questions to you this morning are all about how these final capital rules have been tailored to fit within the broader framework of prudential supervision.

an optimal framework of supervision must have requirements that are capable of being understood by the banks, who have to comply with them, by the examiners, who have to examine for them, and by the public, which ultimately must trust them. balanced against these features is the simultaneous need to not unduly constrain a bank's ability in engaging in financial mediation, particularly in communities that are stressed or with less competitive alternatives. my first question is, it looks as if the complexities of the proposed capital rules have been reduced for community banks, as compared to what was proposed. i would like to hear you explain whether it would be possible for banks to implement these rules without requiring them to engage in time-consuming extra research.

>> so, yes, i think as governor duke mentioned, we are engaging in several different means of outreach to help community banks understand the rules. we are putting out today a guide that is the basis for the most standard community banks that do not engage in foreign transactions, more exotic exposures. on one page are what are the most important changes. i would anticipate going forward some other outreach documents that are more detailed that help a bank understand what it is changing. we will propose regulatory reports rules, and that is what many banks use to walk through the steps in the calculations. -- and calculations.

this will be coming out for public comment soon as well. in addition we will do outreach to our examiners and banking organizations, again with an educational focus as well as standing ready to answer their questions. >> [indiscernible] they will have to be able to first check the capital cap-- calculations of the bank's numbers and then the examiners will figure out what lies behind the ratios that resulted from the capital calculations and then determine what condition the bank may be in by virtue of the ratios. the ratios might bear no resemblance to what appears to be occurring in the bank, or the ratios could be masking emerging problems, and examiners will need to understand what the emerging problems might be. in short, examiners need to synthesize the capital calculations into their determinations of safety and soundness and financial stability. for this reason, examiners have to figure out how to pierce the complexity that is more suited

to economists and modelers. however much risk weights and capital ratios can add, the information that they yield will never be perfect. as precise as these capital weights become, examiners will still make decisions with limited certainty about the outcomes. at the end of the day, there will still be rogue traders, viruses that infect software, and, sadly, there will still be sloppy bank management practices. my questions about this are these -- how do we assure that the final capital framework preserves the ability for examiners to make these determinations? does the final rule abandon protocols for using prompt- corrective action? if not, what efforts were made to align the prompt-corrective action designations with the capital requirements to clarify

that the implications associated with the various pca thresholds need addressed? >> the changes to the corrective action framework has been made to align the framework with the new minimum capital thresholds. and so, the penalties a bank moves through the pca capital categories remains the same, but the thresholds for what constitutes a well-capitalized banking organization has been raised so that the triggers come earlier. there has not been a change to the ability to designate a bank less than well capitalized based on supervisory evaluation. i think the factors you described are very consistent with how bank examiners think about capital and the way it is weighted for supervisory purposes, at the holding company and the depository institutional levels. the regulatory capital ratios are one aspect, not even the

most important aspect to determine if a bank meets the minimums. there is a series of other things that examiners can consider, what is the risk profile of the bank on a more qualitative basis, what are its asset quality trends, what kinds of concentrations and other exposures does it have, and how do those factor into defining its adequacy. for the larger bank holding companies and banks, we have the additional tools of stress testing which provides another piece of information to think about beyond the regulatory capital minimums. what if the overall capital management of the bank and how that evolves over stressful time? i would highlight something that is consistent with our rules, it requires the bank to do its own analysis with regard to the regulatory ratios, how it has enough capital to continue.

>> i wanted to turn to the public trust. the managers of some large financial institutions know how to hide loss exposures that passed through the safety net by transacting in ever-more complicated financial instruments. if a regulatory system tolerates methods of arbitrage and weights -- arbitraging away the weights of capital requirements, such a system itself will encourage an underpricing of risk. we learned from the financial crisis that this underpricing of risk punished investors who accept the more risk than they thought they had bargained for, it punished far worse who were-- borrowers who were overleveraged, and it punished citizens who lost their jobs and homes.

as regulators, we have a duty to understand that risk is fairly priced. i would like to see regulators across the entire system, including those that regulate money markets and derivatives, to make more transparent the risks imposed not only on investors, creditors, and counterparties, but those that passed through to the public. in this regard, i note the draft final rule includes alterative and quantitative disclosure requirements for banking organizations, with $50 billion or more in total consolidated assets for those that are not subject to the advanced approaches, disclosure requirements, and there are these advanced approaches banks which are required to increase the amount of publicly available information about their banks. can you describe these disclosure requirements in more detail? >> sure. as you mentioned, they have both qualitative and quantitative

aspects, and they go through different categories of exposure. the credit, equity exposure, and they ask to describe their risk profile and characteristics as well as their policies for taking on risk and managing that risk. these requirements can be met in a number of different ways to -- since u.s. banking organizations are subject to pretty extensive exposure regimes to the sec and reports and the way that the regime is set up, if one bank can point to and draw together all of the disclosures that make -- meet various requirements and bring them together to the extent they are relevant to meet the disclosure requirements and the rule, and then for more qualitative banks, there will be new requirements for the bank to be explaining to the public its risk profile and its view of itself.

>> i would add the largest banking organizations are the ones where the disclosure issues are the most pressing because of the complexity and the size of those institutions. we have worked internationally to improve disclosure expectations for those companies, so that the financial stability board had a project called the enhanced disclosure test with recommendations on disclosures, which included tracking how risk-weighted assets are changing from one type to the next and giving more granular breakdown about how risk-weighted asset cap allocations are done across classes within companies. we urge organizations to look at those regulations, and there will be follow-up to see how organizations are improving their disclosures. we ought to be able to sustain momentum to have some meaningful improvements in disclosure over the next few years.

>> one final question, having to do with the fact that i think prudential supervision needs to preserve prudent lending, particularly in our nation's most distressed and credit- starved communities, and and in communities where there are competitive alternatives. we want to ensure there is not an unnecessary reduction in credit and economic activity among people and places that have historically had tenuous access to mainstream financial services. i notice in the proposal, and, april, you raised this as well, that risk loans are given a heavy weight, but certain a.d.c. lending done in pursuit of community development is

excluded. my question, what was the rationale for that exclusion? i am thinking this is for the institutions that are community financial institutions, that they should be able to continue to engage in community development lending under that exclusion. was that the intent? >> the community development loans that are excluded are ones that also get other preferential treatments. under the national banking act, so the rationale was just to lineup regulatory treatment for those types of loans across the rules including capital rules. >> thank you. governor stein? >> can you hear me? >> yes, we can. >> i want to add my thanks to the staff who have brought this rule to completion. your work has made a significant

contribution to strengthening the financial system. with all the complexities of the rule, there is a simple idea at the heart of this, that more capital and higher quality capital is perhaps the single best tool we have to insulate taxpayers and the broader economy from shocks to financial intermediaries. there are a lot of moving parts, and we can think of specific things we might have done differently, but the substantial increase in common equity that entails for the banking system represents a major step forward. thanks to all of you. i have just one specific question. it relates to something that governor duke and others have alluded to, the treatment of accumulated other comprehensive income, or aoci. the prior draft version removed the so-called aoci filter that prevents losses on securities

from falling through the regulatory capital. this removal of the filter would result in the afs gains and losses hitting the capital. in the final rule, there is a provision to retain the filter, to keep their capital ratios insulated from afs gains and losses. i think i understand the logic behind this provision. particularly that bears on interest rate risk. >> banks face risk on both sides of the balance sheet. when rates rise, it increases the value of stable deposit franchises and the liability side. if you were to flow through securities, gains, losses to capital, but ignore changes in the value of the liability side, you would be painting a misleading picture and you would introduce what would be spurious

volatility into measures of regulatory capital. that is the motivation for offering relief to smaller banks, where this volatility would be burdensome. i think that makes sense, and i think i understand the logic. the question i have is, if we leave this aoci filter in place, there is no regulatory capital device in place that attempts to capture interest rate risk, as we have seen a good reminder of the fact that interest rates can move around, pretty sharply. the question i have is, what other mechanisms aside from capital regulation, on the supervisory or the stress testing side, do we have or can we used to reassure ourselves that banks are not getting overly exposed to interest rate risk? >> i will take it. you pointed out wisely that the

mixed model, we do not have a full fair value balance sheet, -- we do not actually make calculate changes in the interest rate as they affect deposits. your comment about capital not capturing interest rate risk is only partially correct in that we do not have a standardized way of doing it, but our rules as far back as 15 years ago contemplate that should be measured in the sense of a capital adequacy. more recently, because of the environment, we issued an interest rate advisory to firms where expectations were in this very realm, how they should be adjusting and managing relatively low interest rate risk environments, with the understanding that rates would rise.

we wanted our firms to not be off guard. we outlined some of the expectations we have around --anges in trades and how they interest rates and how they could affect the organizations' capital and their governance. in 2010, we put out a guidance that was received relatively well. in 2012, we put out a series of guidances to address principal concerns raised by banking organizations. in that guidance we went into more detail on the use of the internal models, the appropriate methodologies that one should consider in assessing the impact on capital, as well as the basic things, assumptions about net interest margin projections as well as multiples and interest income. from the overall standpoint, what we are advising firms and

have instructed our staff to do is to continue to be vigilant in pursuit of risk in insurance, but not come up with quantitative adjustments as much. we are incorporating in our q&a's basic assumptions about analysis and what that would do to your portfolio. we have the basis for which we can move forward on this, and our firms are integrating that into practice. it remains to be vigilant as rates change, to follow up with firms as they implement changes to strategy so we do not fall behind. the idea that interest rate risk management is not given as much attention, we are a little bit ahead of the curve in that. our guidance does address the concerns you are highlighting.

>> thank you. >> thank you. >> thank you, mr. chairman. i compliment the staff on bringing this forward for final consideration. i have witnessed the process of careful consideration of comments and lots of thought, thoughtful approaches to the whole project, and i would say the final product seems to be an improved balance between implementing basel 3 and improving and raising capital standards, in a way that avoids unnecessary regulatory burden. in particular, it seems to me this time for us as a reviewing comments and reacting to public thought has resulted in a better balance for smaller institutions that have less access and different business models.

we have reflected their concerns in the final product. an area in which we have received a good deal of comment but have gone ahead as proposed is mortgage servicing assets, and i would ask one question. for mortgage-servicing assets, can you comment on the questions that we had and the comments and concerns that were expressed in the decisions that we are seeing? >> under the proposal, we are maintaining the deductions of these assets from capital. i think the rationale behind it is similar to our current rules, limitations on how many assets can be included in capital, and because of the intangible nature of these assets, there is concern of the ability for a bank to realize the value of these in times of stress.

we do still have strict limitations on the inclusion of mortgage-servicing assets in the final rule. the ideal is service will have a fair transition time in which to adjust for this. there are a handful of firms that add concentrations and will have to adjust their business models to address it. the thought is there is difficulty in realizing the value of these. >> ok, thank you very much. what i would like to do now is ask for positions. we have two issues, one is the broad capital proposal, the other technical amendments to the market risk cap old rule,-- capital rule, and after we hear positions, we will take two votes. let me start. vice-chair, can you hear us? >> can you hear me? >> yes. >> thank you.

i support approval of the proposed final rule on standards and the proposed rulemaking on market risk. i would join others in thanking the staff and the banking supervision for bringing the joint rule making to fruition. [indiscernible] to implement basel 3 is a major accomplishment, and i understand certain community banks around the country are concerned about complexity, regulatory burden, and the potential impact on the cost and availability of credit. we think some of the proposed changes, the rule we are looking at today shows appropriate sensitivity of these concerns.

most important, this proposal raises the quantity and quality of capital regarding banking organizations, large and small, and create the capital conservation buffers so supervisors can act to restrict capital by firms undergoing stress. as the governor noted, it remains an agenda of work to ensure the safety, soundness, and solvability of the largest financial institutions. the crisis showed the need for both capital requirements to include the safety and soundness requirements in the system. those rules are important to this goal. we are told about the uncertainty of the rules of the road that govern their businesses. it has inhibited their

planning and building. i hope the publication of this rule will serve to mitigate uncertainty. >> thank you. >> thank you. i support approval of both the items on our agenda. i believe strengthening capital requirements, including the addition of a capital equity requirement, is an important element of a stable system. due to capital conversation buffers, it is a prudent safeguard for banks. the standardized and advanced approach included in this rule, combined with exercise, and additional comments mandated by dodd-frank create a multidimensional approach to the assessing the adequacy of our largest institutions. at the same time, i think this capital rule will prove to be workable for maintaining the capital strength and community banks tomorrow without unnecessary operational complexity or capital volatility.

the time we took to review the comments we received and assess potential changes to the proposal that would be responsive to concerns are different from those that were proposed. it is time to provide clarity so financial institutions can proceed further strategies. as i read through the lengthy federal register and i realized it is all too easy to discount the hours of hard work that it took to reach this outcome. i want to recognize the staff work that went into achieving such a balanced result. i wanted to thank governor tarullo for his efforts. he has been determined to create a strong capital regime with appropriate incentives got risk -- for risk management and safeguards for arbitrage. this has required him to spend endless hours in discussion and negotiations with counterparts in the international community,

other regulators, and occasionally with me. the product of these negotiations is a strong rule that will promote resiliency, and i am proud to support it. >> thank you. >> thank you. i want to say among the more productive hours i spent in this pursuit are the ones in governor duke's office. i support both of these rules. >> thank you. >> i too want to voice my support. i want to commend the staff for their tireless work and bring-- in bringing this to fruition as well as the work of governor tarullo and the committee. >> thank you. >> i support both items. i wanted to add my thanks again not only to the staff, to

governor tarullo who has been a force of vision and implementation on all of this. again, just offer my support. thank you. >> i support both items. thank you again to staff and governor tarullo. >> i support both items. these are important steps to making our banks safer and for higher-quality capital. i would like to thank the staff for their hard work. i would like to thank governor tarullo, but this really was a board effort. i think it shows in the final product. this will represent an important international commitment that we are fulfilling which will trigger international monitoring and comparisons of the different regimes, which will strengthen the global financial system at the same time.

we have been responsive to lots of domestic concerns, concerns of small banks, and that is a delicate balance that we have managed reasonably well here. this is as the governor pointed out, the beginning or the framework in which more will be done to strengthen our largest and most internationally active -- including looking at the leverage ratios, capital surcharges, senior debts, and holding companies' liquidity, stress tests, so many components which will work together to ensure stronger banks. my final comment is that it is good to have rules out there in black and white, but ultimately the implementation by the banks, by the examiners, and by us here at the board will be critical. we will need to make sure the risk models are safe and there

are adequate safeguards to make sure they are adequately capturing risk. we will need to develop capability to assess risk as we were doing in the context of the stress tests. we will need to strengthen our supervision and our examination to adequately make use of this new framework, and as the governor mentioned, disclosures will be important so the public can understand what the capital standards are, how they are applied to individual institutions. we have learned through our stress testing that effective disclosures is an important mechanism for increasing confidence in our banking system. i am pleased to support these measures. could i have a motion to pass the final regulatory capital proposal? >> moved. >> all in favor, please say aye.

>> aye. >> are there any nos? any extensions? thank you. i need a proposal for the risk capital rule? all in favor? any opposed? any extensions? both measures passed unanimously. i thank the board for their work and participation. the meeting is adjourned. [captioning performed bynational captioning institute] [captions copyright nationalcable satellite corp. 2013]

>> we will have more on the u.s. economy in just a moment. first a look at the situation in egypt, where a former diplomat has been named as the interim prime minister three days after the military moved president mohamed morsi from power and suspended the constitution after mass protests against his government. thes the former director of u.n. nuclear watchdog group, the international atomic energy agency. he was on a team that brokered a peace treaty between egypt and israel at camp david in 1978. he is a noble peace laureate. tomorrow's "washington journal" we will discuss recent developments in egypt.

the political and historic perspective of the country. we will also talk with marilyn werber serafini about the federal health care law. that the obama administration it would delay recently. elizabeth rosenthal talked about maternity costs in the u.s. at 7:00hat will be live a.m. eastern on "washington journal." and now more on the u.s. economy, monetary policy. jeremy stein spoke at the council on foreign relations last week for about 50 minutes. >> good morning. i'm the professor of economics at columbia. it is a thrill to be here to moderate the session with the federal reserve governor jeremy stein. it is part of the cfr's series on international economics. it is on the record.

a brief bio on our speaker, i have known jeremy for years. he has been a member of the federal reserve board since may of 2012. prior to that he was a professor of economics and finance at harvard university. also, a senior adviser to the secretary of treasury and the national economic council in 2009. he has had many recognitions in his career and is widely regarded as one if not the leading scholar in the intersection between finance and macroeconomics, president of the .merican finance association without further ado, i will now turn it over to governor stein. you will begin with some remarks. we will then have a conversation and have plenty of time for question-and-answer. thank you. [applause]

>> thanks very much. it's a pleasure for me to be here at the council and i look forward to our conversation. i thought it would start with beef or marks on the current state of play in monetary policy -- brief remarks on the current state of play in military policy policy.netary there has been a lot of discussion about recent changes in ar communication vote, formal fomc statement, in chairman bernanke's press conference following the meeting. i would like to offer my take on these changes as well as my thoughts on where we might go from here. let me give the usual caveats. what i'm going to say, i am speaking for myself. my views are not necessarily shared by anyone else on the fomc. it is useful to take a step back and start by talking about the design and conception of this

round of asset purchases. -- the firstof it is, it was designed to beast -- be flow based and state contingent. the second, in contrast to the forward guidance we have been giving with the federal funds rate, we chose at the outset not to put a concrete articulation on what substantial improvement meant. we did not put a numerical threshold. on the one hand, the program was designed to be data dependent. we did not spell out the nature of the data dependence in a formulaic way. to be clear, i think that was the sensible thing to do and made a lot of sense, particularly at the outset. it would have been hard at the beginning to predict with any confidence how long it would

have taken to reach any given milestone. back then at 8.1, how long would it have taken to get to 7% unemployment? there was a large standard error about that. as time passes, the balance sheet is growing. i think it was a reasonable -- it was prudent to preserve flexibility. the flipside is of maintaining that flexibility, we provided to you, to the market, less specific information about the nature of our reaction function on the asset purchase side. it made sense on the other, with the funds rate you give the concrete guidance, you're not accumulating a stock of -- might beat i be [inaudible] things are improving.

the unemployment rate was 8.1% when we started, trailing nonfarm payroll growth over the prior six months was just under 100,000. 97,000. now we are at if you look at our forecast going forward, back then in september, the forecast for year end 2014 was for the 3.75. yment rate to be this is the forecast made by the fomc members. now that forecast has come down .5%. so clearly, there has been some progress. it is difficult to do the atri bution but our policy has played some supportive role in that

improvement. one thing i point to is in areas that are typically responsive to monetary combination, housing markets, autos and so forth. it also brings various costs and risks. i'm concerned about the risk versus the financial stability. the fact that we made progress in some sense, has brought to the floor communications issues because clearly the further down the road you get, the closer you get to the end. you need to know what the conditions are going to be that will lead you to wrap up the program. that is the context that i think the message should be. i look at the bernanke's remarks

a as we an tis patriot the purchases will wrap up when unemployment falls to 7% range. that is to put more specificity around the less defined notion of substantial progress. now, it's important to stress the added clarity is not a atement of unconditional optimism. rather involve the subtle change that the data changes are implemented it is a greater willingness that we will know it when we see it. i think that is a natural revolution. as we make progress to our objectives, the balance of the tradeoff will shift from wanting to maintain flexibility as we get closer. we have less balance sheet uncertainty, essentially, about

how long it will take, how much we have to accumulate to get to a given end point than we did back in september. so the balance sheet uncertainty is more manageable at the same time the market's demand for specificity goes up. market participants are also interested to know or eager to know about the conditions that will govern interim adjustments to the purchases. the decisions are data dependent but something i would like to meetingas we approach a it is appropriate to give heavy weight to the stock of progress we made and not be too sensitive to the near-term momentum captured by the last payroll number that comes in before a particular meeting. first, this reflects -- you

don't want to put too much weight on one two or noisy observation bus there is more than that. not only do our actions shape market expectations, our market expectations influence fomc actions. it is difficult through the committee to take an action through the meeting and we don't want to create a lot of market volatility. once you recognize there is a two-way feedback an initial per evings that noisy -- erception that the noisy reaction. so the effort to make reliable judgments about the state of the economy as well as reduce the adverse feedback move. the best approach for the committee is to be clear on the

proposition when we're making a decision, say september, we're going to give primary weight to the accumulated weight of stock -- ws and not be flinesed influence by whatever data comes in weeks before the meeting. now, let me em pa size this does not mean we're going to -- it doesn't bheern going to abandon the premises of the program as a whole. even if a day that release comes in september and it doesn't overly color the decision to make an adjustment in september, that data remains valid for the remainder of the program. the further data in october, november, since we have, in some sense, a fixed end point goal. if the news is weak, the program will be extended further even if ere is an a adjustment based

on the data. it takes a lot of the heat out of the exact -- whoops. takes a lot of heat out of the pace in which we do it because this is clarity we're trying to provide to the market. if you have a better sense of where we're going, the speed that we're driving when we pass chicago becomes a little bit less important. in sum, i think there's key principles for effective communication. we need to eaffirm that the prom s effectively data-dependent program. second, give million clarity on the type of data that will demonstrator the end point of the program. third, when we make adjustments, as we will, those adjustments

should be made on the basis of accumulative progreans not overemphasize the most recent momentum in the data. all of that is about asset purchases with respect to the deral funds rate, we had explicit guideance and it standings and we have reaffirmed it and other members have reaffirmed that in repeat days. we have a 6.5 threshold, that is when we will first consider a first increase in the federal funds rate. as chairman bernanke has emphasizesed -- emphasized that gives us flexibility to react to the incoming data. if the data is softer, it would be natural for us to extend the eriod.

now, of course, there are limits of what you can do even with good communications in terms of market volatility. i think the best that the fomc can do is help market participants understand how we're going to make decisions about the policy fundamentals that the fomc controls. that is to say the path of the short rate and the total stock of assets that we're going to purchase. a perspective that is useful to keep in mind, this recurs in academic finance is if you look at varyability in asset prices, long-term bonds, you can only explain relatively small fraction by appealing to changes in fundamentals. this is robert schiller many years ago that you can only

explain varyability in stock -- es by changes in divided dividends. the bulk comes from changes in discount rates, which is an essentially the fancy way of saying stuff we don't understand. t could be changes in risk diversion, levering, delevering, people having to sell, market dynamics broadly speaking. such as a general statement but it remind you that it doesn't make sense when faced with a large priles move. it doesn't say to say i can explain that based on a particular set of fundamentals. what was the change in expectations of path of policy is necessarily the right way to think about it. we've seen significant increases

in the treasury yield, i think it is mistake to infer there must be a big change in policy fundamentals. just to be specific, nothing we have said suggest a change in our reaction function for the path of the short-temple policy rate. we've been explicit function that the 6.5% threshold stands. even with respect to the asset purchase program, if you think about the clarity we put around it my personal reading of it, it puts us close to where market expectations were before. we look at the primary dealer surveys and others, a program that sort of -- the scenario we're envisionings in wrapping up around the 7% unemployment rate seems in line with market expectations. hi wouldn't fry to back out the market moves that there has been a substantial change in policy.

i don't mean to suggest that the market movements should be dismisseded a noise. i think they teach us as the market and how our communication policy interacts with that. the only point i'm making, if businesses and customers are looking to market prices they should take care not to over interpret the market move. so we've attempted to provide more clarity about the nature of our reaction function but i want to stress, i do the underline fundamentals stance of being broadly unchanged. thanks very much. i look forward to the conversation. thank you. [applause]

>> ok, jeremy, thank you very much you covered a lot of ground there. i want to give our audience plenty of time to ask you questions. i think i will focus on two or three points at the outset. one of the things you mentioned toward the end of your opening remark is that reaction of markets provide you with information that you were learning about. one thing that occurred to me is there is a big discussion about the stock versus flow effect of q.e. has the reaction taught you or the fomc any information about the stock versus flow argument? >> that is an interesting question. you hear all the time that market folks say flows matter more than stocks. think is certainly right. i think it is right -- flows do matter to some extent that has

some truth. when i hear flows, i'm not thinking narrowly of just the flows of our purchases but flows related to redemptions from open end funds and things like that. i think it is more. it would be hard to say, well, we had a surprise that was not a surprise about stock but a surprise -- i don't think there was a big surprise about the stock or the flow. so there is something going on that is not the stock or flow of our stuff that could be flow related. i would be more inclined to think of it has market type flow of the stock. you mentioned, the 7% guidance, which was the first time the fed gave us a number for substantial improvement in the labor market. the chairman spent less time last week talking about

inflation. of course, as you know, nflation is running well below 2% now. does that convey any information about your or the board's thinking about the relative ways that it is receiving right now? >> i think inflation is central to what we do, central to our mandate. i'll say something about the inflation forecast in just a sec. but something that may be stressed more than our forecast is the central data dependence of everything we do in ferms of the asset purchases and the tweard guidance. i think the chmerkovskiy -- forward guidance. when we think about the sequestrations that will enter

in a way. the likelihood that we'll raid the funds rate around 6:5 is going to be lower. >> you mentioned that today. on the fed's websites, jeremy has given a number of speeches, at least in the last several onths, that is excellent overviews. there are those who interpret the chairman's comments and the board's decision last week as being, in part, influenced by your work in terms of potential excess es being in market. would you like to discuss that? >> i would be happy to discuss my stuff but to focus -- i think the sequestration that was made at the recent meeting was first

and almost entirely a decision about clarity. as i said, i don't think it was an effort to change the stance of monetary policy. as we move forward in time it was not acceptable to leave unanswered or put no color around what improvement means. i think the focus was on trying to -- how the market was going to react? there's a set of issues but i can tell you with some confidence and i'm obsessed with these issues. i was not thinking this will move asset prices. the goal was participants need to understand what substantialle improvement is. >> understood. you mentioned and myself have been thinking a these issues as well, the two-way interplay between policy

reaction and the concerns about issues. self-fulfilling i haven't heard anyone else mention it, in the way of mentioning the accumulative evidence. i think that is a new thought here could you perhaps elaborate on the merit of that. >> one thing that i think is counterproductive -- let me step back. i think we've done a lot by putting clarity around the end point. i think that helps a lot. in the world where there is no clear end point. when we say substantial progress, different people have different meanings of that. maybe market participants are thinking what is the fed looking at? maybe they are looking at the latest job numbers. maybe they are looking at number like 200,000.

maybe that is not how we're thinking about it but that is thousand market is thinking about it. not 200,000, it is 175,000. i think once you have pinned down -- once you articulated the end point better, it takes the heat off any particular meeting. before we did not act in september or december, the market was in some sense free to draw the conjecture. that is x am of billion dollars f asset purchases. the total scale of the proom has a tighter connection to economic fundamentals. i think there's a desire to minimize or reduce speculative stuff that is around, you know,

guessing the mark. >> one point, which may sound a bit technical, i think it is relevant here. i think it was december 2012, 2.5 thresholds were introduced. that appeared in the fomc statement. in this context the % number appeared in the chairman's press conference. should we infer anything from that? >> i think the one thing you should infer, it reflects to which the fomc was thinking about this not as a change in policy. we have the same essential policy as before and we're trying to clarify a little bit what substantial improvement means and the press conference was the natural first venue

where the chairman can explain. it's a little dell kate because i don't think we -- delicate because we don't want it to be held as the formula. on the one hand, provide more clarity but not be here's the equation and % unemployment divided by the square root of the labor market. it is the labor market condition you might want to have but that means other things will be in line with it. it is not 7% on the back of weak labor force participant or weak g.d.p. growth. so being able to mutt some color around it -- to put some color around it seemed like a sensible way to proceed. >> one more question from men there's different flavors of fed guy dense -- guideance. the fed introduced what is

alled calendar date guideance. any thinking on your part or the fomc's about the relative advantages or disadvantages of call len did he recall date guideance versus what you have laid out here clearly today? >> i think we learned calendar guideance is a natural first place to turn. it is clear, it is unconditional. we learned as we were going the limitations. because it's unconditional, how strongly can you say we're going 2014, when it has to depend -- you want to put more force behind the statement it has to be data dependent in

some ways. i think the evolutionary inking it is better to build contingency rather than have a flat thing. when the chairman spoke, he said if we meet the 7% mark in the middle of 2014 but he's not putting a date on it. he says if the data things works out that might be where it winds up. we've been very sensitized to put a fixed calendar date. >> i think it's time for questions from the audience. >> an observation and a question. both you this morning and chairman bernanke played with the language a little bit. the committee has spoken about the outlook for the labor market

improving, which would refer to the committee's forecast. the forecast has improved since last september as you alluded to. so the shift of the 7% number or something like that is actually moving from a forecast, that is the committee's long range to a point in time, a point number. i leave that for you as the backdrop to ask you, putting aside if it is calendar based, is forward guideance here to stay? are we going to go back to bankers commenting about the world they see in front of them or is forward guideance commenting about data in the future and going to be with us or are we going to exit from forward guideance? >> that's a very good question. the only i think i would try to unpack a little bit is the

transparency aspect ver souse how far forward aspect. i hope the transparency aspect is with us to stay. some aspects after forward guideance was designed to deal with other problems. we could lower the funds rate, one way to do that is to talk a what is going to happen in a year or two years. there's an element of commit to hat. as we move away from the lower bound, the transparency is still there, the idea that you're always going to be saying here's where the funds rate or suggesting where the funds rate will be two years hence. that is an optimal thing to do when you have room to maneuver on two sides. so that part, i think -- as the

committee has been clear is sort an attempt to deal with the special times to deal with the lower bound. >> thank you. i like your comments on alternative interpretation. the forecast on the short term interest 2%, which is the fonc forecast as well. is it possible that all of a sudden the markets realize that after the events of mid-may that eventually it needs to reach that and that explains the market's reaction? at the beginning of may it was around 40 basis points and it has to reach 300 because points on the 30 year. >> this is a challenge, which is

-- that is a reasonable statement about eventually. what we understand less well, why did the change happen when it happened? it's easier to say, oh, yeah, this is where fundamentals should be. as i was trying to stress before, it is hard to explain based on fundamentals is, you know, the size of the change, not the level, but the size of the change relative to the amount of news that was news about the path of policy. i would submit based on my understanding, the news released about the path of policy was small, essentially. we basically reaffirmed the policy. prices changed a lot. why they changed a lot now, union, maybe people -- markets converged around a new thing maybe it has to do with flose and so forth. it is not a sufficient

explanation to say the rate will have to wind up there. jpmorgan. ang from i'm wonderinging what your think song regulatory reform on market conditions and market dynamics and how you're viewing the current market conditions and the longer term implications are. >> there's a lot of a spects to regulatory reform so there has been a lot of work. for example, one of the things at has been given a lot of attention with equity regulation, what is that going to do? we have quantitative impact

studies. you're asking, i guess about the kind of thing we hear about, which has to do with liquidity in the market now and whether flose have a bigger effect on market prices. it is true and it seems to be true that dealer balance sheets are smaller than they are in the market prices. it may well be -- i haven't seen niddah that that makes a tight onnection to that. it's something we're paying attention to it. >> good morning. would you help us understand the economic difference -- not the legal one but the economic distinction between the private manipulation and the public manipulation of markets?

whatever happened to the price america nifplg? -- price mechanism? >> i don't see a connection between them whatsoever. there's a set of criminal activity, which is a very substantial concern. a lot of effort is going to go into try to reform it, look at other benchmarks. that's a whole set of issues to be frank i don't see a cob next to that with the monetary olicy. >> thank you. first of all, an observation. you speak with remarkable clarity for an economists. >> i don't know how to take

that. >> that's a compliment. the question is this, you talk about the unemployment rate as being an important data point in policy formulation. but the unemployment rate -- the employment rate has two components. there's a lot of commentary that frequently it does not take into account the number of people who have dropped out of the labor force. another way of saying 7% unemployment rate is n one economy may be very different than the 7% unemployment rate in another economy. how do you take that into account? >> that's a great question. the chairman and his press conference have talked about 7% as a goal. i think it is indicative for the reasons -- on the one hand, we ould like some ability to have

specificity. it's a desire to have some specificity and maybe the unemployment rate is as good as any single number we could come up with. we recognize it's not a perfect summary statistic. the spirit behind it is tide up with what you -- tied up with what you said. if it is 7% that gets there because of a move in the labor force participation rate, that is not what we're looking for. it's an atevert to provide clarity. i don't think you want to -- it's an attempt to provide clarity.

>> has the committee ever measured how good it is as a forecaster? how good it is at forecasting economic and inflation? >> i'm not sure the committee has. i'm aware vaguely of academic studies that are done and i'll take a guess, which is not accurate. i realize i'm on the record. let's a certain horizon, call it a year or two, my guess is the fed -- as talented as the staff is, does not out forecast other collection of private forecasters. the awareness of that limitation is central to the way we think about policy. that's why we do thing nas data dependent way. you have to make a forecast to think about what you're doing

but we recognize -- the staff is unbelievable good about showing them.e error bands around when we talk about why did we ove away from calendar guide eaps it is an appreciate of exactly this thing. we all have to do this. we each have to write down a forecast every quarter and see how wrong we are going forward. but we understand that problem and that's the reason we're trying to be data dependent. >> governor stein you have spoken a lot about financial state. i want to talk about how we're driving and if we passed chicago yet. you said that we're making

progress in the too-big-too-fail but we're not satisfied in that yet. what would make you satisfied? how important is that to the roader substantials and is there other financial reforms? >> on the too big to fail fale, my view is two-fold. i think we made meaningful progress. in fact, i think we just made public that we're going to have an open board meeting to talk about the final rule. if you think about the collection of things that has , the surcharge, stress testing, that is quite meaningful stuff as you know better than i do in terms of the

capital position of the largest financial institutions. more resolution work is the idea, making large institution resolveable under title ii and we have been working around having a debt requirement that will facilitate all of that. i want to be mindful and appreciative of the progress that had been made. my own view, i would not characterize as saying job done, we're finished, we should be satisfied where we are. i think there's a further road to go on large institutions. part of this is because, you now, people talk about the too-big-too-fail subsidies, i think bloomberg had a number. i think that is part of the debate. i think it gets more attention

than it should. even if there was no too-big-too-fail subsidy, even if we're committed committed as we should, there is no rule that too-big-too-fail that will spill over. i think we want to get to a place where we feel like capital and the other stuff that goes with it is sufficient to, sustain the spillover. considering open to doing more. maybe that will take the form of a capital surcharge or something like that. but that should be on the table. we should not be in a mode that we're done. what happens aside from all of that? i think you make a great point,

nce you get too focused on the job is institutions, the done. as you know, an important part of the crisis was short problems associated with funding anywhere in the system. the if we totally stabilize large institutionings interest -- d be runs anywhere you repo funding, you know, with ill liquid poe siss. some of that stuff lives in the broker firms but it transcends. the very important round of work we have to do will move to center stage is going to be dealing with short term wholesale funding in a co-inherent way as opposed to where does it reside in the

bigger institutions? you have given us the blueprint for the next year's worth of work. >> next question. right there. >> nancy, i'm not an economist so i may have missed something along the way. but your remark are positive but i don't see where the growth is going to come from. china is not going well, brazil is not doing well, europe is not doing well. so where is the growth coming from? >> i will by you my take. we maybe too optimistic and you may be right. the policy will be data dependent if the growth doesn't come the purchases will go on longer. if i have to tell you a story why things will be better or somewhat better going forward,

we've had now this past -- we're averaging around 2% growth. a lot of the head winds we saw before, europe and others have dissipated. we're running strongly into strong fiscal restraint this year. between the change that were made at the beginning of the year with the phase out of the bush tax cuts and the sequester, estimates are on the order of 1.5% g.d.p. of head wind coming from tax. so the fact that we have, whatever, call it 2% growth against the head wind and we know that will dissipate over the coming year suggest that if you do an adjustment and you see the underlining strength in the economy. the housing market is clearly stronger than it was a year ago and this spills over to other customer behavior, the autos. the customer generally seems to be showing some signs of

strength. think we're goinged to do it internally in the face of the external stuff. we may not. we may disappoint then the olicy will have to be adjusted accordingly. > right there. >> i'm a retired portfolio manager. i was wondering if you could explain how asset purchases are helping small business. i live in a city, new york, made up up of small business. they are dependent on savings more than going to a bank for a loan. so when interest rates are, you know, 0%, very hard to increase your savings. i wonder, if low interest

rates are destroying our savings. > there's clearly of effect on savers. people wear many hats. many of the same people who are putting their money into a c.d. at the bearching not earning a high interest rate are also borrowing to buy a house, buy a car, all that kind of stuff. e basic hope is that the stimulus is running through those sectors and that builds a stronger economy and the demand, you know, you see as housing goes up so do all the tishries goes up with the housing and the plumbing and furniture, and a lot of that is small business. i think, you know, as you look

at the totality of the economy, one would hope that you're lifting up small business as well. >> i'm going to invoke moderator rerogative and ask you a question. al distinguished career now, policymaker, what has been the biggest surprise to you in making the transition? >> many. you know, maybe i under appreciate -- not they didn't appreciate but under appreciate the inner disciplinary aspect of it. it made me wish that i went to law school and spent time in politics and all of that, especially on the regulatory side. i came in and a lot of my own research was on banking regulation and i thought that would be easier for me. when you think of regulation,

not in theory but practice, it s deeply legal and has inner agency negotiation, that is new to me. i'm scrambling to come up the learning curve. i've been surprised how much i've been scrambling to come the learning curve. that is one of many. point, as a ed faculty member you're on committees. tell us about the dynamics of monetary policy by committee. >> one of my big successes was avoiding committee. you try to hide under the desk. i really appreciate the process. i mean, you've got to go into this with a view that individual people are going to have strong opinions about stuff and there's going to be collective wisdom

that comes out of it. i think i've been impressed by that part of it. >> interesting. time for one more. right there. and then we'll finish right on time. >> so you have been, i guess, as a cost discusser of the q.e. yesterday a colleague in his speech, highlighted that in early april, we were at levels financial markets and it is -- [unintelligible] within two paragraphs he gave strong language guiding interest rates in the front end and it brought policy expectations down. to some extent, this notion of the accumulative evidence, very appropriate, talking volatility,

but at some point, are you trying to have it both ways with the market? trying to talk down the market with the policy expectations? talk down the market with volatility? but then asking for a reasonable amount of risk premium being intro introduced like high-yield bonds? >> my understanding of what we were trying to accomplish at this meeting was about, kind of clarity around the nature of the large-scale asset purchase program. it was not about manipulate volatility or do something to the level of asset prices. let me clarify why i think that is the case. i have strong views about financial stableability. what i meant to say and what i believe, i do believe that in a general monetary policy frames

work, it belongs in the framework. one should think about what are the consequences? physical i'm just thinking should i raise the funds rate or lower the funds rate? the consequences belong in my view, i think that is part of the dual mandate. we care about output and employment. we care about varyability. f i thought about lowering the varyability, then that belongs in the decision. i meant that as a general about the framework. take that framework to the today's environment. maybe there's a tradeoff that more policy is helpful, obviously, on the usual ground but it creates financial stability. you have to do the tradeoff. we're very far from our

objective on the unemployment rate or the labor market more generally. when you do the trade off and you do it under today's condition, i think the trade off comes down to one in which you want to be accommodated. i think we have the -- here's the way to say it. if funds it a rate goes lower, we would have it at minus 2. we're going to be at zero either way. you can believe it is important think about this in the general framework and we shouldn't get lazy and dismiss it. when we get closer to full employment the balance might tilt. again, i think the goal this time around was to clarify the policy as opposed to mod late it left or right. >> ok, i think on that note we

will conclude to stay on time. jeremy, thank you so much. [applause] >> we talked more about the u.s. economy, the june jobs report and the 7le.6% unemployment rate on this morning's "washington journal." you can find all of this on our website at c-span.org. on newsmakers the new president of the american medical association talks about implementing the affordable care act, the doctor shortage, and her priorities as a.m.a. president. newsmakers on c-span sunday 10:00 a.m. and 6:00 p.m. eastern. barbara mikulski.

she toured the national weather forecaster last week. his is about 35 minutes. >> good morning. i'm dr. louis uccellini. irst, i want to welcome you to noaa. i'm thrilled this new forecastering facility can host such a visit. just to emphasize this is the central core of the national weather service. especially, this is where what

you read, see, and hear about weather climate starts here. it doesn't end here but it starts here for the larger enterprise. we're here to showcase how the national weather service provides the foundation and works towards obtaining the weather information. joining me today we have senator barbara mikulski, kathryn sullivan and brian norcross. thank you for being here. i would like to start this discussion by saying i'm excited for the changes that will take place and pra what it means to protect life and property across the entire country. we're about to begin remarkable upgrades beginning with the

three-fold increase with computing power by the end of this year and a 10-fold increase by the calendar year of 2014. we'll have greater advances beyond that. we'll be running high resolution models across the whole speck strum and producing more accurate warnings across the country. with more sophisticated models, decision makers across the country will have more dependable information provided early to convey potential threats. i could discuss the changes all day, i will be happy to take questions later. our my pleasure to panelists . >> it was great to tour noaa and to meet our team of experts.

this is my first of several stops in the region. it's a particular honor to be here with chairwoman mikulski. she is someone i deeply admire for her long-standing service to the people of congress. the people of maryland are fortunate to have you representing them in washington. the name of this facility says it all. every day noaa and the national weather service scientists and meteorologist analyze billions of piece of data. they issue highly accurate forecasts that are essential information for each of us and our businesses. we use this information throughout our day to plan our vacations, to keep our families out of harm's way. make no mistake, this center

saves lives. as well, these forecasts help our businesses continue to ,perate and move goods smoothly as smoothly as possible throughout the supply chain of america. these forecasts also help americans who work in sectors like real estate development, helping them to choose where to place a new building, a new property like this. so the work that happens here is also crucial to keeping our economy going. this center is also an important hub of innovation. entrepreneurs and business leaders come here to discover new products and technology. we need their partnership as we build a weather-ready nation. when the federal government builds a state-of-the-art facility like this, we have a

responsibility maximize its possibly. .e want to see -- potential also, we an to see more students come here for an education, hands-on training, internships and more. we want to spark their imaginations. we want to give them skills in their career. we want to plant the seed that public service at a place like noaa could be part of their uture. we monitor and predict climate changes, another part of what noaa does. president obama em pa far sized climate change last week in a major speech. slowing if effects of climate change is crucial to ensure a bright, healthy future for the next generation. as the president said we need an

all of the above approach to energy to cut carbon pollution. part of the solution is both the public and the private sectors to continue to develop break-throughs in things like clean energy. these break-throughs will help outcompete in the energy sector. we also flood too on the ground work to help communities as they face the effects of climate change, which are already of evident in some of the major coastal areas. noaa is at the forefront to helping these communities for the long term. we're providing tools and expertise to help them and respond to issues like drought, sea level rise, flooding, and more. we must all be working together to ensure a healthy planet and provide a bright future for our children. it is clear that our president

understands this and leaders like chairwoman mikulski understands it too. she understands our environment, our way of life, and our overall prosperity are increasingly tied together. she knows why work here rat noaa is important to people here in maryland and all americans. it is an honor to be here with you chairwoman mikulski. thank you. >> good morning, everybody. i'm delighted to be here at the weather forecasting center where maryland is the epicenter for broadcasting, weather forecast to the nation and to the world. it is here that the facility that we gather the information,

-- process says the the information and send it throughout the world. there are tracking devices four satellites, our eyes in the sky, they are looking out over our weather in our own country and in the world, shooting -- gathering that data there and shooting it over here to this wonderful campus where we're processing the data to our computer networks, our talented people using the best science and mathematical models then getting it out to 122 weather atecast offices and to media local radio, and tv stations, and of course, to the weather channel. it is one of the most watched channels in america. we're so excited that maryland is the epicenter to be able to

do that. because we feel that one of the most important jobs that you're government can do is help people save lives and save property. that is why we need accurate weather forecast. now, i was here, as the senator from maryland during the great hurricane sandy. as it moved up the area and i looked at the computers, saw people working 24/7 to give governors, ordinary citizens, day care moms, and so on, the best information. governor chistty and governor o'malley were able to know how to deploy and what to do to protect their people, we were watching this. as we looked at the computers, there were two different models. there was the american model and there was the european model. the europe requestian model said

that -- european model said that we were going in the same direction until we reached a critical point. e european model was faster, had more accuracy in hindsight than ours. as i was working on the money to put the federal money into the federal checkbook to deal with the ravages of the hurricane sandy, to make sure we could work with our governors up and down the east coast. i said you know, what we love the europeans. they are great nato allies but i will be darned if they are going to have a better weather model than the united states of america. i rallied my colleagues on a bipartisan basis and put money in the federal checkbook to come up with the capacity to have a new american model that will be

the fastest, the most accurate, the greatest resolution of anywhere facility in the world. we are in the olympics of the weather. -- workingg to have on a bipartisan basis, we came up with over $50 million as a significant down payment to bring the supercomputer model that will be right here doing , where we haves the right science, we will have a computer that enables us to be able to tell her citizens and even predict to the world what that is. i thought that was a phenomenal accomplishment. we are rebuilding america after , whether it is

the beaches of new jersey, or ocean city, new jersey, or ocean city, maryland, we are all americans together. whether you are along the east coast, whether you are in new orleans, whether we are looking with thend of models , weible fires in arizona need to have the best projection. that puts money in the federal checkbook. i believe that america governs best we can do a bipartisan. support.artisan we were putting money in the federal check look to make the down payment. i will be moving the federal

budget for the weather service and i can assure you we are going to make every effort and a modernizeed way to our capacity to be able to have the best computer prediction model with the best workforce. we will do all that we can to prevent another sequester to be able to do that. this is what we feel we need to be able to defend america. whether you are predicting storms, whether you are predicting the derecho. most of all, saving livelihoods. plan ifnable people to they see the storms coming in their direction. their businesses will be able to plan, governors will be able to plan. onrica's commerce depends

good weather prediction. if your ship is at sea, you need to know the weather. if you are deploying your aircraft, how many of you have been grounded because of the weather? you need to be able to predict, should you even go to the airport at all? america's commerce depends on the weather. what is so great about our oaa service ist n government and operated. we have one of the greatest ways of doing that. we work with the private sector. local radio stations, local tv stations, and the weather channel. when people watch the weather channel, they are getting their information from noaa. i would like to introduce one of the really great people from the

weather channel. fantastic hurricane specialist. brian, as you come up here, i want to thank the for her first public appearance as secretary of commerce to come here to know -- noaa. fornables the functioning the commerce to continue, whether it is international, national, or local. dr. kathy sullivan, administrator. there is a charismatic hersen who runs this -- person who runs this, the intrepid, unflappable. years devoted almost 30 to the weather service. he has won every award. he does not seek awards.

he seeks to make sure we can make the right predictions at the right time to save lives. i would like to give the team around of applause and bring brian up. [applause] >> i think i am good. thank you very much. thank you for having us here. on behalf of the weather channel, it is wonderful to see this magnificent facility. this really is the center of the fundamental and foundational lays in theaa national forecast business. 18 years ago, i testified before the governmental affairs committee.

the discussion was about characterizing the role in the privatepartner -- public- partnership. i said in that testimony and it is even more true today that the satellites, radar, data, and the professionals who work in the building, they are the foundation of the entire whether enterprise. -- weather enterprise. without this operation, everything that we do would not be possible. noaa, the weather channel and private enterprise and researchers would not be able to add value to this work and would not be able to customize and to create the products that we do to do business in the business.

the mission to protect life and property and to enhance the national economy, it becomes even more critical for us. weatherrship with the channel and other businesses in the industry and the academic community all come together to build the most robust weather system in the world. if we are going to continue to do this, we need a strong noaa and a strong private industry so that we can meet the challenges of a changing world as we unravel and communicate to the american public what they need to know so that we can be a climate ready nation. of theou on behalf weather channel. it is a pleasure to be here. brian, for giving us perspective on the private side. count, add that a foot

there are 300 separate private sector entities that comprise a multimillion dollar private whether enterprise -- weather enterprise. has,artnerships that noaa they are absolutely essential to support the fundamental goals that we all share. it is about protecting lives and livelihoods. it is about keeping this country healthy, whole, and functioning. doing that in an environment where the frequency of weather extremes is frequents -- is increasing. the mission has never been as important as it is today. as the acting administrator, i want to include the steadfast

dedication of the people who work in this building. all located here so they can blend their expertise. deliver the absolutely best environmental intelligence. the news you can use. startslity to do this with the expertise in this building, that it would not be possible without the leadership of secretaries of commerce and the steadfast support we have had for many allies in congress, most notably the fine senator standing here immediately to my right. --nk you for your stead rast steadfast advocacy and for your support and leadership in rallying the effort that provided the supplemental funds following hurricane sandy. and the effects

of climate are equal opportunity hazards. the western half of the country record-breaking heat and wildfires, many eastern states are facing severe flooding. we still face threats from tornadoes. families and communities when here in this land, just take steps now to ensure they are ready no matter where they live. week, the president announced an all encompassing approach to addressing climate change. the environmental intelligence will play key roles in this endeavor as well. toreleased a new product provide people with information about drought. willis a data product that allow private sector more up-to- date information about the

status of the drought and help them better informed their planting decisions and the water management decisions. data and the kind of information that is part of the mission. as brian has alluded to, when it comes to weather and climate,noaa is the foundation on which our entire countries enterprise stands. the country needs us and our private sector and academic partners trust us to bring our a game. thank you for being with us today. we will have a few moments to take your questions. it has been an honor having you with us. >> we have time for a few questions. lee's raise your hand and i will call on you. -- please raise your hand and i will call on you.

jason? let thank you for your comments today -- >> thank you for your comments today. supplemental, that is great news, fantastic. at the same time, we have a hiring freeze. we have employees who are not able to travel to professional meetings to present their work, to collaborate with others in the field. offices which are severely short stacked who cannot hire forecasters who are like thedown programs, local sterling office, to bridge the gap between forecast and decision-making. is to either senator or secretary, how can we successfully modernize the

workforce and make raw grass -- and make progress when the weather service can not hire folks, when employees cannot travel, and so forth? thank you. >> i think that is an excellent question. sequestered, have se tightll be the' grips on the personnel at noaa. -- the able to ward off for there to be bipartisan effort to cancel sequester. both the house and senate have to come together. i am deeply disturbed the way the sequester will be canceled is the the work of the budget committee working with the president and the leadership of

both houses. however, right now, for republicans in the united states senate prevent the budget committee from meeting in a conference. , itassed a budget committee passed with over 70 senators. we came up with a framework for the budget to send over and go to conference. free the budget committee so they can go forth and do their job. while they are doing their job to work with the president to come up with a bargain to cancel sequester. for my part, we will be moving our appropriations to an orderly process. we will be bringing this to the full committee the week of july 15th. we hope to have a framework for 2014.

we will have the allocation that will look at some of the other things we need to modernize within the commerce department. one of which is the weather. we must take the steps to cancel sequester. sequester isnot -- not as visible as a government shutdown. bleeding here. i think it has a terrible effect on morale. i think it has an effect on management, so they could be putting their energies and their into movingilities their missions forward rather than managing a crisis that was created by congress in our inability to do our job. tohink we ought to free noaa

do its job by us concentrating on doing hours. -- ours. is there any specific opponent of higher funding among the republicans? is it more of the issue of the across the board cuts? >> there is the ongoing tension between the austerity only framework or the approach that many of us have. the balance between austerity and a progrowth. nat we see in an agency like oaa, whether it is weather forecast or working in terms of fisheries and other kinds of things to deal with it. that is the fundamental issue and i think the european model

was the austerity only approach and we saw that has not really worked. we are supporting president obama's framework, which is to find a balanced approach, a strategic cuts, increased looking at earmarks and subsidies, and the scrutiny of the mandatory spending. >> [inaudible] i cover climate science and one of the things in the budget, some of the climate centers got shifted over to nasa for the satellites. supplemental, i wonder if you could speak to the prior to renovation -- prior to these

prioritaztion between weather and climate. huxley were hesitant to commit to a new program rather than keeping the existing program on track. , thisms of the climate was an issue with how we could make sure it came into a fruition. noaa needs its own satellites. they are civilian satellites. we have that on track. thanks to the work of the predecessor. we are not trying to shortchange climate. it was eating 60% of the budget.

we were heading for a catastrophe. cosmic.wait on the we want that to be as good as our weather forecast. cast -- theorce fiscal forecast is accurate as our weather forecast. any questions for our scientists? you have the weather channel here. what are we going to do to improve reaction for severe weather events? has there been any thought given to establishing a national firefighting service? >> i'm sorry, i do not understand the question. once we havee do this established situation, we are working to improve the way

in which we are predicting the weather. >> what we do currently is once the firefighting command post is set up and established, they take a quick assessment of the situation and they request a meteorologist. we do not go preemptively. we wait until they take stock and call lesson. just getting established, they were just taking stock. the fire started friday night. by saturday, and it was a small hundred acres. it really exploded with the conditions on sunday. -- we aresubsequently embedded with them emily provide this for a spot -- with them and

we provide this for a spot forecast. typically, we would have them embedded with the kind of hotshot crew that was overrun by the fire on sunday. ,hat extremely rapid wind shift that is the kind of impending that they try to protect the firefighters from. we would have been there, and maybe we could have contributed to a better outcome. you are asking if we should have a national weather response? firefighting is local. you need to have firefighters on the ground who know the terrain, who know the geography, who know so that inand creek order to have a national fire service, like a swat team, is what you're asking?

this is a sad day. all of america is grieving because firefighters, though they are local, there is a national culture around our first responders. we admire them and appreciate them and our hearts go out to their families. what we need to be able to do is to be able to get -- work together so we can have the best information available right now come at the best information would be to have a weather person insight -- in sight. we hope there will be technological breakthroughs to do that. national swat teams are not the answer. >> [inaudible]

the weather forecaster brings the same local knowledge. insight youkind of need. metric systemle that works very well, but was late in this case. forecaster, all weather is local. when you get down to it, you have the science that comes out of the building and you have the science that comes nationally, and you have warnings. when you get down to detailed weather forecasts, you need local information. >> the focus on the fire as it the firesright now, are still raging out in the

west, the more general issue is power decision-makers going to use the information we can provide. our decision- makers are going to use the information we can provide. not bash our jobs don't end with the forecast. we are providing information that is actionable, which means we have to learn how to work with decision-makers and decision-makers have to learn how to use our information. that is an effort that we are stepping up as part of this initiative. [indiscernible] folks who have to work with that and act on that also have a lot of work to do. we are working in partnership in that area.

>> thank you to our speakers. thank you for attending. >> congress returns monday from a weeklong fourth of july recess. both the house and senate meet at 2:00. the senate will work on federal spending, but have not announced what portion they will debate next. you can watch the house live on c-span and the senate on c- span2. >> some of the national cable and telecommunications association's annual conference in washington. cable show 2013. this portion of the event

includes executives and innovators. deliversowell also keynote remarks. this is about an hour. >> we are here. i cannot think of a better introduction. true cable experiments -- experience. the duck guys.e that theirited finale past american idol in the ratings. cable is where it is at. we are thrilled they were able to join us at the cable show.

we brought -- we hope we are brought some real fun to d.c.. fun, a to bring more little more class to the nations capital and we also want to show off everything the cable has to offer. we would like to welcome all of you to the cable show 2013. connecting with our amazing technology, with a stunning array of content. with many of the great talent that appear on our screen, with key government officials and opinion leaders and most importantly, connecting with

each other. >> i plan on doing some of my own connecting. i plan to immerse myself in the observatory to get a birds eye view of our industry's contribution. i want to do take in some of the discussions among the 40 sessions. i am going to look at a little bit of the future i cable net. i hope to connect with some of the nearly 300 companies who are displaying on the floor. >> a&e networks is proud to be exhibiting on the floor with so many of our programming and technology colleagues, it is a great few days. i'm especially looking forward to wednesday, when you will be receiving your vanguard award for leadership. let's give pat around of applause.

it is a great honor and well- deserved. i know we will be in great company along with my dear friend and colleague nancy and several other outstanding vanguard winners. >> thank you, that was kind. it has been a pleasure working with you and the vision you have brought to this year's cable show. it has been a fun experience. >> it has been really fun, never expected to be installing cable in monroe, louisiana. will not be doing that again. our objective has been to find ways of featuring all of the things that people love about cable. incredible entertainment and information, the power of broadband, and the role our industry plays in contributing to the american economy and enhancing the lives of all americans.

>> why the theme of the show, cable really is worlds ahead of our competitors and those trying to emulate the success we have had. we are hoping by the time your visit at the show is over, you will be able to see why. >> we're lucky to be kicking off the show this morning with some remarks from an industry leader. with two impressive sediments, featuring global media leaders, one panel will examine the opportunities created by our platform and the other will take a closer look at our incredible robust content. >> we better get off the stage and let this morning's program get underway. thank you for coming to the cable show. connect with your colleagues, soak in all of the information you can, and have a wonderful time. it is our pleasure to welcome to the stage the president and ceo michael powell. [applause]

>> good morning. welcome to the cable show. good be with you. television, it opens the window on her world. storytelling is the most ancient of human endeavors and lets us learn our history, share a laugh, feel a thrill, celebrate. the very best stories live on cable. a medium of exceptional value and unparalleled quality. americans spend a lot of time with our product and they get a lot for their money. cable is on an innovation tear, expanding the video experience to any screen you want, or any time you want, anywhere you want.

cable is more than just great tv. it is a conduit of our future. cable is a significant innovation in its own right. it is also an important contributor to another innovation on this list. the internet. the internet is heralded as the greatest invention of our time and it is. it empowers every one of us to learn, create, and publish. it has transformed industries, bolstered economies, and overthrowing governments. the power of the people has never been greater thanks to this amazing interconnection of networks that cable probably delivers to millions. not very long ago, getting online required zen-like patience. it used to sound like this.

it used to look like this. everyone, everyone wanted something better. we wanted something more powerful, something more useful, some even wanted to use the internet to practice magic. we wanted our internet faster and faster and we wanted it always on. what we wanted was broadband. cable industry heard the cry and answered the call. we invented the cable modem. from this box, the world's information flows. painful dial up has been put to rest.

we are on an endless journey to deliver exceptional experience for american consumers and businesses. moving forward is always good, but it takes energy and effort and money -- lots of money. cable had to dig up a lot of streets and string a lot of wires across lot of poles. cable had to invest, and we have, to the tune of $200 billion as the mid-1990s. it was risky. truthfully, not everyone was a believer. there is much to believe in now. cable serves over 50 million broadband customers. we have worked hard to reach nearly everyone, offering service to 93% of american homes. i mentioned that does not have a horsepower is not worth the

effort. that is why we have increased broadband speeds over 1500% in a decade. today, cable networks available to 85% of all households. this is an achievement envied around the world. while speeds have skyrocketed, the price for consumers have not. all of this has been accomplished in private investment and the government's light touch. america is an innovation powerhouse largely because of the internet we help to build to nearly everyone. thanks to this infrastructure, america is home to the world's very best internet companies. despite our success, many people like to denigrate u.s. broadband by painting false comparisons to other countries.

her are some nations doing very well. there are some nations doing well. it is foolish to compare countries like france and latvia to the united states of america. we are home to 316 million people. our challenges are different, but our results are nonetheless impressive. if you can pare u.s. states to hundreds of foreign countries, 10 of the top fastest regions in the world are here in america. we are flying up the internet speed chart. in 2009, the u.s. ranked 22nd in the world. today, we ranked eighth. average peak connection speeds have tripled over the past five years. like everyone, we want to deliver more.

we want every american to have access to broadband number rich, poor, urban, and rural. we do not cherry pick the most lucrative customers. we serve everyone. we still have one quarter of americans who have access to broadband but have not yet gotten online. we want to fix that. cable has launched adoption programs throughout the country offering low-priced broadband to low income american families. programs like connect to compete and internet essentials are helping get all of america online. one great example is the boys and girls club of central

oregon, partnering with a local cable operator to close the digital divide. there is no way for a child to succeed anymore without the internet. broadband is enabling more job opportunities, more power to more people. to help our children and citizens succeed, we will continue to empower our customers to go where they want and do what they want using the broadband connection. the cable industry has always believed in an open internet. we will continue to embrace it. it is our job to manage our network to keep their internet humming as the world's greatest engine of innovation. we will continue to meet the

explosive demand for internet capacity, investing, innovating, competing aggressively, but always fairly. this is the american way. we want america to soar in the information age. cable is the platform that makes our digital dreams come true. you will see it, you will feel it, you will touch it, and experience it this week as cable puts on a show for you. you will discover a world you thought you knew and find there is much more to know. you will leave more excited about the future yet to come. thank you so much and enjoy the show. [applause] ♪

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>> ladies and gentlemen, please welcome the moderator for today's broadband innovation panel, jake tapper. [applause] ♪ >> hello, everyone. thank you for being here. if you would wait and hold your applause to the very end. the founder and ceo of jawbone, the chief operating officer of twitter, gm of content and services for roku.

♪ have a seat, everyone. before i begin and we start talking to this interesting panel, i would be remiss if i did not take the opportunity to asked our friend from twitter about a story that is in the news. there has been a report in the washington post and the guardian about a program called prism in which, and there are debates, the nsa is able to access files of participating internet companies. twitter, according to public statements, is not a participant. what can you tell us about

twitter refusing to participate? >> first of all, it is nice to be here. [laughter] very nice to be here at meet the press. the truth of the matter is i cannot comment on details of the matter. we are very interested to see how this story plays out. i will say, one of the core values we have at the company is to defend and respect the user's voice and we believe that tweets belong to the users that create them and we have always try to find the right balance between abiding by the law in any jurisdiction and doing what is

right why our users. we will continue to do that. as far as specifics of prism or the issues of the nsa, i cannot really comment. >> thank you very much. i want to get to the real subtext of this panel. are you guys friend or foe to these guys? i would like to very briefly explain what your company does. >> i am with vox media, it is a company built entirely on broadband. in technology and culture and in gaming. each one of these is built on a technology platform that enables

us to grow and scale quickly. our business was enabled by broadband, so we see ourselves as a friend of the industry. we have partnerships with many companies in the room. we would not exist without broadband. for the new wave of talent that has emerged. i look forward to talking about that. >> explain to the people in the audience, what exactly is jawbone? >> we are leading the way around smart connected devices, around this whole notion of the internet of things. you can revolutionize what you are able to do. in the context of the cable industry, we think of it as very complementary. it allows you to extend

experiences in totally new ways. we created a whole new category of the speaker business will be connected smart devices to go along with your phone and ipad. those are the leading devices in the market. that whole part of the segment is growing fast. it is leading to new consumption models. we want to deliver these experiences that will make it richer. >> most people in this room knows what twitter is, but how does twitter view its mission? >> we are lumped into the social media category, the what is distinctive about twitter is that we are public and not private. our network and communication is in real time, partly because of

the short format. it is conversational and distributed. that makes twitter an amazing compliment to television. millions of our users -- 35 million users last year -- tweeted about television programs while the programs were happening. our user base has exhibited a pattern using our service and connection to watching live television. we are really invested in building complementary experiences between what you guys do and the audience on twitter. our mission is to bring people closer to the things they care

about and allow them to participate in the dialogue about those things. a lot of what people care about is what is on television. >> tom, charter communications. >> we are a cable television company. we are a two-way interactive high-capacity digital platform and we still television, cable television, and packages. we have a high-capacity broadband network that is physically out on the streets and highways. hundreds of thousands of miles of physical infrastructure. we are a telephone company and

we are a communications company. are we friends or enemies? we create the platform that allows these businesses to operate. we want our platform used, so to the extent that people are using the broadband services, it helps our business grow. it is in our interest. there are times when we bump into each other. essentially, we have created an ecosystem that create a lot of value for our company and all of the companies appear. >> steve, roku. >> roku looks like a hockey puck, it is a streaming player to connect to your tv. to access nearly 1000 channels. we stream everything from the likes of netflix. we announced a deal recently with time warner cable. channels like hbo go, the lunchbox, all the way down to local churches and all kinds of special interest content.

>> let's cut to the quick. where do you think you and your companies find yourselves at odds the most with the people in this room? what can be done to make those challenges smoothed over or perhaps they are insurmountable? >> the punching bag, sure. a vast majority of our users are cable subscribers. our big initiative -- it is roughly 70% are cable subscribers.

we are putting a lot of focus into tv everywhere right now. it is a phenomenal opportunity for us. it has been shown to drive affinity for the cable package. services like hbo go, a wonderful way to get hbo. imagine multiplying across all of the programmer networks, imagine what espn can do, what nickelodeon can do when these programmers can deliver software along with their video in the form of apps. all of that type of software oriented activity is opportunity for programmers and operators to bring new value as part of their overall pay-tv subscription and it is really working. about three fourths of our users are discovering new value to their paid tv package. it has been a huge hit for us

and it is helpful to the entire ecosystem. >> the biggest issue we have is that the business we are in, the television business, is the television business. it is not the internet, not cable tv. you create audiences and the issues are around business model questions. how do you go and acquire customers if you have a video product? how do make those customers see your product? whether that is in a package or a bundle, those are the kinds of issues that are being challenged as the technology has brought all of the services together into a single wire, single devices, and you can access voice, data, video on the same

device. what is the service? the service is the content. we get into conflicts all the time about, it is the internet, it is cable tv. the reality is, it is content and it is sold a certain way and people are confused by the notion of the internet and cable. it creates regulatory issues, business model issues, but it is all television. >> to be honest, i cannot really think of any ways in which our business is at odds with the cable and tv business. we truly see ourselves as a compliment to the television business, to the cable business. in three or four respects, one of them is in terms of driving discovery to tv behavior. nielsen came out with a study that indicated a very strong correlation between activity on

twitter. in terms of creating a complementary content experience around programming that brings more value that from real-time viewing. in the area of measurement, for programmers measuring social engagement. in the area of complementary advertising and revenue models. among the technology companies of our ilk, you will not find a bigger fan and a bigger supporter of the tv business than twitter. >> for jawbone, it is the same. the thing that has been interesting, we are used to a different pace of innovation, how fast we want to bring products and services to the market.

i think it is aligning companies on being able to do that. comcast has been great and they are moving quickly. as an industry as a whole, it is something that is new for us, the pace of innovation. it is different from what we are used to in silicon valley. >> comcast is a major investor in our company. we are able to create great new journalistic and entertainment services. perhaps we might compete with some of the cable networks, but it is a very different type of business. this week, we will be covering the apple developer conference as well as e3. we like to apply the level of coverage for fans of technology in the same way that cnn would

cover a major news event. do it in a way that is not built for television, but built for the internet and all of the creative aspects of our medium. we think we are building value for broadband users and we appreciate the value they bring to us. >> what cable provider do you have? >> i am a loyal comcast guy. we experiment with a few of them. we have fios in our office downtown. curious.ust >> comcast. >> comcast. >> cablevision. >> time warner cable. >> i have fios.

let's pretend that none of these people are here, except us. what are they doing wrong? what could they be doing better? [laughter] >> some of the people can do it a lot faster. a technologyre company or a media company. we are a media company, but we use technology principles to innovate and iterate. there is a method of building means called agile, which you are moving quickly and if you make mistakes, you go back. you can be afraid to disrupt anyone, especially yourselves.

you have to listen to users, create a feedback cycle of data coming in based on what you put out and listen and act on that data. -- that applies to the media side as well when you are covering an event or putting out new programming, how quickly are you moving? get out of the cycle of waiting for the fall release schedule. looks i agree with that. -- >> i agree with that. in a world where there are are so many new disruptive technologies, there are opportunities to try them. see what sticks. that goes in tandem with the and how toovation monetize the experiences. some of the most it better than others. as long as people are using them, there are opportunities. >> the willingness to fail.

>> i remember when twitter did not exist. now i cannot live without it, right? you see how fast behavior is changing. we have this device where people are tracking all of their sleep and activity. how does that show up on the screen? people did notng do a year ago. now they are at the to do it. addicted to it. >> i largely agree with all of that. this was a statement that would've been more appropriate five years ago than today, but my statement would be to view technology as a friend, as an enabler of new experiences for your

that's not just the hardware that a company like jawbone is building. to think that twitter is going around realtime communication. generally having an orientation of technology being an enabler and extender of your business. >> as a cable industry, we're spending billions of dollars a year every year on technology development and infrastructure deployment. it's technology in the infrastructure that we're spending that money on. i like to go faster. i like to see us go faster. even though we're going very fast and the capacity networks are coming up, it's amazing how quickly the network capacity gets filled by applications that you build it. i think we can keep going and keep building and create demand. on the programming side of the business, anything that you put

anywhere is going to end up on every screen. you can't control it. if you think you can control the space where you distributed a piece of programming, some of the device and bring it back together and put it on the tv or put it on the distributed wifi network and the house or wherever. there's no way to control where your content goes. if you think you can segregate where it goes by calling that the internet and this cable tv, somebody will build a machine to abuse you of your notion. >> thank you for the infrastructure. i will be more specific. tv everywhere initiative is really a moment for the industry. we can move faster. we can make some vast improvements in the way that works. it boils down to embracing the internet distribution of the content and most specifically,

for mobile, we like to make it for tv's as well. that is still the primary place people want to watch all of this content. people used dent have to log in to watch tv. now we got that going, you have to log in to watch tv. these kind of problems are really ripe for solving in the industry as well as general embracing of the tv everywhere initiative and getting our content out there. >> that's all the time we have. i want to thank our panel. if you can give them a round of applause. thank you so much, appreciate your time.[applause] ♪

>> now ladies and gentlemen, please welcome the moderator for our content creation panel, the editor in chief for television at variety cynthia littleton. [applause] now the rest of the family, the chairman and ceo of showtime networks incorporated, matt blank. the president and ceo of amc networks incorporated, josh. and the co-chair of media networks and anne sweeney.

>> thank you all for coming out. i really appreciate it. we were all talking backstage and listening to everybody that was speaking before us, it is a avary of new ways to watch programming, new ways for viewers to engage in programming and literally, i realized it boils down to those two things. new ways to watch programming and new ways for viewers to engage in programming. as programming how has this explosion of platforms and opportunities, how has that changed your job? how has it change the name of what -- nature of what you do? >> we all realized that the consumer has taken control and they're not giving it back. every new technology that comes forward is something that we have to integrate into the way we're thinking about

distributing our content and also what happens to our content when it appears on a device. it appears on a new platform. we have an astounding relationship with twitter and pretty little liars from abc family. that show just never goes off the air. it never goes out of consciousness because the twitter verse and our viewers are one of the same. >> josh you've had an incredible run this year with the walking dead on amc, nice thing to have as the company is now newly solo to have the not only one show on cable but in all of the television universe. can you talk about how you harness all of these new opportunities to -- platform that show? >> it's been a good run. we do look at every platform as

an opportunity to do different things, second screen, viewing that are incremental to the show. show after the show, in which people get to talk about what they just saw. perhaps most interestingly and importantly, what occurs between seasons. in a certain sense, we look at the off season as not the off season but a full year of people who are very interested and try and provide them with the opportunity to stay on as a fan and in fact to invite new fans in. we all have seen that. it's one of the most interesting, i think, things occurring in tv is what happens between seasons. we've all seen shows, homeland and others, build in between seasons.

that is a rich opportunity to expand fan base into a expanded audience. it's every piece of technology is a big opportunity and think the calendar is not quite the calendar anymore. >> do you actually program to that off season time? do you come up with original content. do you try to feed the audience to come back to our platform or is it about driving people to the awareness that you can catch up with catch one? >> it's both. depending upon the platform. on internet delivered and cable on demand, where it's in the sense same content windowed and delayed. which has been successful bringing in lots of new people to subsequent seasons.

it's incremental for the people who seen it. perhaps the most interesting thing of it, it seems to me, consequence, perhaps, i think showtime has done it so well and "pretty little liars," is it creates a particular invitation for stories to go on. because people really like their favorites and they don't want to give them up. they can plan viewing them with their friends or families. i think the technology gives particular rise and influences the nature of content. i think happily its made it better and richer and the craft is better. so we do it all and it does it to us too, by the way. it's doing it to us. the technology is basically informing a little bit what's happening on the creative side of the world.

i think mostly for the better. >> it wepts from -- it benefits from all of these technologies. >> give them the opportunity to where you just got to watch one more episode. >> speculate. >> matt, can you talk about showtime any time and how that, the role out that service, how that differs from the traditional programming of especially cable shows, you give your viewers shortage of opportunities to catch up during the week. >> i wanted to start off by apologizing and admitting that we have participated in a government's prism program providing everyone watched homeland. we view the showtime any time, this is another attribute.

being premium, we have to be there first, someone is paying for a our service. as a technology it allows us to do different things. we were very early in high definition, premium category really invented the spod world. each of these times, we've seen dramatic impact on how people use our service. showtime any time is another way of putting on demand platform out there. we're very different, unlike the josh and anne's network. we're not terribly focused on how many people watch the income. if we do well we'll see it in the press and if we don't, we don't talk about it. our network is 80% of people that watch "nurse jackie" watch

it after the premir on -- premier on a sunday night. we're very much in the hearts and minds of business in terms of how we see the impact of our programming on people. anyway to take that on demand platform which has been so terrific for the premium business, provide different access to it and different ways of accessing it. we think just helps the service. i remember when we were launching on demand, there were people who thought well, your business will be totally virtual in no time. people still leak to watch linear television and watch it vertically to a great extent. certainly the case of a premium network, the more ways we can provide that on demand platform and showtime any time is a great way toking it, the more

successful we'll be getting people to watch the shows. >> you say cable created the spob businesses that are outside of the traditional cable universe. for the major media con -- conglomerates, it's been a double edged sword. there's been a lot of license money coming in. for amc the deal to bring back the killing. i guess the question, are they friend or foe or somewhere in between in terms of your traditional cable businesses versus the new world that we're talking about? >> my sense is they can peacefully coexist. it's all about a windowing strategy and identifying first windows and second windows, the

service is like stream pick. there are different places for content producers to put their shows. other thing we should pay close attention to avod. it's a very positive thing for the economics of television and certainly the economics of television production. >> i think spod has been largely friend. there's been a specktor of friends turning to foes. i think today, we've been quite careful in the manner in which we license and window. we put extended periods of time between what goes on to cable tv and what goes to an s pod service. we enjoy the economic reward. in most cases it's the availability on spod is so

proximate, it's just a big juice-up for premier on cable tv. it's a pretty happy world today i just add one comment. as cable video on demand gets better and better and capacity expands and the dvr capability goes the way it goes, i think that some of the tricks including recommendation algorithms and other stuff that makes the internet delivered s pod services appealing today, cable tv will start to do that. that's a happy thing to look forward to. that does keep it all in the system. we're on our way to a much aimproved cable vod service in terms of all the bells and whistles. >> is that something that in

your discussions with cable operators, is that something you talk about, about the need to improve that authentication platform? the need to fill some of the fizzle from netflix. >> the ones we speak to are very aware of what's going on and how people are consuming. they have aggressive plans and deploying plans. we don't have to ignite it. i'm expressing what we hear from them. >> same question. good answers. we look at the spod business in a number of ways. it is a revenue source for us which probably say more programming, control more programming. in terms of competition, you know, the premium services were in business when there was no amc, when there was no ifc no

disney channel, no espn, no abc family. yet, we've never had better performance than highly competitive environment. at the end of the day, for us this is about making great content, controlling as much as of that content as possible. neither of those things are easy to do. we have a pretty good track record of doing it right now. that's our primary focus and if we're successful at that our brand is going to be successful and whatever additional competition, additional ways of distribution come into the marketplace, showtime is going to be a highly demanded brand. we do not want to slide back into a world where we are worried about every time somebody turns on a tv and do they have to go to showtime.

people are always asking me, you've been doing this so long, when are you going to retire? the day we become least objectionable alternative, is the day i want to retire. i want to be the most desired alternative when somebody turns on that television or fires up that ipad or smartphone. again, it's content. for us it's all about content. if people want our content all the distributors will want our content and all consumers are going to want our content. >> it must be -- you've all been in the cable business a long time, it must be a little bit unfamiliar. you had been disrupttors. you have changed the world of television. >> we're still the disrupters. it always drives me crazy. every time we look at a new show what we see a new show, we say

this is going to blow people's minds. maybe we're right or wrong, we're still trying to be disrupters. you read in the media everyday, the business news channel love to talk about it and you guys love to talk about it. your favorite companies are companies with no revenue and no earnings. your second favorite companies are companies with revenues and no earnings. then you have anne, josh and i running companies keep growing subscriber, keep growing revenue and keep growing free cash flow. how you feel about disrupters. i want to wake up every morning that way. [applause]. >> i think we're still disrupters. we've got probably close to 100 years of experience on this

stage. i think we continue -- >> that's me alone. >> i look at the -- that's disruptive and responsive. when you talk about company that's are disrupters, the best are responsive to consumers. we know they love our brand, we know they love our programming. we know they want to hold them in our hands and take them wherever they go and we're making sure they can do that. if you look at the disney portfolio and watch espn and we watched abc. that's being disruptive. but also i think disruptive in a way that is part of this great ecosystem. it's done in concert with the mpds's and concert with the abc side with the local broadcasters.

>> on this earlier conversation, tom rutledge said that their in the business of providing it all. i'm not so sure the notion of disruption which puts one on their heels. i'm not sure i see it that way at all. there are certain new technologies that provide different experiences. if you're in the content business, each one is just this rich fun opportunity because twitter is a big part now of what we do and second screen viewing is institutionalized. it's fun and we do webisodes on the show. that stuff is all addive. if you're a fan of walking dead or breaking bad, you're finding ways to get deeper and richer experience and much more connected social experiences particularly by using all of that stuff.

that's not a bad thing. that is a good thing. we sort of welcome it. if you actually look at ratings of good tv shows, we spoke about this briefly. we saw -- this is the metric if you want to get the tv metric. what's the rating in season three, four five and six. we've seen these escalations on our tv shows. they have been -- hopefully they're good shows -- they have been enabled by the disruption. this is actually created this ground swell of people talking so that this guy who does the walking dead robert kirkman said it's an internal zombie move that never ends. during the years, the audience getting better aunt appetite increasing. i will look at that stuff as cool and not worrisome.

>> that's the lightning in a bottle who would have thought. >> it's not just "walking dead." we had probably 70% of our scripted shows saw increases in seasons where tv historically has gotten little longer. >> can you corollate? people watch 10 episodes. people caught up with the prevention seasons on -- previous seasons? >> let me give you one. last fall in the second season "homeland," tremendous on demand viewing of the first season of homeland. there's a lot of ways that this viewing relates to linear

viewing. we have four seasons. what we see almost universally is higher ratings for the final episode of a show than the first episode. we see for 12 weeks, the beauty of these 12 weeks -- you got people sucked in for 12 weeks and you move on, those shows will be in the top 10 of trender. we're not creating a viewing experience, we're creating an experience for all of this chatter, all of this talk around the shows. in a prescription business is very important. if you're in the eyeball business, makes those shows more important and more interesting and brings more people under the tent. if that tent has to change,

we're still going to grow the size of that tent. >> unfortunately, i feel like we just got started. we have to wrap it up. i really appreciate your time and your thoughts and i wish we had more time. thank you so much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] in >> will show you more the cable show in a few minutes. a look at first ladies. the influence of women in politics. later, some of the annual conference with a discussion about challenges facing women candidates. >> earlier today, the interim

egyptian government said nobel elbaradei wased nominated. later, the government say he was not nominated. talks are continuing. today, the white house announced president obama has been monitoring the situation in consultation with national security advisers. the white house reiterated the united states is not aligned with that does not support any particular egyptian political party or group. as part of the july 4 celebration, president obama released his radio address earlier in the week. he talks about the significance of the day and the contributions made by citizens throughout our history. theas representative gave republican address. chelsea has independent greetings and the republicans efforts to reduce student loan

interest rates which doubles on july 1. >> hi, everybody. i hope you all had a safe and happy fourth of july, filled with parades, cookouts, fireworks, and family reunions. we celebrated at the white house with a few hundred members of the military and their families. and we took a moment amid the festivities to remember what our independence day is all about, what happened 237 years ago, and what it meant to the world. on july 4th, 1776, a small band of patriots declared that we were a people created equal, free to think and worship and live as we please. it was a declaration heard around the world that we were no longer colonists. we were americans, and our destiny would not be determined for us. it would be determined by us. it was a bold and tremendously brave thing to do. it was also nearly unthinkable. at that time, kings and princes and emperors ruled the world. but those patriots were certain

that a better way was possible. and to achieve it, to win their freedom, they were willing to lay it all on the line. their lives. their fortunes. their sacred honor. they fought a revolution. few would have bet on our side to win. but for the first of many times to come, america proved the doubters wrong. and now, 237 years later, the united states, this improbable nation, is the greatest in the world. a land of liberty and opportunity. a global defender of peace and freedom. a beacon of hope to people everywhere who cherish those ideals. generations of americans made our country what it is today, farmers and teachers, engineers and laborers, entrepreneurs and elected leaders, people from all walks of life, from all parts of the world, all pulling in the same direction. and now we, the people, must make their task our own, to live up to the words of that declaration of independence, and

secure liberty and opportunity for our own children, and for future generations. i want to say a special word of thanks to the men and women of our military, who have played such a vital role in the story of our nation. you have defended us at home and abroad. and you have fought on our nation's behalf to make the world a better, safer place. people in scattered corners of the world are living in peace today, free to write their own futures, because of you. we are grateful for your service and your sacrifice, especially those still serving in harm's way and your families here at home. so, god bless you all. and may god bless the united states of america. hi, i am lynn jenkins. a vice chair of the house republican conference chair i hope you and your family had a wonderful independence day. the spirit of 1776 is fresh in our hearts this weekend.

america is at its best when it placed everything to -- placed everything to secure. every generation has worked hard to expand the pursuit of happiness and it sure our children are free to live a better life. today, the essentials of the american dream are at risk. last week, i spoke with hundreds of college students who were concerned they will not have the same opportunities their parents had. they find it hard to pay for the education, and finding a job in this tough economy. over the last few months, republicans have made every effort to stop interest rates on student loans. link. as a unnecessarily did. -- interest rate doubling on student loans as a unnecessarily did. we keep, the back to deadlines like this. paying for college is difficult

enough without all of this uncertainty. i have two kids in college. i know how hard it can be. the spring when president obama proposed letting the market sets rates instead, the has reflected house his play. the pulpit the senate came to the table similar ideas. unfortunately, democrats attacked the plan. refused to work with us and allowing this rate hike to take for the holiday without passing a solution. because of this in action, millions of undergraduates who want to take out a subsidized stafford loans are being told that one have to pay an interest rate that is double what they were expecting. that is just not right. you deserve a f