situation would make people comfortable, or where this would actually be allowed to happen. when i raised this matter with the new york fed and with the board of directors, sorry, with the federal reserve board, i actually had a petition on the internet on this issue, to have mr. dimon resign, and i got a meeting with the chief council, 35,000 signatures does not get you a meeting with the governor, but does get you a meeting with the chief council, just for reference. and there are -- the answer that i got, i'm afraid i have to summarize as the rules that govern the rest of american society do not apply to us. there's a very problematic reaction when you remember the essential political nature of this institution and what i'm afraid is that the fragile nature of its political legitimacy.

>> i'll make the closing comment on this issue, which seems to me the fed has sort of been between silla, we tried very hard to create a fed that would not be subject to political control and manipulation, and countries like argentina, you see what happens when central banks are subject to political manipulation, but we tried to offset that with much more private sector influence and private sector influence, but the problem is, you fall into the other trap then of being subject to too much industry influence, and i think that's been a continuing struggle with the fed, how do you actually remain balanced on the high tension wire, right, between the two threats, and i think the other thing about the new york fed in 2008, steven friedman, who was the former chairman and still a director of goldman, was on that board, remained on that board even after goldman became a bank holding company, which technically wasn't allowed, and

in addition brought significant amounts of stock after goldman became a bank holding company. that was not the proudest day, in my opinion, for the federal reserve system. >> he was required to resign. >> eventually. >> from the new york fed, but i agree. >> it took awhile. >> it did. >> yes? >> i was going to ask whether the boards of the federal reserve banks have decision making authority over what they do, because you get the impression when you talk to the federal reserve that the boards are sort of almost advisory boards and that they have no policy making authority. >> well, so i have raised this question with the new york fed and others, and, of course, they do have separate advisory boards, so there are plenty of advisory groups. the board is a separate entity, and these are freestanding, independent, or particular kind of corporations, so they are responsible for appointing the

president of that bank. now, the rules have changed. the class-a directors, the bankers representing the bankers can no longer participate in the choice. it's up to the class-b directors, who are chosen by banks to represent members of the public. think about that in modern american context, and the class-c directors, who are the class-c directors in new york? people afraid to come to the bankers. who get all the money from the banks. so, you know, this does not look good. the supervision is run from the federal reserve board, no question, in washington. what is the engagement of the regional feds, including new york, in the perception, the application, how the social context of these relationships, outsiders cannot determine, so you have to worry about the optics, you have to always care about the optics. the technology

that we do possess now of destroying at sea. >> automatically disappear? i think so. welcome back. i'd like to begin the next session, which features don kohn and fred wessel. for fed watchers, don really needs no introduction, although david might. don is an important historic figure in the fed, having spent more than 40 years in the system. most recently as vice chairman. he was mentioned by president obama as a candidate to replace chairman bernanke, in fact. don is now at brookings.

i'd like to acknowledge don for the role he played here at g.w. in helping us establish the paul volcker scholarship. he played a major role, and he helped us actually honor and pay tribute to paul volcker in this very room, and it was a successful event, don, in large part, due to you, so thank you for that. also joining us is david wessel, "the wall street journal," and david, for readers of "the wall street journal," david also needs no introduction. he's been with the journal for 30 years, and the capital columnist for ten, david? ten or so. he's written a best selling book, as you've heard, "in fed we trust." did you go with the whole title of that, david? the whole title is interesting, in fact, "in fed we bernanke's great war of 2009." thank you very much for both

joining us today and look forward to this. thanks, david. >> thank you very much and thanks for doing this. i thought what we might do here is reflect a little on the lessons of history that liaquat and simon discussed, that influenced you while you were in the midst of avoiding the great depression, or likely you avoided two-thirds of it. but i be at the federal reserve. you got your ph.d. at the university of michigan in 1970 when a lot of people were wearing long hair, smoking dope and protesting the vietnam war. you ended up at federal reserve bank of kansas city. >> where no one was wearing long hair, smoking dope and protesting the vietnam war. >> what led you to do that? why in god's name did you stay at the federal reserve for 40 years? >> so what led me to the federal reserve was an interest in

public policy that i had probably from childhood in hearing debates around participating in debates around the dining room table, but certainly while i was at the college of worcester and did my undergraduate work. this had application to public policy. and that figuring out economics and doing it right and applying it to helping shape the economy, shape the way people made money and shape the way economies worked could make people better off if it were done right. i became as an undergraduate fascinated with public poll system university of michigan at that time had a reputation as being deeply involved in public

policy, a tract between ann arbor and washington was well worn. i never had gardner ackley as a teacher because he left michigan and was head of the council of economic advisors. so there was a public policy application there. and a natural place to apply that was the federal reserve system. the federal reserve bank of kansas city had a reputation then as it does now as having a very good small, relative to new york, research department with high standards, with good access to the policy makers, to the director of research and the president of the bank before fomc meetings. it was a great place to go and begin practicing economics as public policy. >> how did you happen to come to

washington? >> several of the people that i joined kansas city fed at the same time i did ended up coming back to the board of governors in the next few years. >> you mean on the staff? >> on the staff of the board of governors, right. they kept calling and saying this is a really neat place. would be great to have you come back and join. i think at some point i saw that there were tremendous advantages to kansas city, but if you wanted to be near the center of policy making then washington, d.c., the federal reserve board staff was the place to be. >> i wanted to ask you a little bit about the conversation lee atkins simon had. as you taught me, to large extent the federal reserve is returning to its roots. that in 1907 we had a financial panic that directly led to the creation of a central bank. the idea they were going to deal

with inflation and unemployment was not central then. i'm sure everybody at the fed has been taught that the fed screwed up in the '20s and '30s, and the fed screwed up in a different way in the '70s when we allowed inflation to get out of control. what role did that have navigati navigating sloals. >> ben bernanke was chairman of the federal reserve. having studied the great depression brought his experience, his study, his thoughts about what to do to avoid that again to our deliberations. >> explicitly? i remember reading in milton freeman in a 1930 board meeting -- >> there was only a little of

that. simon concentrated his studies on the credit side. he wooed to say about franklin roosevelt i disagree franklin roosevelt tried. famous phrase whatever it takes and his openness to experimentation throughout of the idea of decision making under these very difficult circumstances. you don't know how things are going to turn out. you have no idea what's going to work and what isn't going to work. i think a study of the depression and history of the fed and the, what we brought to that meant we were going to do whatever it took to avoid the great depression. he helped shaped the decision-making machinery to get us to that end. >> of course, the financial

crisis didn't arrive on a rocketship from mars. it wasn't an act of god. it was preceded by a lot of developments in the economy. in the financial system that as simon pointed out, the federal reserve was in part charged with supervising. while i don't think there is any substantial question that it could have been worse, i want to ask you about whether it could have been better in a minute. there is a question whether it might have been avoided had the federal reserve done something different in the ten years before? >> i think there were a number of regulatory -- there were a number of mistakes made. first and foremost by the private sector who were buying and selling securities they didn't understand. credit rating agencies were giving ratings that were totally unjustified. on securities that had very little history and there was no -- they weren't warning people, hey, we're taking a guess here. we don't know how this is going

to turn out under certain tale events. i think the cops weren't on the beat. not only the credit rating agencies weren't on the beat, but the regulators weren't on the beat, as well as we could have been. the fed bears some responsibility for that, absolutely. on the consumer side, famously ned gramlich started raising issues. how is it going to work, et cetera. so that never got followed up. the whole atmosphere from the late '90s to the early 2000s was financial liberalization and the advantages that deregulation was having, creating new instruments, spreading the availability of credit to new folks that hadn't had it before, subprime loans are a good

example of that. this wasn't just a d or an r situation. certainly in the clinton administration this was supported. you remember president bush had the ownership society, encouraging people to climb on the ladder of wealth through acquiring homes. the whole thought was the financial system is working better, they created a bunch of new instruments, these helped to distribute risk. sure, there are risks and problems out there, but i don't think no one really foresaw the kind of collapse that happened. we took some steps ahead of time, but part of the -- one i can clearly recall is commercial real estate lending. the federal reserve and the other agencies saw that small and medium banks in particular, regional banks were doing a lot of commercial real estate lending to developers and

whatnot. they really didn't have the risk controls on that, but part of the problem was the structure regulation in the u.s. so to get new guidance out required all these agencies to agree. the office of thrift supervision was very difficult to bring along on that and the thing got watered down. it took a while to get that guidance out. interestingly, there was huge blowback from the political system. what do you mean telling the banker in my district that he can't make loans to this developer that i play golf with with every sunday? so i think the political dimensions are important here. >> but the whole argument for having independent central bank when it comes to monetary policies that the central bank can do things that the politicians can't or might not even support, it doesn't seem to quite work that way on

regulation. >> so i do think though, independence, there's been a bifercation. there's lots of history over time, over countries, independence of monetary policy is essential, a high degree of independence is essential within a democratic system, a democratic accountability to maintain price stability. i think when you get on the other side, on the regulation supervision side, there isn't that history. it's complicated in the u.s. because of the balkanized regulatory structure. you need to get lots of people together. regulation has effects on the distribution of wealth, on distribution of credit and things like that that often isn't in an independent agency. so the degree of independence is different on that side.

good metric for that, indicator for that is the gao can audit everything the fed does but monetary policy. so the gao audits supervision, regulation, payment systems, all kinds of things, but not monetary policies. so the congress itself in the late '70s when they set the gao up -- >> government accountability office. >> right. recognized that there was a different degree of independence on either side. i think this is, becomes an interesting and difficult issue going forward because as the previous panel was noting, there is now more responsibility for overall financial stability. and an expectation that the federal reserve and it can't be just the fed. it's got -- the fed doesn't have enough tools to do it by itself, but the other agencies and the fed together need to take away the punch bowl in a credit

sense. in a financial stability sense on that side of the house as the party gets going. the people drinking the punch aren't going to be happy. it's not been tested out. the macroregulation requires independence maybe not equal to the monetary dependence but something like it. >> the new york thread was captured by the big banks. you never worked at the new york fed. you could be an independent gauge. was that part of the problem? did alan greenspan's regulatory philosophy play a role? >> i don't think that was a root call of the crisis. i'm not sure simon would own up to having said that, but it was close. i think the crisis had many root

causes. part of it was just complacency over a couple of decades. we had several decades of growth, two mild recessions, all this financial innovation which looked like a decent idea at the time. i think everybody got a little too relaxed. not just the new york fed or not just the board of governors or the fdic or occ or anyone else. i think it was part of what was going on. >> so it was mindset rather than looking out for the profits of their friends. that would be -- >> i think that was primarily, yes. >> you agree alan greenspan didn't lean against that wind? >> that's right. to some extent, the new york fed and tim geithner, the president of the new york fed recognized that the system was changing and that it needed closer oversight and some fixing.

he initiated before the crisis efforts to make the derivatives markets more robust, more transparent. he saw that there were problems and there are speeches that he made noting there are problems. i think part of this, taking a step back, this is about the evolution of the financial system from a bank-centered financial system to one in which has banks and nonbanks and the nonbank piece of it, the securities markets, the securitization markets or p markets, how that stuff is financed becoming more and more important over time. i think to a considerable extent, the regulatory system, oversight, did not evolve with the evolution of the system. the legal basis for oversight did not evolve with the evolution of the system. i think the new york fed saw actually some of these, some of the weak points, but the legal

authority, the political backing, the general recognition wasn't there. >> the new regime basically says that we're going to give the fed more systemic oversight. we are going to create this financial stability oversight council so that at least the regulators have to get in one room once in a while. and we are going to talk a lot about this thing called macroprudential, which is hard to define. i get the gist of it is if there's too much lending going on or too much excess, that somewhere there is a dial you can adjust to avoid this so that you can preserve the monetary policy, interest rates, for as to steer the economy. two questions. one is, is there any chance that this could actually work? it sounds good. >> yeah. i think is there a chance it could work. whether it's 100%, i'm not sure.

let me amend what you said a little bit. too much credit is one issue, but also how the credit is being made and how the lenders are. among the problems, chief among the problems leading up to the crisis wasn't just too much credit in the mortgage housing sector that rouletted in overbuilding and overpricing of houses, it was being financed through a system that, a financial system that was increasingly leveraged. a lot of that leverage was occurring outside the banking system. so outside direct control of the federal reserve. the system was increasingly financing these long-term securities with very short term overnight borrowing. you had more maturity

transformation, more leverage. when the prices of the underlying assets came down, there wasn't a cushion to absorb those losses. people said i'm not sure where the prices are going to stay, are going to rest, so therefore, i'm going to be much more cautious about who i'm lending to, who i'm funding and these funding markets. the interbank market in the fall of '07 spreading even into the secured rp market in the winter of january, february, march of '08 when bear stearns came down and the securitization markets and the commercial paper and asset-backed commercial paper markets certainly through part of this, but really after lehman came down. so the panic was there from

august of '07, but it kept in s intensifying and it systems didn't have the cushion to reassure people we can take losses, but we'll be viable. hopefully macroprudential policy will see not only the growth of credit, but the reliance on short term wholesale funding for long term assets and take steps to deal with that. for example, higher capital requirements is one thing that some fed board members have talked about. should we have higher capital requirements on people who are funding themselves short? liquidity requirements. if you've got a lot of short term funding you have to hold short term assets to absorb the cut-off of your funding. the basel committee has another

requirement coming. margin requirements off the banks so that -- off the banks markets like rp markets that aren't necessarily on the banks' books. try to make them less pro cyclical. i think there are a bunch of things you can do in the banking sector to try to control the leverage but outside the banking sector. >> we talked earlier about the peculiar structure of the federal reserve which has its historical roots. in the uk they, confronting the situation you described, they set up two committees. one does monetary policy and one does financial policy. apparently there weren't enough brits to staff both of them so they recruited a canadian to run the whole operation in europe in a financial policy committee. so what's your early experience there? does it seem like a good approach? do we know? >> i like the approach. the monetary policy committee is

basically being given the responsibility for price stability and subject to that growth and expansion. the financial policy committee has been given a clear mandate to maintain financial stability. so there are different mandates. for sure, the policies, and therefore different accountability, for sure the policies interact. what the financial policy committee does affects how monetary policy is transmitted to the economy and how the monetary policy is carried out affects the financial stability characteristics of the uk economy. and the chancellor in his remit to both the monetary policy committee and financial policy committee has told both of them they need to talk to each other more. there are three members that be overlapped. there is more discussion between the two committees. in fact, when the monetary policy committee did what the u.s. has done, put in forward

guidance keeping interest rates at zero until the unemployment rate in the uk, at least until the unemployment rate got below 7%. they said if this has financial stability implications in those adverse implications, you the financial policy committee have tried to address those adverse implications through other things like bearing capital requirements, but that hasn't worked, tell us. that will knock out the 7% unemployment rate. that means every time the financial policy committee meets, last two times we met since that policy was put in play, we had to have a discussion. do we think the monetary policy is creating financial stability issues? if so, how would we address those? have we tried everything we can try? what do we need to say to the monetary policy committee?

so there's a lot of conversation back and forth between those. but i like the separation. i like the fact that there's another set of eyes on the financial stability piece of it that can then advise the monetary policy committee and do so on a very public way. so what we would say to the monetary policy committee, first the monetary policy committee, but as soon as the monetary policy committee made its decision it and we reveal what it told it and how it responds. the past couple of times we told it, we're not worried. we think there are other things we could do if we were worried. in the future i think it fosters a much more transparent and open dialogue between the financial stability and the monetary policy. >> let me switch to monetary policy for a moment. i loved the formulation that the fed gets credit for

preventing 2/3 of the great depression. why not 3/4? why not 85%? with the benefit of hindsight, and once the crisis hits, we talked about what the fed might have done to reduce the risk of it. once it hits, now that you know everything that you know, was the fed aggressive enough? were there things that you had, if you had to do them over again you would do differently? >> no. i mean, yes, i think we were aggressive as we could be given the circumstances and the law. given in those circumstances and law i don't think there is anything major i would have done differently than we did. on the monetary policy side we began easing policy right in the fall of 2007. when we could see, even though the economy hadn't peaked yet. the nbr calls the peak in december, but our forward-looking policy said

well, we can see there's disruption, particularly in thor in bank market. we think that's going to disrupt the flow of credit to households and businesses, financial conditions are tightening. we need to offset that with monetary policy. we began easing in several steps. by the time we got to january, it was clear the nbr calls the peak in december. anybody looking at the economy knew things were deteriorating even in early december. by the time we got to january, it was a very bad situation. the markets were much more disrupted. the economy was clearly on a downward track. we eased very aggressively in january in two steps. i think for 125 and 150 basis. it was unprecedented amount of easing. one between the meeting and at the meeting. when we saw the situation

deteriorate we moved aggressively. interestingly, we talked about the depression as a lesson. the other thing in my mind in that period was japan. so there had been a conference at woodstock, vermont in '99, i think, or 2000. one of -- about the japanese stuck at the zero lower balance. >> interest rates can't go below zero, prices are falling and the economy is bumping along. >> right. one of the lessons drawn from that conference, and there were a couple of papers there saying if you get into a situation where that might happen, go fast, go aggressively. try to head off the situation. the more aggressive policy is, the more likely you won't get to the zero lower balance and if you do get there you'll be there briefly. we were looking not only at depression, but at the japanese

experience. we went pretty aggressively there. i think the other -- then of course after lehman we got to zero pretty fast and started buying securities. we can return to that separately. the other aspect is the liquidity aspect. as was discussed last time, one reason for founding the federal reserve was to head off the kinds of panics that happened. there are quotes from robert owen. one of the sponsors, senator owen was one of the sponsors of the fed. the federal reserve act. and others saying, i think carter glass quotes and others saying, once we get this thing in place or now that this is in place, there won't be panics any more because people will know that there is someone there to act as lender of last resort to head off the panic. it's clear that that didn't work. not only in the '30s but in

2008. i think part of the issue was this business of so much migrating to the nonbank financial sector. that used to be thought of as a plus. you had banks, nonbanks. >> chairman greenspan once referred to it as a spare tire. the tire is flat. >> exactly. the spare tire is flat. all the tires were flat at the same time. >> and there was the fed trying to pump air in a tire with a hole in it. >> exactly. >> i'm sort of convinced the essence of monetary policy is picking the right simplistic cliched metaphor at the right time. >> that doesn't come back to haunt you later. >> true. the trouble is the wrong simplistic metaphor can do great damage. >> right. i think part of the problem, one reason we couldn't head off the panic is because 13-3, the section of the federal reserve act that authorizes lending to individuals, partnerships and

corporations that was referenced in the last session, that can't be activated until there is already a crisis. >> 13-3 says under circumstances -- >> unusual and exegen circumstances -- >> the fed can lend to almost anybody as long as they have good collateral. >> to the satisfaction of the reserve bank. it also says credit is not available from other banks institutions. you have to make a finding that you can't get credit from somewhere else. of course, that section hadn't been used since the 1930s. >> that was the lever you pulled at bear stearns. >> a couple of days before bear stearns then pulled really hard after bear stearns and even harder after lehman. the private sector couldn't

anticipate that would come into play. there was great reluctance to use it. a certain chairman of the federal reserve testified about a week before it was activated that, yes, it was there, but boy, it would be a big deal to do it and have all kinds of adverse moral hazards, things. i was careful not to say no. i know never to say never, particularly about something like that in the middle of a crisis. i didn't say you guys can count on it if it gets bad we'll do it. i think partly 13-3 was to be used once the crisis began. so it couldn't head off the panic. >> i assume it didn't occur to you in 2000 let alone 1990 you wouldn't be watching the federal reserve when interest rates hit zero in 2008. the only question is will they go up in 2015 or '16.

almost a decade of zero interest rates. that forced the fed to innovate, to do this business quantitative easing. would getting stuck at zero, would have buying more sooner eased the economic pain? >> i think it's hard to tell. certainly the case that i and others at the federal reserve did not anticipate, although we knew this would be a slow movement out of this recession. that credit was constrained, particularly for real estate and when you think about when we started buying in late 2008, early 2009, constrain for a whole variety of uses. but i thought that as the banking system and the financial system was rebuilt that credit would become more widely

available and that the zero interest rates and the negative real rates subtracting 2% expected inflation would stimulate a lot of demand. i did not anticipate that we would go through so many years of slow growth. would doing more in 2009/2010 have helped? maybe a little. i think part ly certain balance sheets needed to be rebuilt, things needed to come together, other obstacles needed to be overcome. certainly i didn't anticipate the fiscal restraint that would be in place in 2012 and particularly 2013. so other things happened that were hard to anticipate. whether pushing down long-term rates even more earlier probably it moves in the right direction. would it have avoided four years

of tepid growth? not quite sure. >> what is your judgment of the efficacy of quantitative easing? >> i think it's helpful. it's been helpful with long-term interest rates. when we undertook it initially, i think it had two effects. one was directly affected those interest rates by buying the securities, but secondly waits a powerful signal that we were concerned, we were worried and we were on the job and we were going to do things to keep interest rates low and keep the economy going. the signaling part of that has been shifted really to the forward guidance piece of federal reserve and other central bank policies. i think once the forward guidance is in place, the actual quantitative easing probably less effective than it was when

it played kind of a dual role initially. >> one of the effects of quantitative easing isn't the pluming that pushes down interest rates but convince ed everybody the fed will keep the interest rates it controls low a long time. >> the fed was saying that. >> right. now they switched to we are going to say that with more forceful language. the second part is -- >> i do think even having that forward guidance in play we've got a little bit of a test this summer about what happens when the forward guidance is in play but the federal reserve led people to think that the probabilities were high, that they were start to reduce the volume of purchases. interest rates went up pretty substantially. partly because people took that as a signal. once again, the division between forward guidance and qe wasn't as stark and as tight as the

chairman and the committee thought it was, but also i think just the interest rates rising because the term premium rose and just the qe effects were going off. and we've seen that that had some effect on mortgage markets, probably had some effect on other markets and construction. so took a little bit of the steam out of rise. i would say the tests this summer suggested sort of we got a little test of the counterfactual. suppose they hadn't been doing it. looked like it was -- >> in that context, the economy is better, but not good. we still have 7% unemployment. the fed seems to be on track if not in december but january beginning to scale back quantitative easing. why scaling it back if we are far away from anything like a

normal healthy full employment economy? >> i'll say what i think the fed thinks. >> then tell me what you think. >> there is discomfort in the sense that the portfolio could grow almost without limit, not having any limits on it. there is discomfort in the potential financial stability effect so our people becoming exposed to an unexpected rise in interest rates because there's more maturity transformation. people are borrowing short at low rates and lending longer and becoming more levered or taking risks they don't understand? i think there's some legitimacy in those discomforts. there are other discomforts i'm less sympathetic to. there are people inside the

federal reserve that worries about what happens to their balance sheets when interest rates start to rise. >> they'll be paying more to the bank banks. my judgment would be the fed is a public institution. it's not a profit-making institution. the congress and fed and administration shouldn't look at it that way. what they did they did to accomplish the goals they were given in legislation. the fact they are making a bunch of money now, might lose a bunch of money later is irrelevant. you can argue about what they're doing relative to the goals they were set. >> do you think it's a good time to start tapering. >> i hate doing these predictions of the fed. >> it's not a prediction. it's a judgment of whether it's

a good thing to do. that's easier. >> it is easier, i guess. assuming the judgment's any good. i can see the argument dancing around here. i can see the argument that there is more emphasis on the forward guidance. that's an easier tool to use. it's much more like the old fed funds. i like the fact that they've gone to economic conditions for forward guidance. >> if they said we'll keep interest rates low until the economy meets this condition as opposed to six months or 12 months? >> i think a problem with that is they tried to summarize that condition in one metric, the up employment rate. now they are kind of backing away and saying that -- >> would you vote to taper or not? >> i think i'd wait. >> wait. he said he would wait. if you were on the federal reserve -- >> it's a very close call.

>> if you were on the federal reserve financial policy committee, would you be concerned there are beginning of signs that this very easy money, lots of low rates is causing excess? >> yes. i think i would point to the leverage lending market, for example, where the terms on a lot of loans have become so-called covenant lights so a lot of the terms have gotten much easier. >> banks putting fewer and fewer strings. >> right. it's not just the banks. those loans tend to be securitized. the banks originate them and some are in the market. junk bond market. and there are other signs. i do think i would be somewhat concerned. i think the federal reserve has reacted in an entirely

appropriate and proportionate way. among the things they've done is they have put out guidance on leveraged loans and said we are worried about what's happening here to the banks. you guys need to be more careful with what you put on your balance sheet but also what you originate and put through to the rest of the economy. they said they are going to include in their stress test, i guess they did this somewhat last year, next year the banking system suppose interest rates go up in an unexpected way, what are you exposed to? i think they're reacting exactly as i would hope. >> i was thinking about the many ways which the federal reserve changed in the time you were there. one big change of course is that the fed now has an explicit target for inflation, 2%. this was a big project of ben bernanke as an academic. just to prove that academics actually can get things done, he's got it through the federal

reserve. in the beginning, you thought that was a bad idea. have you changed your mind? is it working? >> yes and yes. i thought it was a bad idea because i thought the federal reserve was getting all the benefits without paying any of the costs. so people understood once we got into the' 90s that the fed had at least an implicit inflation target. that inflation expectations in the u.s. were anchored just about as well as in other countries. i know there were some studies saying there were small differences, but the differences were small. the u.s. could act in a very flexible way in response to the, the federal reserve could response in a flexible way because it wasn't in response to incoming developments like financial changes in the financial markets environment because it wasn't tied to what at that time was seen as the way

inflation targeting central banks would, which is the inflation target two years out. we could get all the advantages and not pay the costs in the loss of flexibility. it did change my mind and going through the crisis was an important piece of that. it was so important that inflation expectations be anchored to give us, because i was inside at the time, the freedom to act very, very aggressively without worrying about what would happen to inflation expectations. as i said looking at the depression in japan, i thought acting aggressively on the monetary policy side was critical. >> print all this money, lend it out and not worry people would think, except a few people who have been proven wrong, we are going to have double-digit inflation? >> that's right. so in making that even more explicit, which they did in january of 2012, i thought was a

good idea. i actually told ben bernanke before i left that he converted me over these many years, and it was the crisis and the importance of keeping those inflation expectations anchored to enable to be aggressive on the easing side that convinced me. i think a lot of inflation targeting countries including the uk treated their target in a very flexible way. to some extent, there's been migration towards the way the fed had looked at inflation targeting as an explicit but very, very flexible. so you can have your inflation target but also pay a lot of attention to output and employment. >> is it in the '60s where you get the explicit, you have inflation and employment target? humphrey hawkins? >> '70s, '77. >> congress told the modern fed your goal is to maximize

employment, maintain price stability and there's always in this conversation about whether that's too complicated. a, do you think having a dual mandate like that mattered over the last decade or two? and b, would you recommend changing it or not? >> so i think the dual mandate, i think, has mattered more in rhetoric than in action, but there has been so the fed talks a lot about that, but other central, about the employment side of it. other central banks said i think are acting as if that's very, very important to them, but i think it's probably made a little bit of difference around the edges in some of the actions. i think of the ecb tightening in 2008 and again in the summer of 2008 when prices were going up and again in 2011 because they have only the inflation target.

i think in the end, the fed paying attention to both of those things helped the u.s. economy. i think the federal reserve having -- think the dual mandates worked out. and the fact that there is a 2% inflation target makes me feel even better about the dual mandate, about paying some attention to unemployment as long as you have that long run inflation target so you are anchored. i don't think there is much difference between where the fed is today and where inflation targeting central banks are. i do think you have to pay attention to that 2% inflation target. i think it's important that the institution recognize as it does that over long periods of time, and this is in that january 2012 statement, the federal reserve doesn't control the unemployment rate. the unemployment rate is controlled by the structure of labor markets. that sort of thing. the federal reserve can't dictate the unemployment rate. there is no permanent trade-off

between unemployment and inflation, as i was taught at the university of michigan in the early '60s there was. so they need to recognize that and the way over long periods of time to stable prices and maximum and the way to maximum employment and efficiency in the economy is making sure that inflation is stable and low price stability, reducing uncertainty among households and businesses they make decisions. in the short run, and right now there is no trade-off whatsoever. inflation is well below the target and employment is well below maximum employment. >> during most of the time you were at the fed until recently, the government was always running a deficit that the fed thought was a little too big and the role of the federal reserve chairman, i remember paul volker and alan greenspan going to congress saying you guys got to

tighten your belts. you're making it hard for us. interest rates are higher than they would otherwise be. the test of this was, i think, seen as the early '90s when chairman greenspan encouraged bill clinton to reduce the deficit. it worked as everybody hope, economy got better, interest rates came down, we got more investments. the last few years have been remarkable in that the fed, ben bernanke, janet yellen and others said to the congress, i've got this all wrong. you've got policies too tight, you're not spending enough, you're taxing too much now and we can't lower interest rates so you're making it hard for us. we have a deficit but it's tomorrow's deficit not today's. that's a long wind-up to, how does the fed think about fiscal policy, and particularly, does it compensate for lousy fiscal policy? should it lecture the authorities? should it try to guess what fiscal policy is and set monetary policy accordingly?

>> i think it does all three of those things. i think it has to -- it's been given objectives for output and inflation. you have to guess, forecast, project what the path of all, a lot of variables feeding into those outcomes will be. among them is spending and taxing by the federal government. that's certainly part of your outlook. you have to take a guess as to what it's going to be like you have to take a guess at what foreign growth is going to be, how consumers will act, any other actor in the global economy that comes back. you've got to do that. at the same time, i think all federal reserve chairman including chairman bernanke have said to the congress, we're taking this as given but we think there's a better what i to do it. you have your hand on this lever and the country would be better

off with a different configuration of fiscal policy. i think the chairman of the federal reserve is in a unique position as being perceived as kind of the chief and the nonpartisan economist for the united states without an interest in the administration, without interest in the congress, and an interest only in better economic outcome. i think that's a powerful position. you have to be careful. chairman bernanke came in saying explicitly, i think chairman greenspan got into things like taxing policy and whatnot that item not sure that an independent federal reserve should be talking about. but he has talked about fiscal policy. he's talked about both aspects. he talked both about too tight in the near term then you haven't done anything. >> what about how you make policy, should the fed tell the

congress, look, we are at the limits of our authority and we are not going to keep buying bonds until you guys get your house in order? >> no. i think the congress knows what it needs to do. the fact that it's had multiple committees and groups trying to get it done, i don't think it's up to an independent central bank to use its tool to bludgeon another part of the government to do what it needs to do under its own authority. and then in bludgeoning and disciplining the other part of the government, steer away from the legislative objectives that it's been given. i think the central bank is on the best path, the most offensible path where it says you told us to do these things, that's what we're doing. if the federal reserve feels, and i agree, if it were not to have undertaken these unusual

policies, that the economy would be weaker, interest rates would be higher, there might be a little more pressure on the congress to do something. i wouldn't bet a lot of money in this partisan environment if anything would have gotten done if interest rates were 150 basis points higher, but i would bet money more people would be out of work, inflation would be lower and perhaps headed even lower. taking a chance, not doing your best to hit your legislative objectives in order to teach those guys a lesson? i don't like that. i don't think that's good public policy. >> let me ask you about one more topic before we turn to questions. i came to washington 1987. the federal reserve's communication policy was basically somewhere between nothing and mumbling. in 1987 the federal reserve didn't even announce after an fomc meeting what the decision was. you had to discern it from the

markets. you've been there as there have been increasing amounts of transparency. you were actually involved. you were writing the statements when they started to write them. i think i'll say as an objective observer, the care with which the statements were written has diminished since you left. so first of all, has it worked and secondly, is there too much? >> i think it's worked. no. i don't think there is too much of it. i do think there are limits on clear communication. i think it was very important. the first statement we put out was in february of '94 when we raised interest rates the first time in several years. we thought it was important that people know what we were doing and there wasn't much in that statement, if i remember correctly. it was just a couple of sentences. >> give the market a heart attack. >> right. but the market survived that

heart attack. economy survived three percentage point of interest rate increases in '94 early '95 just fine. that laid the ground work for the soft landing and continued growth. we thought it was important they know what we are doing and there not be a lot of uncertainty about it. over time those statements grew to add more explanation why we did what we did. i thought that was great. if they understood what which were doing, the markets were more likely to behave in a stabilizing way rather than destabilizing way if they understood what the fed was up to. the statements and the way they've grown have been a

positive -- have helped people. part of what's happened if i think back to the volker era and before, part of what's happened you had more and more people involved in the markets. you've got all these new services so everything happens instantaneously. the information spreads much faster, more people are interested. in the old days, in the '50s and '60s into the '70s, the fed was talking to a small group of primary dealers whose economists had come from the federal reserve board or federal reserve bank of new york and everybody was kind of understood where everybody else was. there were still problems. as the markets became more democraticized it was necessary to talk to more people and explain to more people and explain more clearly. i think particularly in the

crisis and aftermath, an awful lot of the effect of federal reserve policy has been in the communication. so conveying that you intend to keep interest rates low at least until unemployment is below 6.5%. >> that sounds good in theory. if you look at the past year, it seems we've seen down sides of this. it's hard to commit to a future when you're not sure what it is. the longer the statement gets, the harder for all 19 members to agree to it. how would you judge how well they've done a communications in 2013? >> i think there were some stumbles, obviously. particularly in may and june. to some extent we are seeing at least for now the outer limits of the communication. just for the purposes, just for the reasons you gave. you don't know what's going to happen. you don't fully understand what's going on in the system,

all the economic relationships between growth and employment, and employment and inflation. so there are lots of surprises there. i think the disagreements within the committee which are good, you form, congress forms committees. in order to get multiple points of view, diversity within the committee, that is the strength of a committee structure, but it impedes clear communication when it's not clear where the center of the committee is, what it's going to do. all those things limit the extent to which you can talk about what you're going to do next because you don't really know what you're going to do next. i think the unemployment rate issue is nice illustration of that. fed put 6.5% unemployment rate on this as we won't tighten until we go below that.

they started correctly saying that's not the only metric we are going to look at. we'll look at all kinds of metrics for the labor market. that's absolutely the right thing to do. in may and particularly if june, july there was this thing about a 7% unemployment rate that was forming a metric for the tapering. there were communications challenges and people misread them. maybe they misspoke. i think part of what you were seeing was the dynamics going on inside the committee being reflected in the communication outside. i hope the fed recognizes that it should be as clear and predictable as it can be legitimately, but trying to go beyond where that legitimate border is is very hard in trying to go beyond that could constrain the flexibility, which as you noted was one of my

concerns some time ago, and could mislead people. >> i want to turn to the audience. is there anything along this line you wish i asked you i hadn't you want to opine on? >> the due diligence question by the "wall street journal" reporter. >> i thought it was a courtesy to the interviewee. >> no. i'm sure the audience will come up with it. >> tell us who you are and remember the questions and with question marks. >> we can't see very well. >> if you don't have a question, i'll keep talking. craig again? you have to ask a different question. >> the guy with the mike ought to go somewhere else, i think. >> sorry about that, don. i'm craig torres from bloomberg. here is an interesting question, don. >> if you don't say so yourself. >> every forecast period the fomc has looked for stronger growth in the year ahead or two

years ahead. we've all seen the charts. actually, the u.s. economy is moving ahead now four years after the recession below the trend line of 2007. if you look at qe-3, the ten-year yield has gone up, savings rates stayed the same, investment spending isn't all that great. it's had some effect on housing, i grant you that and maybe on employment. here's the question. how do you give a diagnosis of the economy? it looks like the recession precipitated habits by businesses and corporations. i mean, sorry, households and corporations that are much more cautious and long lasting. how do you talk about that as a central bank without being so down beat you actually form expectations to a lower growth trend? do you know what i mean?

i think the fomc has to come clean on their forecast. >> are you asking why is their forecast wrong or are you asking begin that we seem to be in this period of disappointing growth, what do they do about it? >> my question is, is it time for them to be more honest perhaps about their forecast? >> i reject the premise of your question. >> they're just wrong. they're not lying. >> predicting has been very difficult. i think it's a combination of things we don't fully understand. so for one, things have happened that haven't been anticipated. one was the euro crisis and potential for the break-up of the euro zone which came back to the u.s., not only in european recession but in questions about financial stability. another one was fiscal policy. federal fiscal policy, which was, i think, much tighter in

2013 than most people would have anticipated in 2011 or even 2012. state and local governments have been under more pressure and have cut back. there are a bunch of different things, i think, that people didn't anticipate that have held the economy back, the head winds. i think taken longer for the real estate credit and real estate markets to get going, back going again. usually residential real estate leads out of a recession. this time allows for production to get far enough below population to take care of that excess housing. and in addition, i think there are questions about what long-term trends are here. it's -- larry summers raised and

others have raised -- noted, there is long-term downtrends real interest rates and questions about what long-term growth is going forward, not only from demographics but innovation and productivity and that might be depressing interest rates, equilibrium interest rates in a way that hbt been anticipated before. what the federal reserve needs to -- has to do is say, here's our projection and how we get there and here's why we're projecting what we're projecting and it's up to us to evaluate how -- and here's how that projection and our actions lead to our legislative objectives. >> i apologize for using the word -- is there another question in the front?

>> peter brown. i was wondering if you can -- we invoked three in the weeks right before. congressman responded to 13.3 and two ways, one is the institution of the liquidation authority as part of dodd frank and the other is by amending 13.3 itself through a move the discretion of making individual extensions of credit discount window making those more broad based. if you were sitting where you were sitting in spring of 2008 and looking at the law as it was written now in 2013 and 2010, what do you think of this? do you think this is an improvement? are you better members of the board of governors of the federal reserve to respond to these liquidity and credit situations that you are phasing with an ola and new 13.3, or is

this a strep in the wrong direction? >> no, i think -- having ola is really important. we had very -- and very positive development. so we had very few choices open to us in the spring of '08 or fall of '08 because there wasn't an orderly liquidation authority. banks had orderly liquidation and we could take them over and sell the deposits and loans over the weekend. but no wasn't available for other institutions or bank holding company that weren't banks. i think we're in much better place having an ordererly liquidation authority and flexibility for the fdic to use it punishing the shareholders, they'll be wiped out and

culpable management and i agree with simon, it will be difficult -- in some cases it will be obvious who is culpable and in many cases it won't be and punishing the way it's going to be implemented and punishing the creditors, particularly the creditors of the bank holding companies. i think these organizations will be subject to more market discipline and creditors will not be free of that discipline which is essentially what happens. it's a very good change. the changes to 13.3, i think are a bit of a mixed bag and they go beyond what you said. so now 13.3 can't -- can't be used for troubled individual institutions and must be used for widely available credit. it needs approval of secretary of treasury. i think that's going to be okay

too. so my experience is that secretaries of treasury of deeply involved with crisis management and there's a lot of communication between the fed and treasury and the secretary that agreed was both secretary paulison and secretary gitener were closely working. i think that the secretary will be along in the crisis management of what i worry about two things, two other changes in 13.3, one is that if a nonbank borrows from the federal reserve, the federal reserve is required to send the name of that institution to congress that week. now, and congress can be requested to keep it

confidential. put yourself in the position of the bank. then the -- i think that one of the things -- one of the difficult problems we ran into administrating the discount window is stigma. we thought there was a problem here. inner bank funding market was broken. we wanted banks to borrow in order to keep that problem so this is the bid the market maker banks weren't lending to each other. we could lend to the banks and prevent households and businesses from being affected by the seizing up of the inner bank market and cp market, et cetera. but if you think your name might come out, you're going to be very reluctant to borrow until the last minute until the crisis is already there. there's a real tension between the desire for public

accountability of the federal reserve and what it's doing and the effectiveness of the federal reserve's actions and the pen dual um swung and too far on the transparency side. i'd like to tell a story of an insurance company executive i talked to in the spring of '08, i guess, or '09, after our securitization facility was opened and i said, your company isn't participating and you're not helping us get the securitization going again. and this was shortly after the automobile manufacturing ceo had come to washington in their private planes and this guy said, my boss told me and he was head quartered in connecticut, that if he has to ride his bike to washington, d.c., to testify

in front of barney frank, i'm fired. so we are not participating. >> one over here. and one over there. why don't you start and i think that will be it. >> sam altman, george washington finance. are there any opinions as to -- you alluded earlier to the market drop we saw. related to the possible he'sing of qe made it into the guidance. has therein been effort into discussing a level of the market that would be an allowable correction going forward, such as what we're experiencing now? >> i'm sorry, i didn't understand the question. >> i'm going to try. so how -- do you have a view on how much of a reaction it wants to get when it tapers? what's enough and what's too much? >> i think it probably does.

and clearly they got much more in may and june than they were thought they should have. when you take any monetary polycy action, you're thinking about what the effects will be on the markets and what the feedback of the markets will be on the economy and on inflation and how that feeds into your whole point of taking an action is often that get a feedback and how it feeds back on the economy. there are a couple of people in this room who worked with me on something called the blue book, the policy -- the policy choicers and we spent a lot of time saying -- trying to figure out how to say, if you do this, we expect this kind of market reaction and that will have the following effects on your forecast. yes, i'm -- >> the track record guessing

what the market would do? >> not very good. i'm looking at some -- >> and sir, your question. >> you mentioned about the lessons from japan and i agree that the fed has quickly crisis learning from japan's experience, but in the 2002 and 2003, fed also very concerned about the deflation looking at japan. so at that time, feds say for a long time and late on tightening. i think in this case you learned a long lesson from japan. >> good question. it is basically, in order to avoid japanese style inflation, the fed kept interest rates low for quite a while in the 2000s and some people think that was one of the reasons we had the asset bubble and the bust. >> i don't think our -- my view

is that our monetary policies through 2003 -- and i think a lot of the criticism is not so much in the 2003 but we didn't raise them fast enough in 2004 and 2005. i don't think that was a major contributor to the bubble. i think i would vote much more on the credit markets and standard set in the credit markets. i think another, 25, 50, 75 basis points there would have made very little difference in the housing market per se. there were other forces at work and in the end we didn't get -- we got, i think a little bit of an increase in inflation before the crash came and we maybe overshot the one point by a little bit, but i don't -- i don't think easing in contrast to john taylor and others, i don't think the monetary policy

>> hillary clinton receives lantos foundations 2013 human rights award. also speaking at the event, madeleine albright who served as secretary of state under bill clinton. the two women talk about the recent passing of former south african president nelson mandela. this is 25 minutes. >> thank you very much. you. >> thank you for your kind words and good morning. thank you to all of you. i'm thrilled to be here. we are here to celebrate those who dedicated their lives to human rights movement and we would be remiss if we did not to honor the passing of one of the movement's greatest

heroes, nelson mandela. resident mandela was an activist, a prisoner of conscience, a political leader, a venerated statesman and he was above all a teacher. he taught us that the power of forgiveness is greater than the power of hate and the differences of race and nationality matter less than our shared humanity. his presence on this earth will be surely missed. his lessons will endure in the hearts of millions. this has in fact become a very special event as part of what tom talked about. a sadness that nelson mandela has passed from this world, but it is very much the same kind of story that tom lantos talked about. we come together because this extraordinary tear -- trailblazer, a man who was admired from washington to

budapest. as much as we are in all of tom, tom was in awe of his family and what a wonderful big family it is. if you spend more than five minutes talking to him, you knew all about his 17 grandchildren and two daughters and he would even include his dog. mosco.gi to but when you talk to tom he says he thinks of himself as a husband of a remarkable woman. it was so clear how much he loved and that more than anything. for nearly 60 years they spend married together only bright and that twinkle in his eye and so thank you and that -- thank you annette. we have traveled together a lot.

for everything that you do to make sure that the human rights torch that tom latham with you stays lit. tom once said that he was a humble worker in the vineyard of the enterprise to make this world a saner place. you all know the truth, that he had a unique call to conscience, a permanent vigilance against discrimination, genocide, oppression and anti-semitism. he was democracy's staunchest defender and that was a core value of his existence. you may not know that he was also a staunch defender of the rights of women. i'm especially delighted that we honor a dear friend of mine with

this award that bears his name. it is been nearly 20 years since i joined secretary clinton at the fourth world conference on women. -- a simple universal message, human rights are women's rights and women's rights are human rights became a mantra for so many women denied the opportunity to live with freedom and dignity. in beijing is now a watershed moment in the history of the women's rights movement, but even before that defining speech and ever since, hillary has been expanding the frontier of human rights and pushing back against inequality both around the world and here at home. she understands it women's rights are human rights, but also women's progress is human progress. we all benefit when women have the chance to participate fully in every aspect of life. the world needs the wisdom and strength and vision of all its people, not half.

people say that democracy for all its limitations is the greatest force for peace and prosperity. i know hillary truly believes that. that denyings women their rights is one of the greatest forces against peace and prosperity. she knows is because she has seen it firsthand. in her more recent incarnation as secretary of state, she carried the american flag to over a hundred countries and delivered her message directly to its women, even if it rattled the government. she said i stand with you in your fight to shatter your class ceilings. the united states stands with you. and they believed her, because she has shattered almost every glass ceiling in her way.

if we can help give women the power to make choices for the families, communities and countries, the cycle of poverty can be broken, health education can be improved and societies can be better off. it behooves us, those of us who live in places where we have economic and political voice, to help other women. as much as the world today needs good leaders, it needs vision. visionary, soh a much so she even channeled her long departed presents us her predecessor eleanor roosevelt. , when she meets women's rights leaders in countries that are oppressive, they asked if they can get a picture with her. they know that a picture with hillary clinton means they will

not get harassed, abused or attacked. she is the protector. i could go on and on about the awards she has wanted the initiatives she has started and the miles she has traveled and lives that she has changed and writes that she has defended, but to me, the most awful illustration of for example is the fact that a simple picture with her can save a life. surprise come as no that this woman who is qualified for everything has proven to be an outstanding mother and wife and daughter and advocate and lady, senator and secretary of state and a really good friend. , unlikehas the ability anybody else, to look past it every day to help expand women's rights and human rights and people's rights and to speak out on behalf of the voiceless. i have always said that there is a special place in hell for

women who don't help each other [laughter] secretary [applause] so, madam secretary, although it is a hundred years away, i think there's a special place for your next to eleanor roosevelt, congratulations on the special award. [applause] >> oh, my goodness. [laughter] thank you.

thank you, very very much. thank you. thank you and first to the extraordinary lantos family this is indeed a great honor and an immense personal pleasure to have tom lantos around my neck. office or onin my me what i wasng going to do about something or offering to partner with me on and ase of human rights -- of you who are here now,

because youu know recognize his significance of the work that he did joining us public career. he was a man of great courage and compassion him and he had a wonderful partner in his wife, annette, and his fabulous support system with his daughters, annette, and their -- with his daughters, katrina annette, and their , family. we should give a round of applause to the entire lantos family here today. [applause] when the proceedings began, it was said we meet on the day after the loss of a giant among us, someone who by the power of his example demonstrated unequivocally how each of us can choose how we will respond to

those injustices and grievances, those sorrows and strategies -- and tragedies that afflict all of humankind. nelson mandela will be remembered for many things. he will be certainly remembered for the way he led, his dignity, his extraordinary understanding, not just of how to bring democracy and freedom to his beloved south africa, but how important it was that he first brought freedom to himself. as i spent time with him, starting in 1992, until just in the last year and a half, i was always struck by the extraordinary depth of his self-

knowledge, of his awareness about how hard it is to live a life of integrity, of service, but to combine within one's self the contradictions he lived with a lawyer and a freedom fighter, a prisoner and a leader, a man of anger and of forgiveness -- has so captured the hearts of people, not only in his own country, but as we are seeing with the outpouring of response to his death people around the world. i only hope that as we both mourn and celebrate the passing of this universally recognized

and beloved figure that we remember he became that through an enormous amount of hard work on himself. the story has been told several times now in the coverage that i have watched of his passing about how he invited three of his prison guards to his inaugural festivities. i was there as a part of the american delegation for the inauguration, and i was there at the luncheon that was held back on the grounds of the president's house that had transitioned from the morning where i had breakfast with president de klerk to lunch that i had with president mandela.

as he looked out, to the large gathering filled with dignitaries from everywhere, including people who had been part of the struggle itself against apartheid and who had supported that struggle, he made the point of thanking his jailers and pointing out of all the distinguished vip's who were there, he was most grateful that these men with whom he had exchanged words of recognition and acknowledgment of the other's humanity over the course of that long imprisonment could be there as well. as we think about nelson mandela, it brings to mind very much to me tom lantos, because here were two men who had seen

the worst that humanity can offer. who had been objectively denied their right to be a jew in hungary during the holocaust or a black man in south africa during the apartheid, they had every reason to come out, if not embittered, cynical, believing that for the rest of their lives the only thing that would matter was acquiring power, being able to demonstrate their influence, especially as against those who had denied them the right to be who they were.

what always struck me about nelson mandela and tom lantos was the joy the curiosity, the , enthusiasm for life. they brought it with them out of the depths of such suffering. mandela told many people that he had to learn to forgive and he had to learn to leave his anger behind when he walked out of prison on february 11, 1990. or he would have remained a prisoner. a prisoner of his own feelings, of his own resentments.

tom lantos, who escaped the worst example of inhumanity, decided to become an advocate for anyone anywhere who was facing the kind of fear that comes to standing up for yourself and your fellow men and women. so we honor two great men by being here today. two men with un-comparable -- souls. we acknowledge other human rights activists who oversee -- who have received this prize and who stand before us. each of them has also known what it is like to come up against

governments and powerful forces who are determined to squeeze the hope from your heart. to imprison your mind and break your spirit. another man stood up to that kind of oppression, escaped from it as tom escaped from the holocaust. he ran toward freedom. i am proud that the united states is the place that he ran toward. that it was our country, thanks to people like tom lantos and others in this audience, who have held high the banner of human rights as not being something that is given to you, but something that you are endowed with. and paul thank you, you have , stood your ground.

you stood in the face of another horror that was almost unimaginable, the horror of genocide in our time. you saved and protected others. it was a great example not only of courage, but of compassion. as we gather here, we are reminded of those who have given so much to ensure that the hope that is represented in tom's legacy lives on. this foundation really embodies tom's spirit. it is quite humbling for people like madeline albright, my dear

friend, and i, to know that secretaries of state, go, but what remains is that profound commitment to making a difference in whatever position we find ourselves in standing up and speaking out for those who might otherwise never have a voice. i am deeply honored to be given this award, particularly on behalf of two causes that are near and dear to my heart, women's rights and internet freedom. i want to acknowledge publicly the great work that tom's grandson did for me in the state department and continues to do

at the intersection of civil society and government. we can help people help themselves. they can make sure that their voices continue to be heard. i also think it is critical that we look broadly, globally, about why this mission that many of us embrace for the full participation of women and girls in society is so important. it is not just the right thing to do. it is not just the recognition that women and girls, just like men and boys, deserve the opportunity to live up to their own god-given potential. it is because we know that when women and girls participate in economy, economic growth is greater than it would be without them. where women and girls are given a chance to be educated and to get the health care that they

deserve to have, we know that society benefits. where women and girls can participate in peacemaking and peace building as full members of society in trying to resolve conflicts, we know that resolution is more likely to be sustained. it is a great honor for me to have this award, but it is just a reminder of how much more we have yet ahead of us to accomplish. we have to make sure that tom's dreams, tom's life, the examples of the award recipients with us and those unable to come like the dalai lama and ellie we sell elie wiesel bring out each of us our own commitments to what we

will do to further the cause of human rights, universal human rights, for every man woman by boy and girl in the world. it is what tom would expect us to do to hold high his ideals. by accepting this award and knowing that tom would not left me on -- let me off the hook otherwise, it is something that i will continue to be committed to and every way that i can with every fiber of my being because the kind of world we want is a world in which the nelson mandelas and tom lantoses can be proud. [applause]

>> we will have highlights from the nelson mandela memorial service. you can watch president obama and other heads of state as they address thousands in a stadium in johannesburg, beginning at 8:35 p.m. eastern on c-span. >> i wish you both a very happy christmas and a bright and prosperous new year. it is a pleasure to be you mr. and to have you open the sale of seals which begins on thanksgiving day for this year. would you mind autographing some

of the christmas seals as a special favor for santa claus e >> well i should be delighted. it is one of the things that i do best. >> ha ha ha ha. >> you must've performed like this before. >> for my father santa claus gave it to me. >> well it has some of the dogs hair in it. >> first ladies: influence and image, season two. edith roosevelt to grace coolidge. >> next, at the university of minnesota hosts an event with two former representatives talking about the recent budget plan in congress. what it could mean for future bipartisan deal. this event took place one day before the house voted in favor of the budget deal which now requires approval by the senate

>> good afternoon. i'm mary jacobs and the faculty .ere the average of the program talking about the significance of the budget deal in washington both in terms of the regular order in congress and in terms of its political implications for both the democratic and republican parties as well the origins of some of what we're been seeing in washington. we're very fortunate today to have a terrific panel. with real expense in washington and the significant ways, as well as leadership roles in the state capitol in minnesota. i would like to introduce the panel in front of me. who servedlgud nick in the house in the house of representatives in washington. hemartin seybol

went on to washington, where he served for 13 terms in very important positions, including as chair of the house budget committee in the hundred third congress in 1993 and 1994 which passed a budget act that played a major role in the reduction or elimination of deficits during the 1990s. weting next to congressman he was aressman representative in the minnesota to 2007.m 1979

here's also speaker of the minnesota house from 1999-2007. i went to first begin by wouldizing my colleagues first ask a few questions. iggum. >> the conversation is changed a little bit since yesterday afternoon from under plans and preparations were, congress has had some action on a bipartisan budget agreement, which i think is very good for the country, by the way. i would like to look at my two nik who wouldutkne stand up and speak for 10

minutes on nothing. to,s a compliment, gil, sabo. as ofrsabo. yesterday, being in leadership as you work, being a of the budget committee in washington, we had to bring people together. rather than talk about the specifics of it, it's talk about the tone of it and what it means for the future. , doesn'tment yesterday signal an end to this hypersensitive partisanship, to the discord that has happened in washington over the last three years. his is something that we as american people should see as a , somef some cooperation compromise in the future? >> i think it is a plus.

it clearly sets a framework for at least discretionary spending, not only for this fiscal year but for the next fiscal year. there are major problems that remain unresolved. those will remain difficult. we will find a little bit more when we get to the question of extending the debt ceiling next spring. clearly that is something that has to happen we will see if --t can happen without great gutnik, acted agreement yesterday you read some accounts where it is not total harmony third not just because of what is in the bill, but maybe because what is not in the bill. caucus of six years ago.

i want to turn this into winners and losers, hopefully it is a mutually inclusive, everybody can win, how can a republican be against this deal from what is ? it will reduce the deficit, it is not -- it is not include taxes, it is $200 billion less than what president obama recommended in the 2000 14 budget. how can a republican be against us? >> it is not good enough. it is just that simple. i think in the end it will pass, but you will see republicans, the more conservative members of do caucus, will at least some public carping about the deal, but that is always the case. i think both of you are in leadership and the legislature, you understand that there are certain elements of the caucus

that are always unhappy with whatever deal is worked out. i suspect that will be the case this time. just from my perspective, does appear that the republicans have given up quite a bit in this budget deal. others may disagree with me and i think marty may be , i think in so yes the end it is an agreement that we will get the 200 18 votes in the house and it will pass. but there was still be some posturing and there will be some angry people about this. congressman gutknecht, i'm curious what you think about the longer-term implications. we have now gone through a government shutdown, there's a lot of fear that we were heading into another shutdown come january. we had almost default on the government's debt limit for past spending, twice.

signal of larger change in the nature of governance with divided power in washington? in other words are getting back to regular order in congress would you give and take where compromise is not radioactive? is that irter answer think it is progress. the longer answer and i think he to be cynical, but i think there is more about politics than there is to this relative to policy. the politics have changed dramatically since october when obamacare started trying to enroll people on the website. if you look at the polling in someare now, i think respects republicans will be driven to compromise settlement the budget but also ultimately on the debt ceiling, in part because the old adage in politics is when your adversary

-- we as to say committing suicide -- don't get in the way. the democrats have look so bad right now come i don't think the republicans want to pick fights that they will not be able to win anyway and that will probably hurt them at least as much am a perhaps more than the democrats. i would say that on balance this is a good budget agreement, this will pass, you will see arguments on both sides, ultimately i think you do will be struck on the debt ceiling. as i say, and is more to do with the politics than the policy. litanie let me follow up with the morebo. progressive elizabeth warren server the party, as well as within the republican party and

what has seemed to be almost a death grip by the tea party and the liberty movement led by rand paul, does it strike you as a return to the power of leadership and the mainstream >> at an oddparty? to read the republicans at this point. my hunch is that the leadership will win on this one. in the time of the continuing resolution, leadership really lost control in terms of how the issue is framed and politically they paid a price for that. i don't know how to predict the future. in the long-term we still have to deal with some very tough both revenue and expenditure that iand i don't see

think those are the agenda for the next two years, really. see anything happening on those issues. at that point we need to have folks beyond ideology. cossman gutknecht, you mentioned how this was a pragmatic lyrical move by republicans so they could shift to obamacare, but it is interesting the reaction from the right wing of the republican party, red state, one of the better-known blogs out there, referred to the steelers capitulation. there were particularly upset that the budget deal for two years removed an important obamacare.er the question to you is, is this a sign that the leadership is ready to get health with that 20 or 25 hard-core right wingers in the house? produces is a temporary, tactical disagreement? of all the think it is

demeaning to refer to people as right-wingers, ok? they are very committed people on both sides of the political aisle are driven of left-wingers on the side and you call the progressives. the conservative wing of the party has really strong views, ok? i basically come from that side. i went to washington in 1994. we were looking at deficits of more than $200 billion and we were very serious about controlling spending and ultimately allowing americans to keep more of what they earned so that they could reinvest it in the economy rather than allowing it to go through government and the ultimately reinvested in the economy, which we thought was less efficient.

i think they all understand that if the objective focus is on what is going to happen next november, that we can't be preoccupied with what is going on here in december. respond. i think the republicans won the issue on discretionary spending. unreal and in many ways unworkable as even the republicans who worked on the appropriations committee basically say. for the life of me i can't understand their position on the continuing resolution.

at their level, instead of the current deadlock they should declare victory and moved on. but i also have to say in terms of dealing with budget deals, even going back to 1990 when bush was president, over the past important legit deals. there were an overwhelming number of democrats voting for it. the republican leadership voting no. not the republican leadership that most of the members voting no and most of the people who now are their leadership, if they were there and 90 they were part of the noble group. in terms of dealing with budget issues in a bipartisan or realistic fashion, the history

in the 90s was most democrats ipported it, some republicans would be very surprised if that changes in the future. i expected some point there has to be a major deal and it is going to have to be significant democratic votes and hopefully enough republican votes to make a bipartisan and passable. >> i want to confirm that it sounds like you to agree that in the housens today and paul ryan had a big victory here. they're been able to shift the goal post or the 50 yard line critic and suitably in the conservative fiscal direction. the spending is in the ryan- murray deal on this discretionary side is less by some amount than what president obama had proposed.

it is it is even less than what paul ryan proposed in his budget. would you agree with the congressman that republicans -- >> i agree with marty that on the discretionary side that significant progress has been made to the sequester and this budget deal. the issues that remain that are the big issues that we continue to kick down the road are on the mandatory spending. they are the ones that we just cannot get our arms around. unless you deal with the entitlements, you can slash discretionary spending another 50%, but you can never really get to what i think we all want and that is a fiscally responsible government today