this will have on some of your members? >> great question. for c-span viewers, they hear things like capital requirements, leverage ratio, liquidity requirements -- and all of that, combined together represents -- how much cushion should a bank or financial institution have so in the event of a downturn they have reserves in place and they do not become insolvent so they do not have the economic disaster they had in 2008? it is an important question. they should have adequate reserves. it is also finding the right balance. if you have a bank you can get , really great stability by requiring everything in cash and never to any lending. but then that is not a bank. that is a pile of cash. as you begin to accept the notion that some risk needs to be taken so that we have lending and loans for things like buying a home and starting small businesses and all the things people need to do. some of that pile of cash will get distributed out into the economy. how much of that do they need to

to hold back? that is the debate that is going on. chair yellen said, for the largest institutions, we may require more capital or reserve for cushion in the future if we have continuing concerns about systematic risk to these large organizations. she signaled they would be amped up even higher. our members are concerned if you go too far what you're going to do is put them at a competitive disadvantage against other banks that do not have that high of a requirement. it is also going to stifle lending which is going to keep the economy moving in a positive direction, particularly when it is still fragile. >> with all the rules in place, do you think they are reaching a point where the concern will , about too big to fail banks, who will be rescued by the government no matter what happens to them -- are we reaching a point where regulators are not as fearful about that?

>> i think the regulators -- i do not want to speak for them, but if you look at the public comments and summarize them, they say we have required much more capital. we have made great progress. we have required a living will so we have a plan already in place to wind it down. we have much more regulation, much more oversight. stress tests examinations. , enforcement actions. all of that combined represents great progress to make sure we do not have institutions that fail. fail, the way, if they do they should be allowed to fail. no one institution should be to too big to fail. no leader should be too big to jail. we should make sure that when they do there is an orderly wind down so there is not collateral damage. they are saying we are not sure we have gone far enough in that regard as it relates to the big institutions. we may do more. let's let the dust settle and then we will decide whether more is needed.

our companies are saying we understand that but do not go so far it you tie them or prohibit us from letting us do the things to the economy. >> to what extent have you seen banks give up a certain type of business lending because of these requirements? how much are they doing that? >> we have seen some of that. for example you saw some large , banks say we may be making markets and commodities but we are not going to hold for the physical commodities anymore. they're getting out of some of the business lines. we have seen, in the consumer space, banks say, because the regulations are getting so difficult to comply with. we are going to get out of advanced payday lending. we will live this to the unregulated space. that is another important point. if you regulate certain credible mainstream institutions out of certain business lines and the

push it back into the shadows the unregulated space, i think that is not progress for consumers. i think they will get treated less well and be more exploited in those areas. >> on the other hand i think the , fed would say if the bank decides to give up a commodity maybe we do not mind that. we would rather they would be less complex. what advice would you give to regulators to balance the need for some simplification to control what might happen in the shadows outside the system? >> it is a balance. you have got to find -- there are trade-offs. you can really push hard on a particular line of business and either prohibit it or overly regulate it so that you gave businesses to shut it down or abandon the business line.

if you push it into unregulated spaces, it may be the law of unintended consequences. you might take containing are maintaining physical commodities and push it into more hedge funds. the size and complexity is equivalent to what would have been a traditional bank but now they are unregulated. no oversight. no stress tests. no examinations around systematic risk or connectivity. what have you accomplished? >> it is interesting to you move the ideas of places that are unregulated. the financial stability oversight council is supposed to make the attempt of identifying institutions that are systemically important. the largest of the large. insurance, asset managers, and some of the other folks who have them in the shadow banking space. are you concerned, especially since your organization represents insurers, that the designation of some industries or some companies is going to have a larger impact on the

entire industry, be it insurance or any other industry. >> a really timely and important issue. the tradition is to focus on banks. i have a main background, a bank tradition, and a bank-centric culture, capability, and competency. the regulators have to think about insurance companies or asset managers at systematically risky institutions. the initial reflex might be we , will treat them like banks. we will include bank-like capital and reserve requirements. industry is saying before you think about that make sure you understand that a new wants -- at a nuanced level the differences between insurance companies and asset management companies. for example, insurance company assets in many cases our long-term bonds, high quality bonds. for example corporate bonds. one of the biggest buyers of

corporate bonds in america is insurance companies. long-term investments. these are stable if there is a . stablee is a-- these are long-term investments. if there is a crisis, insurance companies usually do not fail over a weekend. the wind down is much more slow. if you came in and says we do not think you should be hoping -- holding all the corporate bonds, we want you to hold shorter-term assets in your reserve, you may make the insurance company less stable by holding a more episodic investment. and the asset managers, the asset management firms they , comprised of funds that are led by fund managers. the assets are held by custodians. when you say a particular asset risky, itstematically is not really the firm. they do not do the investing. the fund does. the people who have the interest

in the fund do. there may be funds worth looking at. we do nothing the firms are in that category. we do not think it should just be size. you could have a really large mutual fund. an s&p 500 index fund could be huge. it is not necessarily risky. you have to look at the risk and activity, not just the firm. >> we have about nine minutes left. >> are you at all comforted by the fact that the council has welcomed more folks with insurance backgrounds to start trying to figure out how best to regulate the space if they are going to identify people like metlife into systematically important? >> it is important. fundamentally, banks and insurance companies and asset managers and others operate differently. they have different asset models, different capital requirements. bringing in those kind of backgrounds is really important.

also being aware of what is happening globally. if the united states approaches out of sync with the global approach, it puts companies at a disadvantage. >> we're talking about the difference between regulating funds and managers. do you think, as you look at the risks that are still in the system five years after the crisis, that there ought to be more regulation on the fund andl of money market funds similar sorts of investments? >> not necessarily. the ofr, which reports i think the group does research on these issues.

they issued a report recently on the considerations. -- on the asset managers. it was criticized for being methodologically flawed. it gets to the point of when you look at it, don't you say the firm, look at the activities underneath the label of the firm to see if they are really risky? getting the nuance of that and getting it properly and focus before they make any decisions is really important. if you have a designation, that is a very significant development. if you own money in mutual funds or a large-cap funds, you own that equity piece. it is held by a custodian. if you do not like it you can hire the funds manager and transfer your custodial assets to some other firm. the idea of what is going on at a particular firm somehow affects the fund is not

necessarily accurate. >> one of the most active areas in our financial services space is housing finance. what are we going to do about fannie and freddie? you said you thought there were some good things in there. it did not seem to be a complete endorsement. not that you have had more time to read it, could you support what chairman johnson has put out there? >> the status quo is terrible. you have fannie and freddie. guaranteeing nearly all the mortgages have access to government money without congress needing to access. -- needing to act. if there is a hick up -- hiccup in the world economy, guess who is on the hook?

the taxpayers. the status quo is awful. we're five years removed and it has not been fundamentally addressed. they are in conservatorship. they are making some money. most of it is one-time money. it would not take much to topple them into a problem zone. that needs to change. senators johnson and crapo should be applauded for trying to drive the process. we do not like every aspect of the bill. we think something needs to happen to change and get rid of fannie and freddie and move it toward a more private market model. >> are the aspects you do not like deal breakers? >> not necessarily. your viewers' eyes would glaze over. there are arguments around if there is the new guarantor of mortgages, do you go directly to the capital market? who should be allowed to do that? can you play multiple roles? how do you accommodate all their interest?

>> not things that we would say we do not want to support? >> we think it is within a zone where you can make some amendments and move it. but our members do have some remaining concern. >> phil gramm called this a bill that is dangerous to the economy , exploiting creditworthy families seeking to sign loans. >> i am not sure what their concerns are. if you look at the current state, i would ask them their idea. if the answer is the status quo, that is a potential disaster. that is not sustainable or responsible. if you look at what other bills can pass this congress or the next one, there's going to have to be some compromises. so i would certainly admire those individuals, but compared to what?

>> about three minutes left. >> what are your thoughts about the bill in the house? does it bring us any closer to a resolution of fannie and freddie and a market that is supported by private actors? >> we think the bill should also be applauded for trying to move the debate and get it to the net -- next level. one of the big differences between house and senate version is the senate has a government backstop. many experts would say if you do not have that there would not be a 30 year mortgage anymore. if you do not have that you will cut out a lot of modest income people from being able to have a home in the future. that is one of the big differences. there are some other differences too. we think both efforts should be applauded. they try to move the need forward. we hope that they will do something this year. frankly it looks like it will be challenging. there will be a committee hearing in the senate.

beyond that it is unclear if , they will process the bill. >> i want to take you back to your time as a politician. as you look at the race this year, how good do you think the republicans are taking the senate? what do you think they need to do to get there? >> i could give you the spin answer, but i think a better answer might be nate silver, who , is widely regarded a good on the numbers person said there is a 60% chance that republicans would take over the senate. it is early yet. anything could happen. i think part of that depends on whether the republican primary process yields electable candidates or whether it yields folks who maybe had too much baggage. that is still unknown. at least at the moment, most people would say there is least a 50-50 chance that republicans take the senate with a lot of

churn in the water between now and anything could happen. november. >> a little bit of time. we talked about the higher capital cushion that the regulators are looking at. regulatory the committee proposed a bank tax. what can your members do to solve this problem of people going after the big guys? it seems the populace anger has -- the populist anger has not completely gone away yet. how are you approaching it? >> we need all sized financial institutions. we celebrate and encourage community banks, midsized banks, regional banks. we need some big banks. if you're going to compete on the global stage again some of the biggest banks in china, latin america, europe, and elsewhere, you need folks who have the ability to have a global scale and global reach. that is really important. i do not think we want to see that economic opportunity to

other parts of the world. let us try to figure out a way where we can offer our economy and the global economy all sizes of institutions. the problem is, like it or not, dodd-frank says too big to fail is over. we're going to have these institutions fail and if they do this is how they will. there will be no more bailouts. the critics say i see that. i do not believe it. we need to do something more. something different. that is the lingering debate that is going on now. it has settled down. i think regulators are saying, let's finish the regulations. let's finish the implementation of dodd-frank. then we will assess where we stand. >> let me close with two quick questions. when the target breach came out, there are security measures available for customers a credit card in europe, other kind of identity theft prevention measures.

are we behind the curve here in this country? >> i think we took a different approach. obviously we need to change. , the technology is evolving rapidly. not just a chip, by the way. this could be one thing. there is a lot of other work being done in payments as it relates to phones or things like facial recognition technology. this is a space that will dramatically change over the next 10 years. but the next step is, the payment networks have said by october 2015 we're going to expect retailers who are part of , to have chip readers. if you do not, the liability will shift from the banks to the retailer. you are going to see a big change in the space over the next 12 months starting with that watershed moment. >> one other question. there have been a number of hearings recently on bitcoin. you talked about unregulated

spaces. what are the concerns about bitcoin? >> everyone is trying to figure out bitcoin. i think a lot of our members are skeptical about it. it is kind of interesting. it is a novelty. is it real? is it stable? in its current form it is , essentially unregulated. should it be regulated? what does it really represent in terms of a predictor poll, -- predictable, stable reliable , thing? the value fluctuates by a given amount in a day. i doubt you are taking your 401(k) and expressing it and bitcoins. >> thank you for being with us. we appreciate your time. >> you are welcome. thank you. >> we are back with daniel douglas and with ryan treacy of the wall street journal. we covered a lot of ground with the governor. you alluded to the fact we are now five years post the financial crisis. how stands the relationship the between washington?

the regulatory relationship with the industry today. >> from a regulatory perspective, these guys have to deal with regulators all the time. they know they need to maintain those relationships. they know they cannot go on the attack too strongly and publicly criticize them. there is a lot of frustration about this onslaught of rules we have seen since the crisis. in terms of the relationship , they would be crazy to really let that deteriorate. from as of -- legislative perspective, congress -- there is still the sentiment in congress that these guys got bailed out and we have not fixed this problem, they were too big. they would get bailed out again. wall street is not very popular right now on capitol hill. paul 20 --overnor

pawlenty talk about the story that they want to tell you to turn that tide. it is an uphill battle. >> what about from the consumer's perspective? how has this made structurally more sound? >> there is still a lot of populist angst against the big tanks. -- banks. there is still a lot of tension between the regulators and the banks they regulate. we see that a lot in some of the settlements that have come down. it has made consumers even more frosty toward the banks, whether it is a mortgage settlement or credit card fraud. you saw bank of america settled for nearly $8 million on deceptive practices. while they are still thinking -- banking with these guys, they are very skeptical about what kind of coverage they could have. at one point, not as much recently -- we saw credit unions taking advantage of that. they are saying, we are not like

these guys. we do not cause the crisis. this is working toward their advantage. but the truth is most consumers , are going to stay with the financial institutions that they have been with a do not know if it is out of loyalty as much as the convenience of not having to change over all of your accounts. >> this is earning season for the banks. >> this is earnings season for the banks. we've seen a number of the big report positive earnings and beating projections, not in some case but in significant cases. that plus the capital requirements. today the banks are able, we the regulators -- they're in better capital shape. wondering what those two things should indicate to the public about where the large institutions are. >> well, they're certainly in better shape than they were if armegeddon were to happen and we had another terrible situation like we had in 2008. there's anyk question that these banks now cushion and more

capital in place, that they'd be less likely to, you know, panic in the same way that we saw the time.s do at that you know, profits are good. these guys are very smart. they know how to take the regulation -- regulatory changes figureve been made and out a way to, you know, make basically.f it, i think one of the really interesting questions going know -- if these big banks continue to be succe successful and yet you've got regulators, as danielle to ratchetstarting things up even further, what does that do to their viability what does that do to the small guys who are trying to compete? it's interesting because a lot of times those regulations filter down to the smaller community institutions. i think they would argue that

now, but overng the years if they continue to it will bed, interesting as well. >> because 2008 was, in many ways, precipitated by financial instruments all around, the housing market, how important is the housing redo, the redo, in congress right now? >> it's extremely important. see that there's some movement on the fronts from senate as well as from the like the governor said, it's very unlikely that we'll see much in the way of an actual bill heading to the floor by the end of this it year just inause of the stalemate congress. but the mortgage rules that the consumer financial protection earlier this year starting to play out. and while it's still early to much of an it's had impact on community banks as well as larger banks, what we thisotice, especially in earning season, is a lot of the banks that were reporting decent earnings was because they were expenses. and where they were reducing those expenses was by laying off

of people within their mortgage units because the refinancing that we saw that was holding the market up for all of these years has out.y much petered new home purchases -- in many markets homes are too expensive to the first-time buyers afford so that market hasn't gotten up to a healthy position where we can say the recovery is solid.d and the banks are seeing it in the layoffs that they've done in .he last couple of quarters >> and this area, is the stalemate house, senate, democrat, republican or both? >> both. >> both? >> yeah. >> and is it going to take for the congress to deal with these issues? >> i think so. unlikely there would be a compromise on any of in this year, i think. hard tor that it's proceed, too. i think there's an attitude where five years from the crisis better, so whyg do we need to go through this incredibly arduous process of

passing legislation? these issues like mortgages, you th the realtors, home builders, so many interest groups are involved when you try and it's law like that hard to do it without getting people angry at you, frankly. incentive for a member of congress to do that, if there's not a crisis, is just not very high. it's so polarized now it may not even have to happen after the election, but we'll see. you fors to both of your time this week and welcome community.smakers" >> thank you. >> thanks for having me. >> tomorrow the outgoing chair of the national transportation board gives remarks at the national press club. her term as chair ends on april 25. she'll then take over as president and c.e.o. of the national safety council. our live coverage begins at 9:00 a.m. eastern on c-span 2.

>> i love duke. duke alum. i didn't do this to hurt duke. there's a tremendous amount of evenon about this story, to this day. all one has to do is go on to already that i've amassed, you know, 25 one-star reviews. the book hasn't even been out a week, it's a 600-page book, so i'm pretty much guessing not many of those one-star review writers have read this book. last book was about goldman sachs and people have a lot of passion about goldman sachs, but this is another realm altogether. and duke alum william d. cohan looks at the duke atrosse scandal tonight 8:00 on c-span's "q&a."

>> next, supreme court justice sonia sotomayor talking about from prosecutor to district and appellate judge to being on the supreme court. latina justice and the third woman to serve on the high court. georgetown university hosted event. it's about an hour and a half. >> thank you. good afternoon, everyone. thank you, president, for your extremely kind remarks. ats always great to be back georgetown and to have a chance to see you and my many colleagues. many here this afternoon stirs of memory.cords it's a very personal experience. thinking back some two decades ago when the bernstein lecture was launched with vice president

gore and continued with so many luminaries. i must also mention another great mentor of mother-in-law, -- mentor of mine,daniel patric. it's been great to be connected this georgetown community. i've enjoyed coming back here, enjoyed being on the board of many years. i've witnessed the hard-headed of dean schraner in these very difficult times. knew bernstein very well. he really was one of two people for my responsible joining the faculty. before we get to the main event, going to speak to you very --efly about three people marva bernstein, sonia eloise pas is akof. bernsteinmarva admired individuals of professional excellence, committed to public service, of

high moral character, and beyond theireach seaming grasp until they attain their as payingses no matter not the -- aspirations matter the difficulties. marva bernstein would have loved sotomayor. you students here at georgetown know of justice sotomayor as a trail-blazing supreme court justice that she is. upon her nomination to the supreme court, the third woman ever nominated, the first latina, her name and fame skyrocketed so that to this day walk down a street with someone, without someone, a driver,er, a bus anyone, coming up to her and telling how inspiring her life story is, what she means to that person, to that family. i've seen it happen every single gone out sincee her appointment. she is accessible to