antibiotics to be used on our factory farmsabout half the total use in this countrywhen we know that that contributes to resistance. >> my hon. friend raises an extremely serious problem, which is global in its nature and could have unbelievably bad consequences in terms of anti-microbial resistance leading to quite minor ailments not being properly treatable. one of the problems is that the way research is done currently by pharmaceutical companies is not necessarily bringing forward new antibiotics in the way that we need or solving this problem. i have met the chief medical officer to discuss this. there are a number of steps that we can take here in the uk and working with other countries, and i hope to say something about it soon. >> yesterday, the secretary of state for business, innovation and skills said that he was working with civil servants to ensure that any assurances given by pfizer during the proposed takeover of astrazeneca could be

made legally binding. does the prime minister back that? >> as i said, the more we can do to strengthen the assurances we are given, the better. but the only way to get assurances is by engaging and getting stuck in with those companies, which is what we have been doing, and i find it extraordinary that the labour party chooses to criticise us for that. >> last but not least, i call dr julian huppert. >> the pfizer bid for astrazeneca is driven by tax advantages. has the prime minister spoken to the us government about whether they propose any changes to their tax law, and has pfizer asked for any changes to our tax system, particularly to the patent box? >> pfizer mentioned in a letter to me, they do mention the patent box as a positive reason for wanting to invest in britain and for examining whether it could increase manufacturing in britain. of course, because of the way the patent box works, you only get the low-tax benefit if you make your investments and do research in the uk, and then

exploit that research by manufacturing in the uk. i agree with the him that we should be incredibly hard-headed about this. it is an advantage that britain is a low-tax country. we used to stand in this house of commons and bemoan the fact that companies were leaving because of our high taxes. they now want to come here because of our tax system. i agree with the business secretary that that is not enough; we want the investment, the jobs and the research that comes with that competitive tax system. [captions copyright national cable satellite corp. 2014] [captioning performed by national captioning institute] >> next, a discussion about the dodd frank law's impact on

institutions that are too big to fail. "q&a," with., author evan osnos. later, another chance to see prime minister david cameron taking questions in the british house of commons. years, c-span brings public affairs events from washington directly to you, putting you in the room at congressional hearings, white house events, briefings and rences and offering complete gavel to gavel coverage of the u.s. house as a public service of private industry. hd, like us on facebook and follow us on twitter. >> next, a discussion about so-called two big to fail financial institutions and the effectiveness of the dodd frank regulatory law. governor timota pawlenty is joined by fdic vice

chairman thomas hannigan. this is an hour and 15 minutes. guess i you for what i would call a gracious introduction. many of you have probably watched me and now you will get to hear us talk. gentlemen certainly need no introduction. tim and tom, two of the most influential voices on the current state of banking. .im pawlenty nearly 100nt financial institutions. very important role. before that, a lesser-known role, governor of the state of minnesota. fdic,ice chairman of the many of you know him. many probably thought he would hang up his hat in 2011 when

after 20 years as head of the kansas city fed, he stepped down. less than a year later, you reemerged. back and better than ever. i think we are going to start with some prepared remarks. we will start with tom. i will ask them questions and we will open it up to the audience after that. >> thank you. i didn't know until this last panel that some people wish i had hung it up. [laughter] never be detoured is my model. that is what i am going to talk about today. i may not be in agreement with some of the comments from the previous panel. it concerns the issue of too big to fail. before i get started, i want to who congratulated the comptroller of the currency for

service to the country. i think it has been an interesting ride. i am also very much looking forward to the discussion and i will try to keep my remarks to the point. i want to start by giving some context or principles for my comments that will follow. ingree with those who say the aftermath of this crisis and its effects, we must be pro-market and not pro-individual firms. i am in agreement with those who say capitalism works best when the business outcomes are symmetric, allowing for both success and failure without regard to which firms are involved, simple or complex. lawree that the rule of must drive our actions. it is crucial to avoid its

discretionary application that becomes crony capitalism. this is important as we discussed titles one and two of the dodd frank act and their use in the resolution of systemically important financial institutions in the future. shelby likesenator to remind the world, institutions that are well capitalized, well-managed and well supervised seldom fail and are unlikely to require taxpayer support. said, let me just move to the idea of too big to fail in my mind. the largest, most complicated banks in the u.s. and globally remain, despite some people's opinions, too big to fail. they continue to distort the market and its performance.

in 2014, no less than in 2008, the largest banks cannot fail without bringing down the entire u.s. system, which means too big to fail remains a factor affecting decisions and performance for the u.s. economy. the largest u.s. bank when off-balance-sheet assets are recognized holds the equivalent of 25% of our national department. the largest eight banks hold the equivalent of 100%. the largest and most complex banks rely disproportionately more on the presence of the federal safety net than they do on strong capital to instill public confidence in their banking and broker-dealer activities. the industry runs with too little capital in my opinion, not too much. in the so-called apical global index that i put before you, it looks at the leverage ratios with tangible capital against

the total assets that take into account the off-balance-sheet items. these numbers give you the true loss absorbing capacity of these institutions. they remain better capitalized in 2008, but not so much so that we should feel safe or comfortable. moreover, the advantage of too big to fail has facilitated the increase in size and complexity of these banks, making them unlikely to the well-managed or supervised in a sustainable manner. the complexity is just overwhelming. read the annual reports of these most complex firms and you begin to appreciate just how difficult, perhaps impossible, to understand their operations. i would note that i am a supporter of making the living wills public so that people in a

more general sense can judge for themselves how prepared we are for bankruptcy. status hasfail facilitated the growth of the largest, most complex firms and the consolidation of the financial industry. it has facilitated it. these trends have turned the structure of the market toward opoly,f an olig . we have to change course in my opinion. in doing that, i am told repeatedly that although the dodd frank act requires bankruptcy as a resolution vehicle, is not a viable option. i am told that bankruptcy has too many problems to overcome for these firms to be satisfactorily resolved in bankruptcy without government support. the implication is that the fdic

can use the title to or single port of entry that has been talked about to manage failure, thus controlling the outside negative affects without costing taxpayers a sense. leaving the taxpayer aside, it is a fact that within the dodd frank act, single point of entry is an exception to bankruptcy, not the rule. the single point of entry is allowed to become the principal -- this willlve institutionalize and already unfair advantage of the largest complex firms. giving waytion than to this special treatment for these firms would be to simplify their structure and pullback the safety net to its original coverage, the payment system and intermediation process that accompanies that, away from the

non-bank rocher deal operations. a simpler structure would aid transparency. forould aid accountability these most complex banks and their regulators and would encourage the market to more actively discipline these firm'' actions. this would also lead to more reliance upon equity capital to build creditor conference on their balance sheets, thus reliance on the safety nets to safeguard their sources of ,unding, greater specialization innovation and services within , as they are simplified to some extent, and more efficient financial conglomerates and markets. that is not easy as others have noted. i make no pretense that it is. simplifying the structure will not end all crisis. ourver it will improve

economy's ability to withstand crisis. it will facilitate a more embedded of playing field. it will encourage a better capitalized industry. it will allow effective management and facilitate supervision. ultimately, it will facilitate economic growth far better than what the current structure has shown us. i look forward to the conversations that follow. thank you. >> thank you, tom. tim. >> good afternoon and thank you for the opportunity to be here. i provide my preliminary comments, i would like to also add my voice of congratulations and celebration to the comptroller for 150 years of great service. important service and meaningful service to the nation's financial industry and infrastructure that goes with that. we know that public service

comes with an important mission that also comes with important sacrifices that are made. i know, comptroller, you personify that. you have a big team and many years, a century and a half of colleagues that have brought that ethic forward. we appreciate your service. , i am delighted to be on this discussion with you. thank you for your service as well. we are here today to talk about the future of national banking probably. this panel is focused somewhat on the phenomena of too big to fail. an important question to ask each other is, what problem are we solving? experience for much of the aftermath of the crisis was the crisis itself. one of the premises that comes out of that debate is, there are certain institutions that are so complex or so large or both,

they present systematic risk and have to be addressed in some fashion. i think there is important agreement on important principles. there is no institution that should be deemed too big to fail. all institutions should be allowed to fail. we are not here to debate, nor should other forums debate whether institutions should fail or not. they should be allowed to fail. what iste focuses on, the best way to allow them to fail so they can fail in an orderly fashion, in a way that is least harmful and corrosive to the larger economy and the important infrastructure of the financial services sector? we have broad consensus in that regard. our u.s. attorney general also suggested that perhaps certain institutions were too big to jail. no institution should be deemed too big to jail.

no individuals associated should be deemed too big to jail. again, the rules of the road should be that we have a playing field that is fair and appropriate and accountable. with that in mind, as you look at the crisis, i think everyone in this room is well familiar with an equal opportunity destruction and equal opportunity bad behavior across sizes of institution, complexity of institutions, risk profiles of institutions. you can't look at the united states congress, fannie and freddie, long-term capital, various small banks, midsized banks, big banks, non-bank institutions, lehman brothers, the list goes on, and conclude -- there is one distinguishing feature around risk or complexity that we can now drill into that is a panacea in response to the concern and

control the debate going forward. revealed thatarly it is more comprehensive in that regard. we can't just make a declaration. it is an important combination of all of that. there is nuance involved as to how to best approach that. the response to that at the time was, the dodd frank legislation. you just heard from the authors of that legislation. the best policy thinkers of that time or at least those that were charged with the responsibility to responding to the crisis in a congress that was not inclined to be generous to the industry. the dodd frank framework. the paint is not yet dry on that framework. it is not yet even fully implemented. we can certainly have a debate about what its affects might be,

but the fact of the matter is it is not yet complete. any declarations on how it does work at this point are partially speculative in nature. it is premature to be making final declarations about what might or might not work under dodd frank. that being said, the regulators including the occ have looked at this issue many times and essentially said, we believe we are making good progress. if more needs to be done, we will do more. what does dodd frank do? it provides more capital, more oversight, more regulation. alarm reach the point of or concern or the need to dispose of an entity, a liquidation authority, living wills and more. there are some folks who look at that and say, i know what it says. title ipposed to be

resolution but if not, there is a special circumstance, title ii. if it spills into title ii, there is no public bailout involved. it is supposed to be funded through other means. there is a difference between liquidity and bailouts. policymakers say, i see what it says but i don't believe it. that is the fundamental divide here. law isot that the ambiguous about whether there is going to be future bailouts. the law is not ambiguous in that regard. policymakers for right or for wrong say, i just don't believe it. i choose not to believe what is written on the paper. that is a legitimate difference. it is not unclear what the law says with respect to the possibility of future public bailouts. with that, i look forward to the discussion.

i know we are going to talk about more than just too big to fail. thank you for your attendance and interest in these issues. good facts and good debate fosters good public policy which is in the best interest of all the attendees in this room and the country at large. thank you very much. [applause] >> thank you both. it is a debate. it has become a very loud debate recently. it is clear that no one in this room would be served by the financial sector bringing it back to the brink. how do we get to the point where on one hand, tim, you started off your speech by saying this so-called so pose it phenomenon -- no organization is too big to fail. tom hoenig called it an oli goply. how did we get to this point? >> let organizations fail. we just want to make sure that

as you do that, you are thoughtful and orderly so that you minimize, hopefully eliminate, collateral damage. you can look at dodd frank and say, i don't think it will work. i don't believe it is the default mechanism. they won't bail them out with some extraordinary subsidies in the future. it depends on what you choose to believe. there is not a dispute about what the law says about bailouts in the future. the law says there is not going to be public funding other than the possibility of temporary liquidity being made available. is there a misconception about the effectiveness of the orderly resolution plan? -- it misconception depends on who you are asking. the fact of the matter is, if organizationking

and the creditors know they are going to get paid, they are going to act differently. that is what a major point of it is. it is temporary liquidity. the fact of the matter is, it will take government cash to come in. that will give others time to escape the losses that would otherwise, in a normal bankruptcy, where they would be , they wouldsolution take a haircut and lose and move on. you have got this concept of too big to fail from the perspective of not just the stockholder but the creditors behind that. compete i am trying to with the largest banks in the country and im a reasonable bank , i am not going to win that battle. creditors know they are going to be safe with these largest banks and not safe with me.

especially under stress. that is the issue around too big to fail. when you hear these individuals , living will, give us bankruptcy, that really won't work, but we have title ii. put it saying, we will in the fdic's hands. who capitalizes the bridge bank. it is supposedly these debtholders who we haven't even defined yet. these debtholders are going to recapitalize. in doing that, we are promising the world that the operating units will stay open. that is a tremendous competitive advantage, encouraging consolidation to ever larger institutions. fundamentally, we are preserving the largess and not giving equal treatment to the smallest. that is what people object to. >> tim, do you object to the

idea that this is leveling the playing field more than clarifying the law? >> if we are talking about temporary liquidity as one element or one tool in the liquidity isorary available to all size institutions. it is not unique to large institutions. getfdic and others, they potential he access to liquidity. there is not some sort of on level playing field. >> why are you having this temporary liquidity? >> many times you are insolvent, you get this liquidity, where does this capital come from? >> how is that different from the small or medium-sized entities?