there was something that fell through. in majority opinion that somebody was not ready to go along with. it just so happened that one argued in january and one argued in march happens to be the last two cases of the term. >> people have been wondering for weeks whether the term was going to and the previous week, on thursday the 27th, or they were going to go over to the last day of june, monday the 30th. it made me wonder -- i remember an article you did about how justice blackmun urged him to postpone the decision from a aursday to a monday because story on a friday or saturday newspaper does not get much attention in the summer. i wonder if any suspects that hobby lobby may have gotten pushed from last week to this week precisely for the style and

impact that david was talking about. >> i think that theory would make more sense if they issued decisions on friday, which might get lost. but i don't think it applies to thursday decisions, which is what they typically do these days. that was good pr advice from the clerk back in the day, but i in't inc. i attribute that -- don't think i attribute that to why monday. >> gentlemen, you said something about the difference between being upstairs in the courtroom and downstairs in the press office. can you tell us about what that differences and how you make the choice? >> i am in a lucky position that i have a partner who is very fast and handles our on the spot copy. copy ofte he can get a the opinion, he runs to his terminal and types of what happened. he has prewritten what we call

snaps which are like urgent lines that will go to our customers. that gives me the luxury of being in the courtroom. and i worked for usa today the washington post, i could do it all the time. but that was before we had to be as fast as we have to be. you get to hear the justices tell you what they think is so important about the ruling. you get to see their colleagues react. people in the spectator section react. i think it is wonderful drama, and it plays into what david savage said about the not about whattting to the nut of they have done. as justice scalia said in the epa case, the government gets 83% of what they are trying to do. we walk out with that understanding, not having to page through dozens of sheets trying to figure out what is the nut of it.

and because cameras are not there, we can bring that into our stories and enhance with the readers get. i feel very fortunate to be able to do that. >> it's important to emphasize the cost. talking,t they start your competitors are downstairs with the hard copy of the decision. they will talk, as they did in the hobby lobby case, for half an hour. you are in a courtroom, incommunicado. they are nervous about posting something without your permission. there is a cost to this incredible benefit of having the case explained to you why the people who wrote it. they are not reading the decisions allowed. they are giving a colloquial summary of the high points, which is incredibly valuable. >> part of the reason that some of the media organizations got it wrong with the affordable care act is they did not sit opinionthe entire announcement, where you do hear

the nuances and there are two parts to it. act ise affordable care unconstitutional on one ground but constitutional on another ground. the people that raced off with got sidetracked. you would think it would be more accurate if you had the piece of paper in your hand, but it didn't work out that way in some instances. there is some thinking that maybe, if they did not hand out the opinion to the reporters until the end of the oral recent tatian, it might work out better. presentation, it might work out better. faux unanimitybe if there was. >i saw someone walking with a plate of food from the lobby be varied i'm get -- food from the

lobby. if anybody wants to look for it. there is more food if you did not notice it coming and your remarks i went to add a postscript about being in the room. themember bob observing do -- during the aca rollout. spectators who are really keenly interested. lawrence gold, who was interested in the union decision. you can see how they react. during the course of the relink, we both noticed that he tightened when it sounded like the government had lost, and then he loosened up. lot.o get a it can be at a cost if you are the only one up there for your news organization.

clerks -- >> the dragon attic moments -- the dramatic moments, you are not the only one. when they announced the affirmative-action decision. on a day that was very heavily covered. i want to say it was so phone searches. >> the day of aereo. >> we were hoping to be there for two arguments. they announced the decision. justiceda my are -- first theyave her sent from the bench -- dissent from the bench. if you were not there, you missed it. it just so happened in that case, a lot of reporters were there. you have the explanation that you normally, on another day, a run of the mill sort of hebe is

case, nobody would be there -- there is a value. you can't always be there. >> in a situation like that, what do you do? you stay upstairs to watch the arguments? do run downstairs and file a story? >> i went downstairs because i thought it was a dramatic moment and the case people were going to be interested in. i wanted to get something on the web. even though i had thought at first i would stay and watch the arguments, i decided it was not worth it. it was more important to get a story out on the web. unanimous --he >> i just do what bob does. [laughter] >> i stayed for the arguments. you have the same time pressure to get something out to your publications? >> not quite as much as some of

the folks who need to get some thing out within the hour. papers ihe paley -- write for our daily. i heade -- had to get some been out. the editors realize i am one person so i do the best i can. >> you are making so many judgments. my colleague knows more about business cases. he was going to cover aereo. i am not even knowing that justice sotomayor is about to present this great his assent -- dissent. says what she says, and i know it is huge, i said i think i'm going to stay for the susan b anthony oral arguments. for that. are hoping but i know i have observed this big moment that i want to wove weave into whatever we are

putting out on the affirmative-action case. i knew my colleague could do whatever we needed to do. it was more important to have one of us up there for the relatively important first amendment case. it was tough, especially since the first two rows anted up completely. everybody knew it was wiser to run down for their purposes. w for ournew -- kne purposes to wait. we typed up what had happened in the oral arguments and then shifted gears to write a separate story. soto mayor's moment to rate -- sotomayor's moment. nothing is easy the moment. >> have you ever made a calculation, what is the story likely to be on the front page? the affirmative-action story was

a front-page story. theit would help you write decision. you lose something. this is the instance of a general problem for journalists. we cover a not very hard working court that does all its works seven mornings among -- seven mornings a month. the happened simultaneously and we have to do a kind of triage to decide which things to cover. helped,er thing that transcripts of the oral arguments are available, usually fairly early in the afternoon. i ended up writing a story about the susan b anthony case by reading the transcript later in the day. it is not the same as being at oral arguments, but you get the high points and understand where

the justices are coming from. that helps a lot. >> they have alluded to this. we are in two different businesses. bob and adam and i. i'm not sure about kimberly. we are serving a website that wants newsly -- immediately. we also work for a newspaper that wants to be more reflective. i stay downstairs and get the opinion, but i do it the as of the website. my choice would be, i would rather go listen to them deliver. but as long as there is a demand for the website to get some been up immediately, i don't feel there is a cost to it. you take a half an hour or 45 minutes. every days torn thinking i have two different jobs. court wasred if the

showing a little consideration for the press, although not as much as if they spread their work around. >> the answer would be no. >> there were never more than three opinions a day. and maybe throughout the whole term. they have been -- there have been days and other terms when there have been four or five opinions. do you think that is because of their own convenience, or they may be care about the press and their staff? >> go ahead, kimberly. >> i concur. it would be much more helpful if they delivered a bunch of opinions in the cases we did not care about, and then spread out the big ones. which they did not do. really we're not in mind. a week of two decision days in june where they cleared out every dog. and saved every big case.

the final't help, days, having two big decisions. they were not securely inclined to help us -- particularly inclined to help us. about how youken prepare in advance to cover these cases. reading the breeze. anything on the backend in terms of following up about the consequences of the case? is anybody going to track how convention -- to seek exemption under hobby lobby? i definitely will be keeping an eye on that one. one thing i am not doing which i have done in the past to wrap up what the terms mean.

the buffer zone case. all the big cases it is not necessary at this moment. i will revisit and see what the impact of these rulings are on the ground. it will take a little bit of time for that to happen. also do some previews of what is coming up. . keeping an eye on what is bubbling up. are looking ate is whether the state law bans on same-sex marriage will make it to the term next year. where those are. things of those nature. the summer is a nice time to be able to think about the stuff and do some analysis in a way you can't do when you are under the tight deadlines. a decision date. >> i plan to talk a little about next term as we get closer to the end. let's hold off for now.

mentioned panelists about how i am not allowed to have electronics upstairs in the courtroom one person who was not a reporter to get some electronics up in the court room one morning this year. were you there to -- >> i was not. during a not that newsy or a argument. it was on february 26 when a young man, a protester stood up court a session of the and started speaking to the justices. it was about the mccutcheon case.

that has happened before. it happens once every five years. what was unique about this was somebody else who had either a pen camera or some other device ofk a picture of -- a video him and making his statement. internetd up on the within a few hours. another piece of video did from another time. times literally the first since 1937 that a photo of any while it wasourt in session had been published anywhere. such a rare event. >> it was amazing in the room. it was a patent case. of semi's equivalent

crashing into each other. the room is so orderly. a couple of us could fear shares crashing. the police had trouble getting fellow.palo -- they had to knock over a couple of tears to get to him. the justices were stunned. he was, just complaining about campaignspeech finances case. he was able -- he was seven sentences before they stopped him. >> i thought he was a good advocate. got people's attention. the justices did not say anything from the bench. but we did things change. the security we go through is different. >> it happened fast. you saw the police go over. he seems to go down.

it was almost as if there was a trap door. he was there and then he was gone. right before it and attorney was giving his rebuttal. he said counsel, you have four minutes. i was just talking to my editor in the weeks before that happened. nobody can bring phones or any recording devices in. visitors have to check them in the locker. nowadays people have smart watches. and everything. they never check for that. i said, i am surprised nobody has tried to take some video. there are not more protesters. all you have to do to protesters stand in line and get into the court. it is theld think chambers of the wizard of oz. there were two footnotes to

this. one was that the audio was redacted. the explanation is that was not what normally record. was prosecutede under a law that prohibits orations at the court. one wonders why justice scalia has not -- [laughter] i went to the trial at the d.c. superior court. the judge clearly thought this was not a big deal. no jail time.

he wanted the u.s. attorney to drop the whole thing. the lawyer for the court, the general counsel the court, was very much involved in the hallway negotiations over this. he was sentenced to time served. he had been held overnight over the -- after the incident. that was enough punishment, the judge felt. >> there are several cases like that. a good news case for a select group of people. i don't want anybody to raise their hand here. there are people in the country who feel their free speech rights are stifled if they cannot give more than $123,000 to the candidates for congress. some of you out there for this category and can just smile. don't identify yourselves.

rightu have a free speech to go up to capitol hill with a check for $3.5 million and say , i want tohner support the entire team to the max. that is what this case was about. the idea that, thankfully, we have a speedy -- free-speech right to give more than a couple hundred thousand dollars to members of congress. that is good news. >> let me give a more than nine interpretation. another way to frame it was, a $2600isputes there is limit per election cycle. but there is a separate law that $2600nce you have given to the first 15 or 16 candidates, the 17th one will be corrupted. that is not obvious. >> i do think my voice would be

hurt if i took my $3.5 million check to the hilt. -- hill. john roberts says there is nothing that allows congress to stop the use of money to buy influence, by access and influence. you cannot do a bride. but you can use money to buy influence. as part of being a citizen. if you have $3 million, you can buy influence. no corruption. you are just having your voice be heard. about antually care industry, you have a lot more influence if you can take $3 million to the speaker of the 2600 than if you give dollars to elected members. >> there are a lot of other ways to buy influence than making campaign contributions. we can debate this and we will for the next kate. -- next decade.

going back to the questions of whereonics, another place that hasn't become an interesting story is the scotus blog. which does a live blog. upstairs in the press gallery. they are not downstairs in the press room. they are sitting in the cafeteria. i wonder someone would like to tell us more about why that is so. and what is going on with them with the get equality rest of the press gallery. >> the legendary lyle continues to have a press pass and writes for scotus blog. part an academic discussion for that day which we hope never comes of lyle retiring. is in the press room.

he is able to take the opinion on an back to his phone, open phone line, and is able to feed the information to the live others are feed that managing. that is how he is able to convey this to the blog. you're right. tom goldstein and some of the encampede and can't -- in the cafeteria. they wanted a press pass for two reasons. one is to -- they wanted a senate press pass. a congressional press pass so they could cover supreme court

related events in congress. budget or confirmation hearings. they wanted to get a press pass from the congress because the supreme court traditionally honors those press passes. make a long story short, they were denied by the senate press gallery. which is made up of media reporters. it is ae concerned -- legitimate concern -- they don't want to give credentials to somebody that lobbies congress. they want the press corps to be somewhat independent. to have integrity in that way. they wanted the reasons for denying the pass, the credential

to the scotus blog was they felt litigating before the supreme court -- and tom goldstein who is the publisher argues before the supreme court quite often -- they felt litigating before the supreme court is a form of lobbying the federal government. it is kind of a novel thought, that arguing before a judge is a form of lobbying. you could view it that way. they were denied. a lot of people feel that scotus and -- well it is unique, is not a journalistic organization in all senses, the proof is in the pudding. the product it puts out has so many benefits. it is so journalistic and such a public service.

process should not exclude scotus blog. there has to be a way to redefine the criteria to accommodate something like scotus blog. modelsre many business and media organizations that are different from traditional methods. i think there has to be some accommodation of the new forms of media. >> the question tends to muddle through different areas. -- two different areas. is the government is allocating access to its public institutions. the only grounds on which it should make those distinctions are content neutral, motive neutral, and should ask whether the enterprise is actually serving as a proxy for the public to get access.

to allow citizens to see their government at work to read -- at work. as a first amendment matter, it is hard to see why scotus blog does not have a credential in either place. >> any dissenting opinions? you mentioned earlier that you are finishing up a book about justice soto mayor. wanted to tell us more about what that will look like. i am curious about whether you have spoken to her since that decision. i have spoken to her many times during the course of doing research for this book. after. before and ands unlike the scalia o'connor murphy -- biography.

i thought i would go into it and talk about her trajectory. she ended up giving me a good story by what she has done over the last five years on the court. at the end of the book, it focuses more on her as a justice. on her own book tour. what a public figure she has been. everybody has commented on the fact that the dissent was her first from the bench. it was too much of a dramatic move to even do an oral descent. -- dissent. rooms evident from that and everything else, this has mattered to her. she wished she had been able to persuade her colleagues. it was not even a close call. there were only two of them in dissent. joined by justice ginsburg. justice breyer did not adapt the reasoning of the majority, but

he did vote for it. liberalth bit -- justice, elena kagan, was out of the case. they felt justice kagan probably was relieved in part to be out of this case because it was a very thorny issue. a difficult issue. among thed passions justices. it will be in the book. >> i will read the book. there was one sentence in her dissent that particularly caught my attention. for eight or 10 pages about the benefits of affirmative action and the great decrease in diversity that has been the result of anti-affirmative action legislation in place of like california, she has a sentence and says, to be clear, i don't mean to be clear that the

re-sensitiveopting sensitive -- that's the only time i can think of somebody saying seven like that. does anybody remember another situation like that? do you think there's anything inappropriate about that? >> the union case, two days ago, it ends page long -- with, never mind. [laughter] >> i think what was so interesting about the dissent by the societal mayor -- justice sotomayor was it was very personal and directly called out

the chief justice. to famous line that the way stop discrimination on the basis of race is to stop discriminating on the basis of race. a must have that backwards. -- unless i have that backwards. she wasery clear what talking about. the chief justice felt he needed to respond to that. he responded, too. it was i thought a very personal moment there at the court. you saw these people who disagree about something quite strongly wanting to get that view out there. this year, we saw a number of us who have written about an interesting thing with her. being much more comfortable in dissenting on her own, writing separate things in decisions.

in that way, she seems very nomineet from the other to the court, justice kagan. veryce kagan writes some tough descents, but they are joined by everyone else on the side of the issue. i thought we saw a real difference between the two of them this year in the way they handle those things. >> i would like to put in a plug for elena kagan. law students, she is a terrific writer. i don't know of anybody that writes opinions that are so readable. one of those opinions, she has a paragraph that says, stop and dogeared this page. she gives you guidance. she's a terrific writer, very smart, a terrific questioner. ofood timing sense in terms

when to ask questions. she seems to be an inside player. where is soto mayor -- whereas sotomayor is more of a public figure. scotus blogmber the numbers right, this is another year where kennedy was in the majority the most. kagan was third, which i think was new. >> that reinforces the inside player part, too. she knows how to work the -- >> you have now written books about justice o'connor, scalia. is justice kennedy scratching his head and saying, i am the most important justice. i'm in the majority. why is nobody writing a biography about me? is anybody planning to? >> not me.

the new hero of the gay rights movement. the man who will probably bring same-sex marriage to the u.s. it strikes me as curious he is not getting attention in a personal way like that. >> i think he is. he gets magazine profiles. we have all done a version of the kennedy court. to sustain a book, you want someone whose life story tends to be broader than what she is doing on the court. sandra day o'connor offered that. so does stotmayor. sotomayor. i'm sure the seeds of the kennedy book are in east -- the mind of some academic. i can't imagine anyone other

than kennedy will take the lead on same-sex marriage. there might be another moment to talk more about him. he turned 78 this month. which in supreme court years is young. he will be with us, he will probably be with us for another 5-10 years or so. were talking about the cases and what was coming up. someone says, i want to be the first one who says it all depends on kennedy. that is the supreme court reporter's burden. how do we keep finding new ways to say it all depends on kennedy. it reallynt out, does. there's no way around it. >> you would be surprised how many legal academics get a call from a major newspaper and say -- think they are imparting some dose of wisdom by saying, it all comes down to kennedy..

audience to remind the i will be opening the floor for questions about 10 minutes. if anyone wants to be thinking about the question, now would be a good time. let's talk about the future. i understand you have been following the same-sex marriage cases that are percolating in the lower courts. what are your predictions? >> i think it could easily be taken abide the justices in the next term. we had the first ruling by the appeals court. which said that a ban should be struck down. in that case, it involved the utah. we had more district court judges rule. this thing is marching towards the supreme court. the big question is, will there be a split in the circuits? at this point, we have zero splits. has been the same.

these bans are unconstitutional. we still need to see how things will play out in more conservative jurisdiction. the fifth circuit has a texas case before it. even without a split, the justices will have some interest in taking up this question. they will not leave it hanging out there with most of the circuits approving but not issuing a national constitutional ruling. i am hoping for our benefits, because we love a big issue and this thing is percolating faster than we would have ever expected last year this time, that it does indeed come up and next year you are asking about how we wrote that story. >> the sixth circuit has a they set asidede -- day for same-sex marriage. every state in the circuit has a case before the appeals court. it will be a solid day of hearing that issue. it is clearly moving around in

some circuits faster than others. the fourth circuit could rule at any day on virginia's case, in which case that ban was struck down. the court is surprised at how quickly it is moving and how fast it could come back to them. >> one interesting thing about the appeals, that i know some of my colleagues wrote about, is after the affirmative action ruling, there was a flurry of filings in these cases because of the court's reasoning because look, even if it is difficult and highly charged, the states have the right to decide on these issues. as soon as they said that, everyone filed supplemental briefs saying it is up to the states to decide what the definition of marriage is. that put a new twist. it will be interesting to see if

there is a circuit split. if that is part of the reason that causes one. >> that was written by justice kennedy. among all these cases that are moving up, are they all basically the same? moree there some that are more favorable to the same-sex marriage and some less? >> some just talk about the recognition of marriage that has been performed elsewhere. the arguments in the cases, the reasoning in the opinions, are remarkably similar. mentions of them justice scalia positive sent -- scalia's dissent where he sort of wrote down a blueprint for how you challenge a state's ban based on what the majority has said. it has worked out for him.

what will be fascinating to watch as the bloodsport among the lawyers who want to represent the winning side. >> how was i going to go -- that going to go? >> in the end, you may be surprised to hear a lot of stuff decided by acorn flop -- by a coin flip. there are about 40 cases that have been granted for next year, not including same-sex marriage. have any of you had time to take a look at them and have any thoughts about other cases we might be discussing here a year from now? there is one just -- redistricting case from alabama. thing to us are complaining about gerrymandering

not in their favor. the case that was in the court a couple of years ago looks like it is coming back which has to canith whether congress direct the secretary of state to consider jerusalem part of israel on a person's passport. any predictions about what the court is likely to do with those? now is the time -- >> we all look forward to digging into those briefs. >> i think we would agree that the court so far has not exactly put together a blockbuster docket for next term. there certainly are cases out there, we talked about same-sex marriage, it is surprising to a lot of us that the court has not accepted a case involving gun laws. that try to find out exactly

what the court meant in the heller decision. everything that has come before the court, it has turned that on -- turned it down. the gun folks rights are getting irritated and annoyed by their refusal to take another case. it is all speculation, but i speculate it is because they are not sure about what justice kennedy would do. each side is a little worried about breaking up one of those cases without knowing how it might come out. there is a surprising but uneasy feeling on all of lee's cases that raise interesting questions about whether there is a right to carry a gun outside the home or just to have it inside. who gets a permit. the court so far has not found a case that is willing -- it is

willing to accept. >> one cases about how the first amendment applies to facebook postings. another is whether muslim prisoners have religious rights beards. having found out corporations have religious rights, we will find out whether people do as well. >> we have about turkey mince left. anybody in the audience have a question they would like to ask? >> one of the things i found oferesting in the coverage whenever they had their soundbite, was the characterization that the women justices voted in the dissent. the insinuation being it was a which issed decision, a feminist i find a little offensive.

the second insinuation that it was a women's rights acision as opposed to decision about the rights of corporations. i noticed that in the written media, it was not so characterized. questions. one is for you to comment on the difference between broadcast media coverage, where a lot of americans get their news, and written media. whether you think it is genuinely -- was influenced by gender. >> on the first issue, you should rely on the written press. the three women on the court are the most liberal members on the court. it is the second point that matters, not the first. do you think it is inappropriate

to mention? i don't know what the right answer is. what do you do when the four are the four more liberal members of the court, and three are women? in different both versions. i wasn't sure whether you should mention it or not mention it. >> i feel like justice ginsburg has made the point that when justice o'connor was on the court, they were different in so many ways. , won aemocrat republican. but they were together on all women's issues. >> she did think it mattered. she said they are coming to it from the point of view of a wise jurist. it is inflicted by their experiences. in my story on monday, i played up justice ginsburg's women's rights background. she talked about reproductive rights and how important may have been to women's

anticipation in the economy -- participation in the economy. i thought that was a good angle. even though i did not point out the overall women factor of votes. out like i did not point the religion factor vote. the five justices in the majority are roman catholic. justicese three jewish in the dissent. i decided not to put that in. i thought that could deter some readers and make them get off on something i wasn't trying to force the issue on. but you can't help it avoid the kind of sensibility that some of the women's justices will bring. but it is overall a matter of ideology rather than gender. >> what i heard from women's groups later was justice ginsburg's dissent pointed out that earth control is health care -- birth control is health

care. the majority opinion seems to think it is a subset of health care, something set off by itself. i thought those were two differences of feelings you got from reading the dissent and the majority opinion. incision -- was it a decision about health care or religion? it has been many years since the courts decided any case involving the right to religious freedom. most of the cases are involving the establishment of religion. early 1990's, justice scalia was part of the majority that said, we are not going to grant religious exemptions to general laws under the first amendment. but we have had the religious restoration act. the supreme court in 1997

limited the act and said it did not apply to state and local laws. there have been very few statements on religious liberty for the last 20 years. i can't think of any decision as close to significant as this one. >> any other questions from the floor? a mike is coming to you, hang on. >> if you look at the stories that were read at the beginning, each of you is not just reporting on what has happened, but the occasions of what is happening. the invocations color the public policy debate. how do you decide how far to go in that portion of your stories? thing, it is often hard for us to know that they. -- day. this is a good example of a case that will play out for a long time. the court has sent back to lower

courts some cases that involve businesses that don't want to cover contraception at all in any form. they have said that -- send those back and said, take a look at these with what we have said. the most natural thing in the questions you get from editors is what does it mean? no -- what does it mean for people. you do that to the best of your ability, judging from what is written down, and then say, when you don't know how it is going to play out. or what the decision does not say. what the decision is careful to say we are not deciding. that is the only way to do it. >> yes, ma'am. what don't you wait for the mic. >> i hope you have time for two banquet -- quick questions.

because the case was argued in january, what caused it to be decide at the very end? cleared justice scalia was going to be with the majority. have been a- must lot of negotiation about whether president should be stuck down. >> somebody mentioned about segmentkagan's long suggested it was possible the majority at first was going to strike down the decision. and somebody got off the train. it possibly could have been scalia. >> she liked what she had written so much, she left it in.

decision had, the forecast trouble. there is a theory about the court that there are a lot of decisions that are one-two punches. trashes is aision president. the next decision overturns it a couple years later. the knox decision was the one forecasting the end. it did not deliver. quickly, i have to say i'm quite jealous of the fact that you are all in the court room and witnessed justice soto mayordramatic they sent's -- dramatic dissent. how do you feel about cameras in the courtroom? >> i speak too much about it. that -- it obvious

is crazy in this day and age that that medium is excluded from the court. almost everyher, other institution in america, which is open -- there is no rational reason why they are not doing it. that said, i don't get is going to change. i don't think the court is going unless they are dragged, kicking and screaming. >> yes, ma'am? mic.40 -- wait for the >> as all these major decisions have come down, it was reported that the public approval of the

supreme court is around 30%. the lowest it has been in decades. observers of the supreme court, i would like to ask you what you think because of that is -- the cause of that is. and what the invocations are. a among the causes are distrust of government generally. those numbers rise and fall with all the branches together. they tend to fall when the court politicaled to be a institution. the implications for the court, case-by-case and year by year, are fairly small. >> there is interesting -- in interesting thing to polling about the court. people who tend to approval of the court's performance are people who are in the party of the president. the court, even though it is independent, is perceived to be

associated with the president in office at the time. haveps because they often appointed the latest members to the court and gotten attention that way. but if you go back and look, it is a strange sort of connection that democrats now will approve of the court more than republicans do right now. that was different when president bush was in office. >> adam, do you think the evidence for the court as a political institution is not strong? >> i don't think it is especially stronger than in years past. for the first time in american history, all of the republican appointed justices are more conservative than the democratic appointed ones. that sounds like it should be normal. but in closely divided courts, it has never been the case. all you have to do is think back to justice stevens.

there were lots of examples of people overlapping and not doing what you think they're appointing president might want eir appointing president might want. a senseo think there is with each new appointment on the court, it has been a few years, but there was a. period when there was one every year. that process has become more publicized. is a political process to put them on. people expect that to continue based on the spectacle around the appointments. that was very much the case with justice sotomayor a. that colors the perception.

>> think back on some the nominations. my colleagues will correct me. but kennedy and scalia were unanimous? ginsburg, three votes against? that is not the world we live in. on that note, it is 2:00. we hope to see you back here next year. thank you. [captions copyright national cable satellite corp. 2014] [captioning performed by national captioning institute] >> this morning, federal reserve chair janet yellen speaks at an imf concert -- conference. live at 7:00, "washington at violence in iraq, the gas tax and electronic surveillance system. janet yellen was the keynote

speaker at the lecture series on wednesday. after her remarks, she was interviewed by imf director christine lagarde. this portion of the event is one-hour. [applause] >> thank you, christine. it's an honor to deliver the inaugural central banking lecture. with distinction of longestwas one of the serving directors of the international monetary fund.

the interconnections were apparent in the latin american debt crisis, the mexican peso crisis and the east asian thereial crisis to which -- the imf responded. leadership. these episodes took place in emerging market economies, but since then, the global financial crisis and, more recently, the euro crisis have reminded us that no economy is immune from financial instability and the adverse effects on employment, economic activity, and price stability that financial crises cause. the recent crises have appropriately increased the focus on financial stability at central banks around the world. at the federal reserve, we have devoted substantially increased resources to monitoring financial stability and have refocused our regulatory and supervisory efforts to limit the buildup of systemic risk.

there have also been calls, from some quarters, for a fundamental reconsideration of the goals and strategy of monetary policy. today i will focus on a key question spurred by this debate -- how should monetary and other policymakers balance macroprudential approaches and monetary policy in the pursuit of financial stability? in my remarks, i will argue that monetary policy faces significant limitations as a tool to promote financial stability -- its effects on financial vulnerabilities, such as excessive leverage and maturity transformation, are not well understood and are less direct than a regulatory or

supervisory approach. in addition, efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment. as a result, i believe a macroprudential approach to supervision and regulation needs to play the primary role. such an approach should focus on "through the cycle" standards that increase the resilience of the financial system to adverse shocks and on efforts to ensure that the regulatory umbrella will cover previously uncovered systemically important institutions and activities. these efforts should be complemented by the use of countercyclical macroprudential tools, a few of which i will describe. but experience with such tools remains limited, and we have much to learn to use these measures effectively.

i am also mindful of the potential for low interest rates to heighten the incentives of financial market participants to reach for yield and take on risk, and of the limits of macroprudential measures to address these and other financial stability concerns. accordingly, there may be times when an adjustment in monetary policy may be appropriate to ameliorate emerging risks to financial stability. because of this possibility, and because transparency enhances the effectiveness of monetary policy, it is crucial that policymakers communicate their views clearly on the risks to financial stability and how such risks influence the appropriate monetary policy stance. i will conclude by briefly laying out how financial stability concerns affect my current assessment of the appropriate stance of monetary policy.

when considering the connections between financial stability, price stability, and full employment, the discussion often focuses on the potential for conflicts among these objectives. such situations are important, since it is only when conflicts arise that policymakers need to weigh the tradeoffs among multiple objectives. but it is important to note that, in many ways, the pursuit of financial stability is complementary to the goals of price stability and full employment. a smoothly operating financial system promotes the efficient allocation of saving and investment, facilitating economic growth and employment. a strong labor market contributes to healthy household and business balance sheets, thereby contributing to financial stability.

and price stability contributes not only to the efficient allocation of resources in the real economy, but also to reduced uncertainty and efficient pricing in financial markets, which in turn supports financial stability. despite these complementarities, monetary policy has powerful effects on risk taking. indeed, the accommodative policy stance of recent years has supported the recovery, in part, by providing increased incentives for households and businesses to take on the risk of potentially productive investments. but such risk-taking can go too far, thereby contributing to fragility in the financial system. this possibility does not obviate the need for monetary policy to focus primarily on price stability and full

employment. the costs to society in terms of deviations from price stability and full employment that would arise would likely be significant. i will highlight these potential costs and the clear need for a macroprudential policy approach by looking back at the vulnerabilities in the u.s. economy before the crisis. i will also discuss how these vulnerabilities might have been affected had the federal reserve tightened monetary policy in the mid-2000's to promote financial stability. although it was not recognized at the time, risks to financial stability within the united states escalated to a dangerous level in the mid-2000's. during that period, policymakersmyself includedwere aware that homes seemed overvalued by a number of sensible metrics and that home prices might decline, although

there was disagreement about how likely such a decline was and how large it might be. what was not appreciated was how serious the fallout from such a decline would be for the financial sector and the macroeconomy. policymakers failed to anticipate that the reversal of the house price bubble would trigger the most significant financial crisis in the united states since the great depression because that reversal interacted with critical vulnerabilities in the financial system and in government regulation. in the private sector, key vulnerabilities included high levels of leverage, excessive dependence on unstable short-term funding, weak underwriting of loans, deficiencies in risk measurement and risk management, and the use of exotic financial instruments

that redistributed risk in nontransparent ways. in the public sector, vulnerabilities included gaps in the regulatory structure that allowed some systemically important financial institutions and markets to escape comprehensive supervision, failures of supervisors to effectively use their existing powers, and insufficient attention to threats to the stability of the system as a whole. it is not uncommon to hear it suggested that the crisis could have been prevented or significantly mitigated by substantially tighter monetary policy in the mid-2000's. at the very least, however, such an approach would have been insufficient to address the full range of critical vulnerabilities i have just described. a tighter monetary policy would not have closed the gaps in the regulatory structure that

allowed some sifi's and markets to escape comprehensive supervision. a tighter monetary policy would not have shifted supervisory attention to a macroprudential perspective. and a tighter monetary policy would not have increased the transparency of exotic financial instruments or ameliorated deficiencies in risk measurement and risk management within the private sector. some advocates of the view that a substantially tighter monetary policy may have helped prevent the crisis might acknowledge these points, but they might also argue that a tighter monetary policy could have limited the rise in house prices, the use of leverage within the private sector, and the excessive reliance on short-term funding, and that each of these channels would have contained, or perhaps even

prevented, the worst effects of the crisis. a review of the empirical evidence suggests that the level of interest rates does influence house prices, leverage, and maturity transformation, but it is also clear that a tighter monetary policy would have been a very blunt tool. substantially mitigating the emerging financial vulnerabilities through higher interest rates would have had sizable adverse effects in terms of higher unemployment. in particular, a range of studies conclude that tighter monetary policy during the mid-2000's might have contributed to a slower rate of house price appreciation. but the magnitude of this effect would likely have been modest relative to the substantial momentum in these prices over

the period; hence, a very significant tightening, with large increases in unemployment, would have been necessary to halt the housing bubble.2 such a slowing in the housing market might have constrained the rise in household leverage, as mortgage debt growth would have been slower. but the job losses and higher interest payments associated with higher interest rates would have directly weakened households' ability to repay previous debts, suggesting that a sizable tightening may have mitigated vulnerabilities in household balance sheets only modestly. similar mixed results would have been likely with regard to the effects of tighter monetary policy on leverage and reliance on short-term financing within the financial sector.

in particular, the evidence that low interest rates contribute to increased leverage and reliance on short-term funding points toward some ability of higher interest rates to lessen these vulnerabilities, but that evidence is typically consistent with a sizable range of quantitative effects or alternative views regarding the causal channels at work.4furthermore, vulnerabilities from excessive leverage and reliance on short-term funding in the financial sector grew rapidly through the middle of 2007, well after monetary policy had already tightened significantly relative to the accommodative policy stance of 2003 and early 2004. in my assessment, macroprudential policies, such as regulatory limits on leverage and short-term funding, as well

as stronger underwriting standards, represent far more direct and likely more effective methods to address these vulnerabilities. turning to recent experience outside the united states, a number of foreign economies have seen rapidly rising real estate prices, which has raised financial stability concerns despite, in some cases, high unemployment and shortfalls in inflation relative to the central bank's inflation target. these developments have prompted debate on how to best balance the use of monetary policy and macroprudential tools in promoting financial stability. for example, canada, switzerland, and the united kingdom have expressed a willingness to use monetary policy to address financial stability concerns in unusual circumstances, but they have similarly concluded that

macroprudential policies should serve as the primary tool to pursue financial stability. in canada, with inflation below target and output growth quite subdued, the bank of canada has kept the policy rate at or below 1 percent, but limits on mortgage lending were tightened in each of the years from 2009 through 2012, including changes in loan-to-value and debt-to-income caps, among other measures. in contrast, in norway and sweden, monetary policy decisions have been influenced somewhat by financial stability concerns, but the steps taken have been limited. in norway, policymakers increased the policy interest rate in mid-2010 when they were facing escalating household debt despite inflation below target and output below capacity, in part as a way of "guarding

against the risk of future imbalances. similarly, sweden's riksbank held its policy rate "slightly higher than we would have done otherwise" because of financial stability concerns. in both cases, macroprudential actions were also either taken or under consideration. in reviewing these experiences, it seems clear that monetary policymakers have perceived significant hurdles to using sizable adjustments in monetary policy to contain financial stability risks. some proponents of a larger monetary policy response to financial stability concerns might argue that these perceived hurdles have been overblown and that financial stability concerns should be elevated significantly in monetary policy discussions.

a more balanced assessment, in my view, would be that increased focus on financial stability risks is appropriate in monetary policy discussions, but the potential cost, in terms of diminished macroeconomic performance, is likely to be too great to give financial stability risks a central role in monetary policy decisions, at least most of the time. if monetary policy is not to play a central role in addressing financial stability issues, this task must rely on macroprudential policies. in this regard, i would note that here, too, policymakers abroad have made important strides, and not just those in the advanced economies. emerging market economies have in many ways been leaders in applying macroprudential policy tools, employing in recent years a variety of restrictions on

real estate lending or other activities that were perceived to create vulnerabilities. although it is probably too soon to draw clear conclusions, these experiences will help inform our understanding of these policies and their efficacy. if macroprudential tools are to play the primary role in the pursuit of financial stability, questions remain on which macroprudential tools are likely to be most effective, what the limits of such tools may be, and when, because of such limits, it may be appropriate to adjust monetary policy to "get in the cracks" that persist in the macroprudential framework. in weighing these questions, i find it helpful to distinguish between tools that primarily

build through-the-cycle resilience against adverse financial developments and those primarily intended to lean against financial excesses.12 tools that build resilience aim to make the financial system better able to withstand unexpected adverse developments. for example, requirements to hold sufficient loss-absorbing capital make financial institutions more resilient in the face of unexpected losses. such requirements take on a macroprudential dimension when they are most stringent for the largest, most systemically important firms, thereby minimizing the risk that losses at such firms will reverberate through the financial system. resilience against runs can be enhanced both by stronger capital positions and requirements for sufficient liquidity buffers among the most interconnected firms.

an effective resolution regime for sifi's can also enhance resilience by better protecting the financial system from contagion in the event of a sifi collapse. further, the stability of the financial system can be enhanced through measures that address interconnectedness between financial firms, such as margin and central clearing requirements for derivatives transactions. finally, a regulatory umbrella wide enough to cover previous gaps in the regulation and supervision of systemically important firms and markets can help prevent risks from migrating to areas where they are difficult to detect or address. in the united states, considerable progress has been made on each of these fronts. changes in bank capital

regulations, which will include a surcharge for systemically important institutions, have significantly increased requirements for loss-absorbing capital at the largest banking firms. the federal reserve's stress tests and comprehensive capital analysis and review process require that large financial institutions maintain sufficient capital to weather severe shocks, and that they demonstrate that their internal capital planning processes are effective, while providing perspective on the loss-absorbing capacity across a large swath of the financial system. the basel iii framework also includes liquidity requirements designed to mitigate excessive reliance by global banks on short-term wholesale funding. oversight of the u.s. shadow banking system also has been

strengthened. the new financial stability oversight council has designated some nonbank financial firms as systemically important institutions that are subject to consolidated supervision by the federal reserve. in addition, measures are being undertaken to address some of the potential sources of instability in short-term wholesale funding markets, including reforms to the tri-party repo market and money market mutual fundsalthough progress in these areas has, at times, been frustratingly slow. additional measures should be taken to address residual risks in the short-term wholesale funding markets. some of these measuressuch as requiring firms to hold larger amounts of capital, stable funding, or highly liquid assets based on use of short-term wholesale fundingwould likely apply only to the largest, most complex organizations. other measuressuch as minimum

margin requirements for repurchase agreements and other securities financing transactionscould, at least in principle, apply on a marketwide basis. to the extent that minimum margin requirements lead to more conservative margin levels during normal and exuberant times, they could help avoid potentially destabilizing pro-cyclical margin increases in short-term wholesale funding markets during times of stress. at this point, it should be clear that i think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. this focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a "bubbl"" and whether policymakers should attempt to pop the bubble.

because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical. nonetheless, some macroprudential tools can be adjusted in a manner that may further enhance resilience as risks emerge. in addition, macroprudential tools can, in some cases, be targeted at areas of concern. for example, the new basel iii regulatory capital framework includes a countercyclical capital buffer, which may help build additional loss-absorbing capacity within the financial sector during periods of rapid credit creation while also leaning against emerging excesses. the stress tests include a scenario design process in which the macroeconomic stresses in

the scenario become more severe during buoyant economic expansions and incorporate the possibility of highlighting salient risk scenarios, both of which may contribute to increasing resilience during periods in which risks are rising.13 similarly, minimum margin requirements for securities financing transactions could potentially vary on a countercyclical basis so that they are higher in normal times than in times of stress. in light of the considerable efforts under way to implement a macroprudential approach to enhance financial stability and the increased focus of policymakers on monitoring emerging financial stability risks, i see three key principles that should guide the interaction of monetary policy and macroprudential policy in the united states.

first, it is critical for regulators to complete their efforts at implementing a macroprudential approach to enhance resilience within the financial system, which will minimize the likelihood that monetary policy will need to focus on financial stability issues rather than on price stability and full employment. key steps along this path include completion of the transition to full implementation of basel iii, including new liquidity requirements; enhanced prudential standards for systemically important firms, including risk-based capital requirements, a leverage ratio, and tighter prudential buffers for firms heavily reliant on

short-term wholesale funding; expansion of the regulatory umbrella to incorporate all systemically important firms; the institution of an effective, cross-border resolution regime for systemically important financial institutions; and consideration of regulations, such as minimum margin requirements for securities financing transactions, to limit leverage in sectors beyond the banking sector and sifi's. second, policymakers must carefully monitor evolving risks to the financial system and be realistic about the ability of macroprudential tools to influence these developments. the limitations of macroprudential policies reflect the potential for risks to emerge outside sectors subject to regulation, the potential for supervision and regulation to miss emerging risks, the uncertain efficacy of new macroprudential tools such as a

countercyclical capital buffer, and the potential for such policy steps to be delayed or to lack public support. given such limitations, adjustments in monetary policy may, at times, be needed to curb risks to financial stability. these first two principles will be more effective in helping to address financial stability risks when the public understands how monetary policymakers are weighing such risks in the setting of monetary policy. because these issues are both new and complex, there is no simple rule that can prescribe, even in a general sense, how monetary policy should adjust in response to shifts in the outlook for financial stability. as a result, policymakers should clearly and consistently communicate their views on the stability of the financial system and how those views are

influencing the stance of monetary policy. to that end, i will briefly lay out my current assessment of financial stability risks and their relevance, at this time, to the stance of monetary policy in the united states. in recent years, accommodative monetary policy has contributed to low interest rates, a flat yield curve, improved financial conditions more broadly, and a stronger labor market. these effects have contributed to balance sheet repair among households, improved financial conditions among businesses, and hence a strengthening in the health of the financial sector. moreover, the improvements in household and business balance sheets have been accompanied by the increased safety of the financial sector associated with the macroprudential efforts i have outlined.

overall, nonfinancial credit growth remains moderate, while leverage in the financial system, on balance, is much reduced. reliance on short-term wholesale funding is also significantly lower than immediately before the crisis, although important structural vulnerabilities remain in short-term funding markets. taking all of these factors into consideration, i do not presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment, in order to address financial stability concerns. that said, i do see pockets of increased risk-taking across the financial system, and an acceleration or broadening of these concerns could necessitate a more robust macroprudential approach. for example, corporate bond spreads, as well as indicators of expected volatility in some

asset markets, have fallen to low levels, suggesting that some investors may underappreciate the potential for losses and volatility going forward. in addition, terms and conditions in the leveraged-loan market, which provides credit to lower-rated companies, have eased significantly, reportedly as a result of a "reach for yield" in the face of persistently low interest rates. the federal reserve, the office of the comptroller of the currency, and the federal deposit insurance corporation issued guidance regarding leveraged lending practices in early 2013 and followed up on this guidance late last year. to date, we do not see a systemic threat from leveraged lending, since broad measures of credit outstanding do not suggest that nonfinancial borrowers, in the aggregate, are

taking on excessive debt and the improved capital and liquidity positions at lending institutions should ensure resilience against potential losses due to their exposures. but we are mindful of the possibility that credit provision could accelerate, borrower losses could rise unexpectedly sharply, and that leverage and liquidity in the financial system could deteriorate. it is therefore important that we monitor the degree to which the macroprudential steps we have taken have built sufficient resilience, and that we consider the deployment of other tools, including adjustments to the stance of monetary policy, as

conditions change in potentially unexpected ways. in closing, the policy approach to promoting financial stability has changed dramatically in the wake of the global financial crisis. we have made considerable progress in implementing a macroprudential approach in the united states, and these changes have also had a significant effect on our monetary policy discussions. an important contributor to the progress made in the united states has been the lessons we learned from the experience gained by central banks and regulatory authorities all around the world. the imf plays an important role in this evolving process as a forum for representatives from the world's economies and as an institution charged with promoting financial and economic stability globally. i expect to both contribute to and learn from ongoing

discussions on these issues. thank you very much. [applause] >> oh, my goodness. madam chairman, you have impressed us enormously with a rich, dense, very informative and very candid your read of the current situation and how monetary policy and macroprudential tools could be used in sequence, in parallel, in different circumstances. and i would like to, maybe following the stradivarius analogy of michel, to stay loyal to him today, what would you say? would you say that macroprudential tools are second

fiddle to the main stradivarius of monetary policy? or would you say that, depending on circumstances, macroprudential tools become the premier violon and have to deal with the issues as a first line of defense? >> well, i think my main theme here today is that macroprudential policies should be the main line of defense, and i think the efforts that we're engaged in in the united states but all countries coordinating through the -- through basel, through the financial stability boards -- the efforts that we are taking to globally strengthen the resilience of the financial system -- more capital, higher quality capital, higher liquidity buffers, stronger and -- arrangements for

central clearing of derivatives that reduce interconnectedness among systemically important financial institutions, strengthening of the architecture of payments and clearing system dealing with risks we see in areas like tri-party repo. all of these efforts -- and particularly focusing on the resilience of the most systemically important firms through sifi surcharges and other measures -- higher leverage ratios. i see this as the core step that we need to take in the united states and globally to create a safer and sounder financial system. and if we're able to do that, reducing also the reliance on

wholesale funding, if the system does experience shocks, it will be better able to deal with it. i would also put resolution planning which we're engaging in actively as among those measures. and, you know, as i mentioned, i think cyclical policies and sector-specific policies that we're seeing many emerging markets take steps that can be used, particularly when we see problems developing in housing or a particular sector. these are really promising. i don't think we yet understand how they work.

when they can be effective, how we should use them. i hope this will be an area for the imf and for us of active research so we can better deploy those tools, capital -- countercyclical capital charges. but i think importantly, i've not taken monetary policy totally off the table as a measure to be used when financial excesses are developing because i think we have to recognize that macroprudential tools have their limitations. and there may be times when monetary policy does need to be adjusted or deployed to lean against the wind. so to me, it's not a first line of defense, but it is something that has to be actively in the mix. >> right. and if you -- if you're using your first line of defense, do you think that this is likely -- not now but sort of in more calm possibly and in more medium-term times, would you -- would that help us get away from this zero

lower bound environment in which monetary policy is currently a bit stark without being negative about the -- being stuck -- words that i'm using. but whether it's here or whether it is in the u.k. or in the euro area, we are faced with that issue. with the exploring of negative interest rates, as is the case now in -- by the ecb. do you believe that the sort of constant use of those macroprudential tools are likely to move us out of that direction? >> so it is remarkable to see how many countries have been affected by the zero lower bound. it's something that for most of my career would have seemed frankly unimaginable. and often, it has been the case that these episodes have occurred in the aftermath of a crisis that impacted the

financial system whether it's in japan or here in the united states. so, you know, i think it will be helpful if we can strengthen the financial system. such huge adverse shocks are less likely. still it is a real possibility. and for example, the work that we've done with the standard kind of macroeconomic models we use inside the federal reserve, looking at the incidents of shocks that have occurred, there is a real possibility -- there remains a real possibility that we could continue to be hit by the zero lower bound. and i think, you know, we've had recently many discussions of secular stagnation or the notion that for some period of time, whether it's because of slower

productivity growth or headwinds from the financial crisis or demographic trends that so-called equilibrium real interest rates may be at a lower level than we've seen historically. and that's one of the factors that i think will be important in determining how frequently a negative shock could push economies against the zero lower bound. so if it is correct that equilibrium rates in the united states and globally may be lower going forward than they have been historically, i think we will have to worry about these episodes more often. and, you know, of course often there are other tools besides monetary policy, and sometimes monetary policy bears the brunt -- i mean, in recent years it has borne the brunt of responding.

i think if countries had greater fiscal scope, if they had more room for the use of fiscal policy than many countries have now, there would be a larger toolkit that could be used to respond to the zero lower bound. >> well, the toolkit of the moment seems to include more structural reforms than fiscal space, although this is -- the situation is improving slightly. on the sort of lower interest rates, our research department that is headed by olivier blanchard, who is around somewhere, has done similar work to the one that you're alluding to, and we point to that direction as well. >> and you've -- so that's >> one -- let me take you one circle further. you've beautifully demonstrated

the efforts that have been undertaken from a macroprudential point of view in terms of the universe that you have under your jurisdiction. but this universe, being restricted and well supervised as it is, has generated the creation of parallel universes. and, you know, i'm just thinking of you, janet, with the toolbox with all the attributes that you have -- what can you do about the shadow banking at large? and, you know, i'm not giving it any dismissive connotations. it just happens that there have been developments of alternative funding mechanisms and financing mechanisms that are outside the realm of central bankers. what can be done about them in order to make sure that there is no creation of significant risk threats out there which are not covered by macroprudential tools? >> so i think you're pointing to something that is an enormous challenge.

and we simply have to expect that when we draw regulatory boundaries and supervise intensely within them, that there is the prospect that activities will move outside those boundaries and we won't be able to detect them. and if we can, we won't be -- we won't have adequate regulatory tools. and that is going to be a huge challenge to which i don't have a great answer. but as we think about tools that we can use to address systemic risk, i think it's particularly useful to focus on those that have the potential to control risks not only among regulated institutions but also more broadly. and that's one reason that in the speech i gave, i mentioned margin requirements and, you know, limit -- that can serve to limit leverage not only within

the banking system but more broadly, by any institution -- >> that would use the clearing system. >> -- hedge fund, an unregulated -- right, that would be borrowing -- using short-term financing to take on leverage positions. because this is the type of tool that might have wide -- >> universal. yeah. >> -- more universal effect. i'll tell you also, we have developed -- as many, you know, as you have and as many central banks have -- very active monitoring programs to try to be on the lookout for what will cause the next crisis. hopefully, many, many years in the future, but

>> we'll both be retired by then. >> i think -- i certainly hope 21536so. -- i certainly hope 21536so. but you know, what are the new threats? and, you know, we're trying to look for those and to be attentive to them and, you know, particularly to look outside the regulatory perimeter to see where threats are emerging. but this is a -- this is a real challenge, i think, for all of us. >> we share exactly the same concern and we try to -- because we look at the horizon and we know where they -- >> what could happen. >> -- could be the traditional risks based on history. but what i'm obsessed about is what do we not know from history and that will arise and that will be the risk of tomorrow. >> yeah. i think we have a much more active program of monitoring for those risks and -- >> yeah. >> -- you know, than we did before the crisis. >> let me take -- you've taken examples from canada, switzerland and a few other countries. you know, i'd be remiss not to

address the issue of spillover. we are an institution that is concerned by 188 countries; they are the members. and we are doing as much research as we can to identify the spillovers from monetary policies and macroprudential tools used as you have described them. we have seen an episode of strong spillovers between, say, may 2013 and august 2013. i know it's not directly in your mandate to worry about the spillovers, it's in mine. [laughter] and we compare our notes and -- on a friendly basis. but what -- how do you perceive them? how do you integrate them in your -- in your way of thinking? and are you attentive as well to what we are working on, which is the study of the spillbacks from the spillover? and for those who are not so much in tune with our spill-spill business, the spillovers i think is widely understood as the consequences outside of domestic base of decisions made in terms of monetary policy in that domestic base. the spillbacks is the consequences of the spillovers as they bounce back to the

domestic markets where the decisions were originally made. and i'm sure that you pay attention to it. >> so we certainly do pay attention to spillovers, although the fed -- and this is true of most central banks -- the mandates that we're given by our -- by congress or the relevant legislatures tend to focus on domestic goals. we certainly strive to avoid harm in generating spillovers when we use monetary policy, and of course, we are very much affected by the global environment. and so the spillbacks to which you refer are central in our analysis of our own economy and what the impact of our policies would be. i mean, i think if you look at u.s. monetary policy generally, given -- of course, there are spillovers. i mean, in global financial markets that -- where capital flows are as large as they are in the global economy today and financial markets are so

interconnected, of course, there are spillovers and there is no denying that. but i think, you know, when you've seen significant impacts on, say, emerging market economies from capital flows, i think most studies -- ours and i think of other researchers -- would suggest that there are a multiplicity of factors that are causing it, of which movements in global interest rates would be only one. so for example, when we instituted qe2, which generated in that period after that there were capital inflows into many emerging markets. i mean, there were other factors also: stronger growth in the emerging markets, i think, was an important factor. and shifts in risk attitudes among investors globally that are not necessarily driven by monetary policy.

but i guess the other point i would make is that the studies that we have done -- and i believe this would be consistent with the imf's analysis -- would suggest that when the united states, as important as we are in the global economy -- when we adopt policies to -- in pursuit of price stability and full employment, given our importance as a purchaser of goods from other countries, generally, these are not beggar-thy-neighbor policies. we're not mainly affecting foreign countries by pushing down, say, with expansionary policy, our exchange rate, to their detriment. when our economy expands, we buy more, and on balance, i think the spillovers are not negative, they're typically positive. but you did refer specifically to the episode a year ago -- and of course we did see before there had been any real change --

>> right. >> -- in monetary policy, but a shift in communications about future monetary policy, a very pronounced jump in interest rates. and for some countries -- and i think they were typically emerging markets with greater vulnerabilities -- there were pronounced capital -- >> currency, yeah. >> -- outflows that put pressure on currencies, caused those countries to tighten monetary policy. and obviously those were disruptive. you know, i think it was -- >> just to give you an example because michelle bachelet was here exactly where you are yesterday, and she was reminding

me that at that time the currency in chile went up by 30 percent. now, it sequentially went down a bit, but it had immediate and strong effects on those countries. new zealand is another point and case. >> you know, i think there, in part, what was happening is that traders had built up positions that were premised on unrealistic expectations about interest rate paths and about the appropriate level of volatility. and it wasn't just a shift in monetary policy, but a rapid unwinding of carry trade and leverage positions that had built up that caused that

damage. you know, i pledged often and will continue, we will try to conduct our monetary policy, to communicate about it and to conduct it in a manner that is understandable to financial markets to avoid the kinds of surprises that could cause jumps in interest rates that cause such capital flows. you know -- you know, to some extent -- to some extent, i think -- i think such spillovers are really unavoidable in a situation in the global capital markets. i don't know if you would share this assessment, but my own assessment is that most emerging markets do have much stronger financial systems than they had at the time of the crisis that michelle had to intervene in because of -- >> and it's because they went through the crisis with the support of michelle and the team that they felt a lot stronger afterwards, that's for sure. >> yes. and all the things that were put in place that -- the kinds of shocks that we may see or spillover is -- as hopefully the

global economy recovers and we're in a position to be able to tighten monetary policy, i wouldn't assume that this is going to go badly. and i can just say that we will do everything on our side to make sure that it goes smoothly. >> well, thank you so much for this commitment to it. certainly, the -- there are representatives of the emerging market economies in the room and i'm sure that they are particularly interested in your views as to how we can best -- you can best communicate and they can best anticipate so as to limit the volatility risk that arises from that. i will ask you a financial question before we wrap up because i know that we are pressed for time. michelle referred to napoleon bonaparte who said that the central banks should be independent, but not too much. [laughter] well, purposely i changed a little bit. [laughter] monetary policy, macroprudential tools to be used for financial stability, your dual mandate in a way of both employment and growth -- are you independent? [laughter] >> well, i think we are independent and appropriately so

in the conduct of monetary policy. congress has established the goals the goals that we're to pursue. and i think this is true in most countries that there's not goal independence, but there is independence about how to carry out monetary policy. and there's an awful a lot of research that suggests that macroeconomic outcomes are better when central banks have the ability to decide how to use their tools. they have to explain them. they have to be accountable. we're accountable to congress. and i think that is very important. sometimes when central banks take on financial stability mandates, it becomes harder. and i don't think independence is appropriate in absolutely

every sphere of conduct that central banks become involved in. so i think it's really the conduct of monetary policy where independence is important. we had the experience during the crisis of putting in place a very large number of liquidity programs and when central banks become involved in those kinds of lender of last resort activities. for example, the lines between what should a central bank do and what's the responsibility of government can become blurred. >> right. >> and, you know, these are times when i think the activities of central banks can become quite controversial. and one of the things that we did during the crisis to try to clarify what's the dividing line, what are we supposed to do, what is the line a central bank shouldn't be dragged over, or if it is, that the fiscal

authority should clearly be taking responsibility. we actually had a kind of accord with treasury that was signed. it kind of indicated we may use our balance sheet to lend, but we shouldn't be taking on credit risk. and to the extent we do, it's the responsibility of the government. but with cooperation and becomes very natural, the lines do get blurred and there is a potential threat to central bank independence. but i think it is important. >> but from a monetary policy, there is complete independence. >> from a monetary policy, there -- right. released tool independence. >> well, chairman yellen, as a token of our appreciation, i would like to hand over to you a little book which celebrates actually the 70th anniversary of the imf and tells the story of how it all started back 70 years ago plus one day, because the anniversary was actually yesterday of the beginning of the imf. you've been a fantastic speaker -- >> thank you so much.

>> you've been a terrific partner in this venture. and i look forward to continuing working for you. >> as i do too. >> thank you so much. [applause] >> for over 35 years, c-span brings public iver at debt public affairs events from washington to you. offer complete gavel-to-gavel coverage of the u.s. house all as a public service of private industry. we are c-span, created by the cable tv industry 35 years ago and brought to you as a public service by your local cable or satellite provider. what just in hd, like us on facebook and follow us on twitter. >> coming up today on c-span, "washington journal" is live next. tonight at 8:00 p.m., a look at the origins of the universe. a house hearing on the search for extraterrestrial life. an interview with the commander

of the international space station. coming up in 45 minutes, former u.s. ambassador to iraq, james jeffrey, on developments in iraq and options regarding the terrorist group isis. at 8:30 a.m. eastern, look at the proposed increase in the federal gas tax to fund the highway trust fund. at 915 eastern, on -- the emergence of regulating the bank industry.